William Polushin is founding director of the Program for International Competitiveness at the Desautels Faculty of Management, McGill University, and President of AMAXIS, an international business and operational development services firm.
The rise of China, India, Brazil and other emerging economies in the global economy are transforming the competitive dynamics driving industry today. It is by no means business as usual. In the coming weeks and months, Mr. Polushin will be providing Economy Lab readers with a regular series of blog posts on topics that pertain to globalization, international business, and competitiveness.
International trade and investment are critical elements in Canada's economy and economic prosperity. In 2010, exports and imports of goods and services totalled $986.7-billion or 60.7 per cent of Canada's gross domestic product (GDP), and foreign direct investment inflows and outflows were $22.5-billion and $38-billion, respectively.
As the economic epicentre of the world shifts from New York and London to Shanghai and Mumbai, how well positioned is Canada or, more specifically, Canadian industry to profit from these changes? Or, put another way, how well positioned are Canadian enterprises positioned to compete and win in the global economy?
Simply put, we're not. As David Emerson, former minister of International Trade accurately stated in the preface to the 2007 edition of Canada's State of Trade, "On the global front, we are being outpaced by our competitors: not just by fast paced growing emerging economies like China and India, but also by our more traditional competitors such as the U.S. and Europe, who are aggressively pursuing international policies to strengthen their competitive advantage." While these words were written four years ago, they are as relevant today.
A look at some facts helps illustrate the point:
- Since 1948 -- the year after the General Agreement on Tariffs and Trade (the predecessor to the World Trade Organization) was created -- Canada's share of world merchandise exports has steadily fallen from 5.5 per cent in 1948 to 2.6 per cent in 2010;
- For the same period, Canada's share of world merchandise imports has fallen from 4.4 per cent to 2.7 per cent;
- Since reaching a peak in 2000, exports as percentage of Canada's GDP has fallen from 45.6 per cent to 29.4 per cent in 2010;
- Canada's share of global outward foreign direct investment stock has decreased from 4.3 per cent in 1980 to 4.1 per cent in 1990 to 3.0 per cent in 2000 to 2.7 per cent in 2009;
- In 2009, 2 per cent of Canada's 2.3 million business establishments (or 47,637 establishments) were exporting establishments -- a percentage that has varied little over the years;
- Of the 47,637 exporting establishments, 76.1 per cent had exports of less than $1-million, 56.6 per cent had exports to the U.S. only, and 20.7 per cent had exports to destinations other than the U.S.;
- The largest exporters (those with $25-million or more in exports), accounted for 81.9 per cent of the value of total 2009 exports while representing only 3.1 per cent of the total number of exporting establishments.
- (Sources: World Trade Organization; Hart, Michael (2002), A Trading Nation; UNCTADstat; Statistics Canada, International Trade Division, Exporter Register Database)
Don't get me wrong. As we approach our nation's 144th birthday, we have a great deal to celebrate. Canadians enjoy a quality of life and standard of living that is among the best in the world. In an integrated and competitive global economy, though, the path to profits is increasingly complex. It is by no means business as usual. The time has come for Canada to truly become a nation of traders, not just a trading nation.
In my next post, I'll take a detailed look at Canadian exports and exporters.
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