BUSINESS

Canadian Exports Decline: Country Needs New Trade Partners, CIBC Says

04/16/2013 04:00 EDT | Updated 06/16/2013 05:12 EDT
CP
Companies need to take more risks in emerging markets so Canada doesn't experience another lost decade for exports, says CIBC's senior economist.

Despite nine free trade agreements, the volume of Canadian exports has receded back to about the same level it was a decade ago.

That's because exports to countries outside the U.S. have hardly increased over the past four years — and in recent quarters, volume has actually dropped.

Benjamin Tal said part of the reason is that Canadian exporters have been squarely focused on China and the United States for growth.

While global trade has surged 70 per cent and imports have increased by 45 per cent since 2002, the volume of exports has hardly changed over the same time, he said.

"That's basically a lost decade. Now for a small open economy that relies heavily on exports, that's not a very positive trajectory," he said after releasing the report titled "Stuck in Neutral."

Tal said the stagnant growth can't solely be blamed on the strength of the loonie, but also other factors, including the struggling U.S. economy and heightened competition from emerging markets.

Tal said Canadian companies need to look beyond its two largest trading partners, which promise only slow and unreliable economic growth in the near term, and focus more on emerging countries such as Brazil, India and Indonesia.

"I think it's more a problem of attitude, it's more a problem of taking risks and I think that it's doable because we have proven that we can do it," he said.

Export Development Canada chief economist Peter Hall said the report doesn't reflect the efforts by Canadian companies to expand trade outside China.

"To say it's a lost decade is more true of the world than it is for Canada in isolation," he said.

"I think it's important to put this in a context of a world that has seen incredible duress in the last four to five years."

Hall said the high Canadian dollar has had a bigger impact on exports than the report captures.

Canadian exports to almost all countries but China got pummelled in the downturn. Using 2009 as a reference year would reveal growth in emerging countries such as Brazil, Hong Kong, Indonesia and Russia that are on par with China, he said.

Hall doesn't dispute the general thrust of the report, adding Canada can do a better job of boosting trade with South Korea, India and the Middle East.

"A very strong growth trend was resumed post-crisis," he said. "It's just that trade was affected in most nations in the crisis year."

Lakehead University economics professor Livio di Matteo agreed that trading diversification has stalled even though Canada has become less reliant on the U.S.

Canada has traditionally been a "monogamist trade country" — first focused largely on Britain and after the Second World War, on the United States and then China.

Di Matteo said Canada can accelerate its ties with emerging countries by increasing international business student exchanges.

"Let them learn about the country and when they come back of course you'll have all these automatic human capital resources that will help you grow your trade," he said from Thunder Bay, Ont.

Meanwhile, Tal said diversifying Canada's trading partners will create employment, economic growth and the standard of living at home.

"In the past, diversification out of the U.S. was a nice thing to do, today for many companies it's a question of survival," he added.

Also on HuffPost

World's Most Competitive Economies