Canadian executives have received a wake-up call when it comes broadening this country’s trade relationships. While executives still believe the United States will continue to be our largest trading partner and of critical importance to our future, perhaps the most interesting finding of the C-Suite survey is the belief that to remain prosperous, Canada must expand trade with emerging economies, such as China and India.
The state of our economy, along with U.S. political events like the Keystone XL pipeline controversy and the “fiscal cliff,” are driving businesses to look overseas. For the first time in 2012, the number of executives who fear a slowdown in the Canadian economy has increased, with 24 per cent expecting a moderate to strong decline, up from 15 per cent last quarter. While gross domestic product grew by 0.1 per cent in the third quarter, stock market performance remains stagnant, high unemployment persists at 7.2 per cent, and personal debt continues to increase, with the average Canadian household having just 61 cents of disposable income for every dollar of debt.
These factors have a domino effect on consumer confidence, which is worrying executives.
We have seen recent signs of improvement in the United States. Industrial manufacturing surged 1.1 per cent in November, the biggest increase in two years, and retail sales are up while jobless claims have declined. However, this will not translate into optimism until there is greater clarity as to how the U.S. is going to manage its fiscal impasse and deal with the ballooning deficit. Concurrent to this, developments such as the recent purchase of Nexen Inc. by CNOOC Ltd. demonstrate that a wider group of Canadian executives have begun to realize the importance of expanding and diversifying our trade relationships abroad.
This sentiment aligns with recent actions taken by the federal government to enhance trade relations with such countries as India. Prime Minister Stephen Harper has indicated he would like to see trade with India triple by 2015. In 2012, Canada joined the Trans-Pacific Partnership (TPP) and signed trade deals with China and India; over the past three years it has also entered trade agreements with some of Latin America’s leading emerging markets, including Brazil, Colombia, Panama and Peru.
Why? Emerging markets are where the growth lies. By 2030, the middle class in China is projected to total 1.4 billion consumers, which will be four times the size of America’s middle class.
India is not far behind and is expected to reach 1.07 billion middle-class citizens by then.
The U.S. is our largest trading partner, closest ally and friend. By virtue of its size, proximity, our cultural similarities, and the built-in trade relationships we share, it will continue to be an important contributor to our future. However, while good for the Canadian economy, NAFTA also enhanced our reliance on the U.S. and North American trade. The respondents of the 29th Quarterly C-Suite Survey demonstrate, that like our government, they also recognize the importance of building relationships with emerging markets, so we can broaden our trade with those countries that want and need, what Canada has to offer.
Canada is on the right path, but we need to continue to increase our trade with markets that are in ascendancy, like China and India, while fostering and supporting our strong and important relationship with our neighbours to the south.