June/July 2007

Supply Side

The federal government ignores export trade

By J. Baird

This issue of CIM Magazine is devoted to exports. Indeed, Canada’s mining industry contributes mightily to our nation’s economy and export performance. Mining’s $42 billion contribution to Canada’s GDP includes $10 billion in mining extraction and $32 billion in mineral processing and manufacturing. A full 80 per cent of this production was exported in 2005, worth 14 per cent of the total value of all Canadian exports in that year. Further, 60 per cent of total railway freight revenue and 70 per cent of total port volume was due to mined commodity shipments. Would we have railways and ports if we did not have mines?

Canada’s overall trade performance was strong in 2006, but was showing some signs of weakness. Exports grew by 1.1 per cent to $524 billion, but imports grew 4.2 per cent, leaving the trade surplus at $37 billion, down $14 billion from 2005. Note that mining industry exports are about 90 per cent of our trade surplus. When and if commodity prices weaken and if the US market takes a downturn, Canada may wish that it had embarked on a trade promotion and trade diversification strategy.

Opposition trade critics were quick to point out that the March 19, 2007 federal budget did not add more resources to the international trade department to help promote Canada abroad. Because the trade lobby is weak and because few votes are to be gained on the trade issue, this is not surprising, given that the budget was designed for political electoral purposes.

Earlier this year, the government closed four consulates in Russia, Italy, and Japan. These closures come at a time when many believe that Canada should be diversifying its export markets away from the United States, to whom we currently ship over 85 per cent of our exports. More profoundly, the budget lacks a broad, overall vision of the need to enhance our productivity, which has been lagging behind many other countries.

On April 18, Embassy, Canada’s foreign policy newsweekly, reported on unconfirmed indications that Canada will close another 19 foreign missions. The rumour was not denied by an official within Foreign Affairs Minister Peter McKay’s department, which is struggling to deal with a $142.8 million cut to its budget. Ask any exporter that travels and does business in foreign countries and he or she will tell you how useful the Canadian Trade Commissioner Service is. Yet only 25 per cent of Canadian diplomats are deployed abroad, the lowest proportion of any G8 country.

As I write this, the federal government’s Standing Committee on International Trade is wrapping up a report on their study of how the government can improve Canada’s trade policy, started last October. Some recommendations have been released, including asking government to “increase its current expenditures on trade negotiation and promotion by a full 50 per cent.” The money would be spent, in part, on “aggressive marketing and promotion of Canada and Canadian products abroad.”

Sandra Pupatello, Ontario’s trade minister, says, “Since the feds won’t do it, we’re doing it,” in an article in Embassy on February 14. She was referring to the fed’s closing of foreign offices while Ontario is opening them. A lack of federal initiative means the provinces must keep Canada globally competitive, although this is more expensive than national approaches and leads to fractionization of the Canadian brand.

Canada is lacking sectoral approaches to export trade promotion, wherein industrial sectors prepare strategies and implement them, with the support of the federal government. We are falling behind other developed countries, like Australia, that are better organized than we are. For mining, CAMESE calls for a strategy to “Brand Canada in the World of Mining” to enhance: 1) investment in this country; 2) acceptance of Canadian explorers and developers working abroad; 3) exports of mining goods and services, and 4) the numbers of students and workers coming to Canada to participate in mining in this country.

Jon Baird
Jon Baird is the managing director for CAMESE.

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