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The Ambassador Bridge links Detroit, Mich. with Windsor, Ont. It is one of the busiest trade routes in North America. Canada’s biggest export market is the United States, with 75 per cent of our exports going south.Steven Kriemadis/iStockPhoto / Getty Images

Ron Meng is a professor emeritus, economics, at the University of Windsor

Richard Douglass-Chin is an associate professor, English and creative writing at the University of Windsor.

Imran Abdool is a lecturer, economics and finance at the University of Windsor, and president of Blue Krystal Technologies and Business Insights

Now that the global baby boomer generation, born 1946 through 1966, is either retiring or in some cases dying, there is an historic demographic crisis occurring. With crashing birth rates, increased life expectancy and limited or no immigration, some countries and regions have a serious problem on their hands. It is often thought that Canada will avoid many of these issues because of good planning and simply good luck. Unfortunately, this is not the case.

Canada’s biggest export market is the United States, with 75 per cent of our exports going south. Currently, Canada’s top-10 exports are: minerals and fuel (including oil), vehicles, machinery (including computers), precious metals, wood, plastics, electrical machinery, aircraft, aluminum and paper. The popular business phrase “know your customer” is a time-tested principle for business success. We would do well to apply it to our trade-policy planning, too.

The United States, like many other developed countries, is undergoing the same demographic shift that Japan, South Korea, Europe and Russia are experiencing. The result is an increasingly greater proportion of older-to-younger Americans on a year-over-year basis.

That demographic shift has important implications for U.S. spending habits as well – and Canada’s future trading patterns.

After the global financial crisis of 2008, American spending habits pivoted sharply toward health and other services compared with their more traditional tangible goods. According to Bank of America Merrill Lynch: “Between 1960 and 2007, the ratio of consumption of a U.S. 80-year-old to that of a 20-year-old doubled. This is likely to continue to increase."

Those countries and companies wanting to export to the United States must be cognizant of this shift in U.S. consumer spending. Aging boomers have a rising buying power and they prefer services over traditional tangible goods.

What does this mean for Canada? There are two implications.

First, Canada cannot rest on its laurels as an exporter of resources and primary materials of production. The demographics of our largest trading partner will structurally change its demand for our products. Canada needs to become an exporter of processes, innovations, technology and cutting-edge research in health care and other service sectors.

Second, Canada could pivot its trade to developing countries that have a demand for infrastructure and fossil fuel energy. But with increasing renewable technologies, the latter source of export revenue will be limited. The top three energy-consuming countries include India and China.

This reinforces the need for Canada to have efficient trade with these countries, especially given the current assortment of our top-10 exports. Leading countries for infrastructure spending as a percentage of their gross domestic product include: India, China, Turkey and Indonesia, among others. To hedge against Canada’s ability to diversify its exports away from goods to services, strong trading relationships must be sought with these and other countries needing Canada’s endowment of infrastructure materials.

Changing Canada’s trade patterns would take time – both for individual businesses and for policy-makers setting rules for an efficient and fair trading regime.

Compared with 1972 and adjusted for inflation, U.S. households are spending significantly more on health care, shelter and pensions/insurance services. Consumer debt in the United States has changed considerably in terms of its composition: Mortgage debt is down and other forms of debt, including student loans, are rising.

Since 2008, U.S. student loan debt has surged by 131 per cent and auto loans by 52 per cent. These factors are a considerable drag on the spending power of younger Americans. Some U.S. commentators have even called it the Great American Affordability Crisis.

This situation is not unique to the United States; all Organisation for Economic Co-operation and Development countries are facing these challenges. Estimates suggest in 2020, adults aged 65 and over will begin to outnumber children under 5 for the first time in human history.

Time is now of the essence. Failure to act will result in a poorer and more economically fragile Canadian society of the future.

While we have outlined two options, which are not mutually exclusive (both or some combination of the two options can occur simultaneously), it is clear that given the proximity and size of the U.S. market, our future primarily lies in producing more age-related goods and services and less natural resources to that market.

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