Stopping short of trespassing on the terrain of government policy, Mark Carney, the Governor of Bank of Canada, gave a speech on Monday with manifold implications for Canadian businesses and governments. In particular, he made a persuasive case that Canada – which has hitherto made a habit of recovering from recessions by its exporting strength – is not doing nearly enough to take advantage of the booming import demand from large emerging economies such as China and India.
Mr. Carney could hardly make such a speech without echoing some current political controversies – such as the exchange at the end of February between the Premiers of Alberta and Ontario, in which Alison Redford quite properly criticized Dalton McGuinty, after he expressed a certain dismay at the prosperity of the Western oil and gas industry, because of its effect on the Canadian dollar and thus on exports of manufactured goods. Indeed, in a point similar to reassurances often advanced by Albertan politicians, Mr. Carney emphasized a one-year increase of 44 per cent in the exporting of Ontario mining-related services to Alberta.
Mr. Carney acknowledged that the exchange rate is one cause of Canadian exporting weakness, but he said that the high dollar and high relative Canadian labour costs are “less important than the drag coming from market structure.”
That “drag” is Canada’s continuing heavy reliance – 85 per cent of exports – on markets in the United States and other developed economies, where growth is much slower than in a group of high-speed emerging economies, not only in East and South Asia, but also including Poland, Brazil and Turkey – only 8 per cent of Canadian exports.
This thesis appears to be consistent with Stephen Harper’s recent trips to South Korea, China and other East Asian countries – and his cautious indication of interest in the Trans-Pacific Partnership trade negotiations.
Mr. Carney is not taking sides in party or regional politics. But by making clear and informative statements about the relative importance of the various difficulties facing the Canadian economy, he inevitably reveals some affinities with Canadian politicians.