Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.


Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.


All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.


Learn more about Globe Unlimited and how to subscribe.

The Ambassador Bridge spans the Detroit River dividing Canada and the U.S., is shown on Friday June 15, 2012. (Mark Spowart/THE CANADIAN PRESS)
The Ambassador Bridge spans the Detroit River dividing Canada and the U.S., is shown on Friday June 15, 2012. (Mark Spowart/THE CANADIAN PRESS)

For Canadian trade, a ‘lost decade’ Add to ...

After nine free trade deals, countless trade missions and endless talk of global diversification, Canada remains as wedded as ever to the U.S. market.

Efforts to broaden and grow the country’s exports apparently aren’t working, committing Canada to a “lost decade” in trade, according to a report Wednesday by CIBC World Markets Inc.

More Related to this Story

Merchandise trade figures for February, due out Friday, are expected to show that Canada continues to run a small trade deficit, but the gap has been narrowing in recent months thanks to rebounding energy exports and a lower dollar.

The CIBC report points out that the volume of Canadian exports to all countries is back to the same level it was a decade ago. The share of non-U.S. exports peaked at 25 per cent last year and is now falling again.

China and Britain accounted for virtually all the recent diversification. In Britain’s case, the main driver was a 300 per cent rise in the price of gold – “hardly an inspiring diversification story,” argue CIBC economists Benjamin Tal and Andrew Grantham.

“This uni-diversification is certainly not what the architects of Canada’s nine free trade agreements with non-U.S. partners envisioned,” Mr. Tal and Mr. Grantham write.

“This was a lost decade for Canadian exports. And for a small, open economy, this is not a positive trajectory.”

Canada’s share of non-U.S. exports rose to 25 per cent from 13 per cent between 2001 and 2009. But it’s been stuck at roughly that level since.

“Despite intensifying efforts, Canadian export diversification is losing momentum” the report says.

The strength of the Canadian dollar in the early 2000s is only partly responsible for the poor export performance, according to CIBC. Just as important have been weak U.S. demand, diminishing returns from the North American free trade agreement, competition from emerging markets and cost-cutting by U.S. manufacturers.

CIBC cautions that while the U.S. economy is showing signs of life, it likely won’t be a long-term answer for Canada’s export woes, due to U.S. fiscal restraint and more cautious consumers.

So the promise of trade lies in China and beyond. Mr. Tal and Mr. Grantham conclude that Canada’s modest success penetrating the Chinese market suggests that despite a strong currency, Canadian companies can “win and compete in a very competitive emerging market environment.”

Since 2003, China has accounted for half of the export growth to developing countries.

Follow on Twitter: @barriemckenna

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories