Jennifer Jeffs on why Canadian companies need to develop relationships with the higher-growth emerging economies.
Past President of the Canadian International Council (CIC).
CBC News recently reported on a leaked Harper government ‘Canadian foreign policy plan.’ The document is a fascinating window into the economically-driven goals of the Harper government’s foreign policy, though Roland Paris argues that the plan “offers few surprises.” One of the key insights from the document is the suggestion that economic ties must be pursued “even where political interests or values may not align.” China will, in other words, be a leading destination of Canadian business, and vice versa.
The CBC’s Greg Weston suggests that, in the past, the Harper government “took the slow road to China.” Now, Sino-Canadian economic relations are most definitely warming up. The Conference Board of Canada, an applied research organization focusing broadly on economic trends and public policy, recently published a study on Canadian export trends with our major trading partners and opportunities for expansion in the future. According to their study, whereas the value of Canadian exports to China was under $3 billion in 1990, it is now $15 billion and projected to increase to roughly $45 billion by 2025. China will thus take 6.8 per cent of Canadian exports, rather than the current 3 per cent – still a small percentage in overall terms.
More worrying, as Governor Carney has pointed out repeatedly, is the apparent reluctance and slowness of Canadian companies to jump into deeper trade and commercial relationships with the higher-growth emerging economies. Canadians are – unsurprisingly given their historic dependence on commercial and economic relations with the U.S. – still more comfortable with the lower-growth countries. Propelling relations with the higher-growth, less traditional, more exotic countries is often riskier and at least unfamiliar. But the Harper foreign policy document demonstrates this government is keen to push forward.
Meanwhile, the Conference Board predicts that the American share of Canadian exports will drop from 75 per cent today to 68 per cent in 2025. Despite the Harper government’s current pivot toward China, the U.S. will remain Canada’s largest market. Nonetheless, the Conference Board’s Kip Beckman notes that “[a]n important shift is underway.” While Canadian trade with the U.S. has remained stagnant in real terms for the past decade, trade with the fast-growing markets, especially China, Mexico, India, and Brazil, is increasing, albeit at slower-than-desirable rates. Hopefully the Harper government’s foreign policy plan will propel public policy frameworks in this country to adjust in ways that facilitate deepening trade relations with high-growth emerging countries.