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What Does the APEC-CEO Summit Reveal About Canada's Trade and Investment Future?

Posted: 10/18/2013 7:00 pm

Enveloped in cloudless skies, brilliant sun and crystal waters, the delegates at the APEC-CEO summit in Bali had almost perfect conditions for clear communication. The conference didn't disappoint. Presentation after presentation took into account the fast-growth years, the ravages of the crisis, and offered thoughts on the way forward. Were there some key messages for Canadian exporters and international investors?

Nearly every speaker made reference to the disappointing global growth of recent years, and the recent slowing of Emerging Asia. Nonetheless, all took comfort in the observation that growth will be faster in the Asia-Pacific region than anywhere else on the planet. Thoughts were less about how to get growth going again and more about making sure that economies could accommodate continued growth. The contagion of Western pessimism seems to have stopped at Asia's door.

A key and repeated observation was the critical mass in the emerging Asia-Pacific zone. Multiple years of stellar growth rates have doubled and doubled again GDP in China and elsewhere, meaning that even if growth rates are lower in the future, they are growing on a much heftier base -- effectively giving birth to a decent-sized economy every year. Also getting multiple mentions was the consequent growth of the region's middle class. Tens of millions of new entrants to the club are consuming more and moving up the quality scale -- starting with food, but spreading to a wide variety of goods and services. It's doubtful that the region can accommodate these demands on its own.

Another message was the need to move up the production value chain. China is quickly running down that vast surplus of cheap labour, and wage rates are on the rise. Eager to remain competitive, China is seeking to boost education, getting more out of its workers -- and farming out more basic manufacturing to the rest of the region. Others are trying to do the same. Two messages here: expect increased competition for higher-end goods; and higher demand for educational goods and services. All this upward movement is putting pressure on infrastructure. In economy after economy, infrastructure deficits are colossal. The collective need suggests a continued golden opportunity for construction firms, equipment makers and engineering services companies in the region.

Huge profile was given to the pursuit of freer trade. The Trans-Pacific Partnership was hailed as a new and very necessary type of free trade deal -- praised for what it will achieve, while at the same time acknowledging the pain of relinquishing various measures of national sovereignty over key issues of policy. Canada's intent to participate gives hope for freer access to regional dynamism -- and the pledge by the Americans and others to conclude talks added excitement to the proceedings.

Not absent from discussions was the need to deal with the thornier issues present in the region. The challenges of corruption, governance, inclusivity and transparency, to name a few, were not ignored -- rather, recent progress was seen as the best evidence that the region is moving in the right direction.

One oft-expressed criticism was the cancellation of U.S. President Barack Obama's visit. But if, as some intimated, this was really a sign of waning U.S. influence, it's amazing that the absence of the President received so much air time.

The bottom line? Key takeaways for Canada from this year's APEC-CEO summit: demand from the region will remain robust, a sign that Canada's diversification of trade and investment will continue. A new thrust in key areas like infrastructure, clean-tech equipment, education and health care services suggest that Canada can gear up for greater participation in this region's ongoing, exciting story.

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  • The housing slowdown

    Canada Mortgage and Housing Corp. predicts<a href="http://www.huffingtonpost.ca/2013/02/22/canada-housing-forecast-cmhc_n_2743550.html"> construction of new homes will fall 11 per cent this year</a>. That could be bad news for the economy, as Canada has come to be more reliant on real estate and construction-related activity than it has been in recorded history. The "FIRE" industries -- finance, insurance and real estate -- amount to 27 per cent of the economy, up from a long term average of 24. A construction slowdown could translate into big job losses.

  • Commodity prices and the oil "discount'

    Prices for Western Canadian oil are about <a href="http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/price-discounts-the-other-half-of-the-barrel/article9027565/">30 per cent below market rates</a>, due to a lack of capacity in the infrastructure bringing Canadian oil to the U.S., as well as the shale oil boom the U.S. is experiencing. The Harper government is lobbying furiously to get the Keystone XL pipeline built and gain greater access to the U.S., but <a href="http://www.huffingtonpost.ca/2013/02/21/keystone-pipeline-gina-mccarthy-epa_n_2735643.html">success on that file is far from guaranteed</a>.

  • Consumer debt

    Canadian household debt has <a href="http://www.huffingtonpost.ca/2012/12/13/consumer-debt-canada-2012_n_2292914.html">reached an all-time high</a>, but in 2012 Canadians still took on more. <a href="http://www.huffingtonpost.ca/2013/02/05/canadian-consumer-debt-up_n_2621024.html">Consumer debt jumped 6 per cent last year</a>. Analysts are growing concerned that Canadian consumers are over-leveraged and will eventually have to make steep cuts to their spending.

  • Consumer spending

    The flipside of Canadians' explosive debt burden is consumer spending, which is now showing weakness as debt loads continue to grow. <a href="http://www.huffingtonpost.ca/2013/02/22/holiday-retail-sales-canada-december-2012_n_2741025.html">Retail sales over the crucial holiday season posted an unexpected 2.1-per-cent decline this past December</a>, signalling that the Canadian consumer may be running out of steam, and finally reigning in those debts.

  • Government austerity measures

    A recent CIBC study estimated that austerity measures <a href="http://www.cbc.ca/news/business/story/2012/08/28/cibc-gdp-government-restraint.html">will shave 0.9 per cent off government spending</a>, which in turn will translate into a 0.2 per cent drag on Canada's GDP.

  • U.S. gridlock

    The sequester debate currently going on in the U.S. is just the latest example of legislative gridlock in Washington that can translate into economic pain for Canada. If the $85 billion in cuts that form the sequester go forward, <a href="http://www.huffingtonpost.ca/2013/02/26/janet-napolitano-border_n_2768080.html?utm_hp_ref=canada-politics">Canada can expect to see gridlock on its borders</a>, harming its very large and important trade relationship with the U.S. Pictured: U.S. House Speaker Joen Boehner.

  • Business investment

    Canadian companies' <a href="http://www.huffingtonpost.ca/2013/02/27/investment-intentions-canada_n_2773101.html?utm_hp_ref=canada-business">business investment plans are at their lowest non-recession point since 1995</a>, an alarm bell for the economy because investment is so important to the creation of new jobs and future profits.

  • Exports

    Canadian <a href="http://www.huffingtonpost.ca/2013/02/08/canadas-trade-deficit-na_n_2645297.html">exports fell 2.8 per cent in the last month of 2012</a>, a sign that Canada's largest trading partner, the U.S., is still struggling to sustain growth. But with Asia experiencing a slowdown and Europe continuing to muddle through its debt crisis, the odds of a pick-up in demand for Canadian exports are slim.

  • Global economic turmoil

    Prime Minister Stephen Harper <a href="http://business.financialpost.com/2013/01/23/global-economic-slowdown-having-fiscal-impact-on-canada-harper-says/">recently noted that a global economic slowdown is having an impact on Canada</a>. “There has been a general slowing of the global economy over the past half-year so it is obviously a concern to us. And…it’s going obviously to have some fiscal impact on us, will have some impact on the pace of job creation," Harper said.

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    Number of job-seekers for every job available, in the three months ending in January, 2013. Source: StatsCan

  • Prince Edward Island - 15.1

    Number of job-seekers for every job available, in the three months ending in January, 2013. Source: StatsCan

  • New Brunswick - 13.5

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  • Nova Scotia - 12.3

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  • Nunvaut - 10.7

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  • Ontario - 9.3

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  • Quebec - 8.6

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  • British Columbia - 5.6

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  • Northwest Territories - 3.9

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  • Best (tie): Alberta - 2.0

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  • Yukon: data not available

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  • Administrative & support - 4.5

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