Canada must shift its trade focus towards emerging economies, which account for two-thirds of global growth and are key drivers of the worldwide economic recovery, says Bank of Canada Governor Mark Carney.
Canada's central bank head said Friday that countries such as China, India and Brazil are becoming growing centres of economic power and have a big impact on the price of oil, metals and other commodities, drivers of Canada's resources economy.
"The relatively slow recovery expected in our most important trading partner, along with ongoing sectoral adjustments, means that Canadian firms have to find new markets," Mr. Carney said in a prepared speech Friday to a Newfoundland energy conference.
"The global economy is increasingly multi-polar," he added. "Emerging-market economies currently account for about two-thirds of global growth. They represent almost one-half of the growth in imports over the past decade, particularly of capital goods. They are the main drivers of commodity prices and are therefore important determinants of our terms of trade.
"More fundamentally, they are increasingly thought to be leaders and innovators in public policy and business. Canada needs to become fully engaged with these emerging centres of economic power."
Canada's trade with China, India and other parts of Asia has grown in recent years, mainly in grains, fertilizers, coal and other commodities. Chinese companies have also made major investments in Canada's oil sands and mining sector in a bid to secure future supplies of energy and key industrial metals such as copper and zinc.
In his speech to the Newfoundland and Labrador Oil and Gas Industries Association, Mr. Carney also predicted the global recovery will not be smooth. And in the absence of other demand growth and exchange rate changes, there could be a shortfall of up to $7-trillion in worldwide GDP by 2015.
"The global economic recovery is proceeding, but it is increasingly uneven across countries. There is strong momentum in emerging-market economies; some consolidation of the recoveries in the United States, Japan, and other industrialized economies; and the possibility of renewed weakness in Europe."
Mr. Carney also said global growth ahead will be more commodity intensive because emerging-market economies' share of global growth is now two-thirds, rather than the one-half it was a decade ago. In a spring forecast, the Bank of Canada projected an additional 30-per-cent increase in the prices of non-energy commodities over the next few years.
That's good news for Canadian resources companies, he said, but there are still major challenges ahead for corporate Canada, including a need to grow productivity and technology investments to become more competitive in the global market.
"The imperatives for Canadian businesses appear clear," Mr. Carney said. "New suppliers need to be sourced; new markets opened; a new approach to managing for a more volatile environment developed."