The Conference Board of Canada has just released a study that examines the export opportunities for Canadian companies to the hot economies of China, India, Brazil and Mexico.
As expected, the outlook – to 2025 – indicates a significant shift away from trade with the United States.
China is of course a key destination.
Canada’s goods exports to China have taken off, from a value of less than $3-billion in 1990 to $15-billion in 2011, according to the Conference Board.
That number is projected to increase to the $45-billion range by 2025, says the board, based on the assumption of an average annual economic growth rate in China of just under 7 per cent.
If that trend does indeed unfold as predicted, China’s share of Canadian goods exports would more than double to 6.8 per cent from today’s 3 per cent.
Contrast that with shipments to the U.S., which now account for about 75 per cent of Canada’s goods exports.
The study predicts that the share will drop to 68 per cent in 2025.
Canada’s goods exports to the U.S. are projected to grow by about 2 per cent per year through to 2025.
The bulk of Canada’s exports to China are natural resources or semi-processed raw materials, while imports are made up mostly of manufactured goods.
That’s not necessarily a bad thing.
While many policy makers say Canada must reduce its reliance on natural resource exports, others agree that right now is the time to take advantage of the global commodities boom.
As Conference Board associate director Michael Burt has pointed out, the fact that the vast majority of our exports to China are natural-resource based products shouldn’t be viewed as a failure of the Canadian economy to move up the value-added chain.
Rather, he says it simply makes sense to take advantage right now of our natural-resources bounty, a move that has a positive knock-on effect on such areas as mining financing.
Exporting commodities in a major way can also lead to the development of related support technologies and services, he says.
Sarah Kutulakos, the executive director of the Canada-China Council, says Canada shouldn’t merely “diversify for diversification’s sake.”
Canadian companies need to make more of an effort to break into carefully targeted Chinese markets with products and services we are good at providing, for example clean tech and financial services, she says.
“We need to position ourselves in the near-term to meet existing Chinese needs, such as insurance products and pension plans for an enhanced social safety net.
“Getting in on the ground floor of those reforms could be very lucrative.”Report Typo/Error