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Canada urged to develop smarter trade with Asia

‘Canada must go beyond being an exporter of only natural resources,’ Asia Development Bank managing director general Rajat Nag said on a visit to Toronto. Energy and agriculture will remain important, but this country ‘needs to think of ways to move up the value chain.’

Kevin Van Paassen/The Globe and Mail

Canada should engage more actively with Asia as the global economy's centre of gravity shifts, the managing director general of the Asian Development Bank says.

Growth rates may have slowed from their blistering pace of previous years, but the region is still poised to expand at a "robust pace," Rajat Nag said in an interview Wednesday, citing the "Asian century."

By 2050, Asia's share of global GDP is expected to hit 51 per cent compared with 27 per cent now.

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His comments come as domestic demand is softening in Canada, making trade an ever-more important driver of growth. Emerging markets have become the engines of global economic growth, but Canada has yet to capitalize on the shift. In the past decade, 84.5 per cent of the country's exports have gone to slower-growing countries such as the U.S., Britain and France, while just 9.3 per cent of exports have flowed to high-growth nations like China and Indonesia, according to the Bank of Canada.

"For Canada's own growth story, it has to diversify. The U.S. should remain a very important market – but the growth is going to be in Asia," said Mr. Nag, who was born in Bangladesh, raised in India and is now based in the Philippines. He has Canadian ties too – he attended the University of Saskatchewan and his first job was as an economist at the the Bank of Canada.

Priority should shift to the quality of growth rather than quantity – with policies in the region that promote inclusion (and reduce income inequality) and environmental protection, he said. Inequality of opportunity dampens growth and hurts efforts at poverty reduction. Climate change poses a huge threat to Asian countries and the emphasis should shift now to green growth.

Therein lies a key opportunity for Canada. Appetite in areas like clean coal and technologies to cut greenhouse gases will surge, and Canadian companies should ramp up efforts to export there.

Mr. Nag also urged Canada to broaden its economic base – not relying as much on natural resources, and putting more effort into value-added goods for Asian markets (for example, by producing more fertilizer, instead of just potash, and more clean technology rather than just energy).

"Canada must go beyond being an exporter of only natural resources," he said on a visit to Toronto. Energy and agriculture will remain important, but this country "needs to think of ways to move up the value chain."

Higher education presents another opportunity in which Canada should carve out niche areas, for example, teaching governance, agriculture and applied skills.

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In the coming decades, growth will not be uniform throughout the region. Rather, the most dynamic economies are what the bank dubs the "Asia-7": China, India, Indonesia, Japan, South Korea, Malaysia and Thailand. By 2050, these seven economies alone will account for 45 per cent of global GDP.

Mr. Nag doesn't see Japan sliding into recession, but rather eking out 1.5-per-cent growth next year.

China's double-digit growth rates are likely a "thing of the past" and India's near 9-per-cent growth streak won't likely be repeated. But the region is still set to expand at a far greater pace than growth in advanced economies, he noted.

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