Stephen Harper keeps insisting trade is at the top of his government’s economic agenda.
But the results aren’t there, at least not yet. Not only has the prime minister failed to turn multiple negotiations into any new free trade deals, but the real world results aren’t there either.
Canada’s trade performance is faltering. And for a trading nation, that’s not good.
Canadian trade is emerging as a “sharp drag” on economic growth in the first quarter, ScotiaBank said Friday in a note to clients.
February marked the 11th straight month that Canada has run a merchandise trade deficit. The shortfall reached $1-billion, up from $746-million in January, paced by a 0.6 per cent fall in exports and a modest 0.1 per cent increase in imports, Statistics Canada reported Friday .
The January deficit was also larger than previously thought – to a revised $746-million from $240-million.
The drop in exports was almost entirely due to lower volumes. Prices were flat. Vehicle exports were up, but shipments of many other items fell, including metals, agricultural products, chemicals, plastics, rubber, petrochemicals, electronics and electrical equipment were all lower than in January.
The truth is that Canada’s poor trade performance goes back much further than just last year. A report this week by CIBC World Markets Inc. says the 2000 to 2010 marked a “lost decade” for Canadian exporters. After climbing prior to the Great Recession, the volume of Canadian exports has now sunk back to where it was a decade ago.
“For a small, open economy, this is not a positive trajectory,” CIBC economists Benjamin Tal and Andrew Grantham argued.
Statscan reported Friday that Canada’s merchandise exports reached $462.6-billion in 2012, up for a third consecutive year. But that’s still more than 5 per cent below where they were in 2008.
Canada’s trade surplus with the United States ($42-billion in 2012) has shrunk to less than half of what it was in 2008.
More broadly, Canada is being cut out of surging global trade flows, which are up 70 per cent since 2002. Over that same, period Canada’s exports were flat (in volume terms), while imports rose 45 per cent.
So Canada is losing market share in the global marketplace.
The reason isn’t just the strength of the Canadian dollar – a phenomenon that exporters and importers alike have learned to live with. The other key reasons are weak demand from our major customer – the United States – diminishing returns from the North American free trade agreement, competition from emerging markets and cost-cutting by U.S. manufacturers, according to CIBC.
Friday’s weak U.S. jobs report is a reminder of just how slow the recovery is in the United States, which buys nearly three quarters of Canadian exports.
The opposition NDP is also critical of the government’s inability to improve Canada’s trade performance. The party released research this week that compares Canada’s current account – the broadest measure of trade and financial flows – to 18 other major trading nations. With the deficit rising, the NDP says “Canada is at the bottom of the list when it comes to trade performance, and the trend shows things are getting worse.”