Canada's exporters are entering a new era of lower commodity prices and strong demand from a rebounding U.S. economy, but many are not prepared to take advantage of this major shift in trade patterns, says a new report.
Among Canadian industries best positioned to capitalize on the end of the commodities supercycle, the low-flying loonie and stronger U.S. demand are many service providers, according to the Conference Board of Canada study, published on Thursday. But several manufacturing industries will need to increase capacity to benefit from stepped-up demand, the analysis by Jacqueline Palladini says.
Five industries are singled out as being the best positioned to reap benefits from what the author calls "Canada's next trade era": transportation and government services; other commercial services (such as wholesale trade and administration); computers and information services; food manufacturing; and financial and insurance services. The author notes that four of those five industries are in the services category, which has been among the fastest-growing Canadian exports over the past decade.
Six industries facing strong U.S. demand but lack sufficient capital to increase production are: wood-products manufacturing; pharmaceutical and medicine manufacturing; aerospace-product and parts manufacturing; other transportation manufacturing (such as rail and shipbuilding); clothing; and motor-vehicle-parts manufacturing
Many of the companies in these industries laid off employees, scaled back or shut down operations in the past decade, hurt by low-cost competition from China, Mexico and other countries and by the high Canadian dollar. Consequently, they face challenges increasing operations again, the report says.
These companies are prime candidates for capital investments such as plant expansions, machinery upgrades or stepped-up hiring. But that may not always be easy, given the potential difficulties in locating financing and finding enough qualified people.
This is where the government can help, notably with new policies and programs in the areas of labour mobility and skills enhancement.
"We are shifting back to a world reminiscent of the 1990s, characterized by strong growth in U.S. demand as it continues its recovery from the recession," the report says.
Meanwhile, demand from emerging countries is slowing.
Canadian exports to the United States are expected to increase by a robust 4 per cent, on average, over the 2010-19 period, according to the analysis.