Sept/Oct 2007

Supply Side

The state of Canada’s trade - thank God for natural resources!

By J. Baird

The 2007 annual report entitled Canada’s State of Trade – Trade and Investment Update is available online at www.international.gc.ca/eet. It is a comprehensive 70-page document about where the government thinks Canada stands in the world of trade. Here is a brief review with a focus on the contribution of the mining industry.

For Canada’s international commercial performance, 2006 was, to a large extent, a resource story. Although Canadian exports were up by 1.1 per cent to a record $523.7 billion, Canada would have seen a decline in overall exports in 2006 if it were not for the high prices realized for exports of resources and resource-based products. The expansion of resource exports was also largely responsible for Canadian exports diversifying away from the U.S. as their share of our exports fell to 81.6 per cent, compared to a peak of 87.1 per cent in 2006.

As a result of a stronger growth in imports, compared to exports, Canada’s trade surplus narrowed to $37.2 billion in 2006. In fact, Canada’s trade surplus in resources and resource-based products is now equivalent to the country’s entire global trade surplus.

Resources, along with merger and acquisition activities in a variety of sectors, were the primary drivers of the surge in foreign direct investment (FDI) flows into Canada in 2006, which reached $78.3 billion, more than double the $35.0 billion witnessed the previous year. If I recall correctly, the sale of Inco and Falconbridge alone amounted to over half of the 2006 FDI into Canada.

The report makes a special note of the rise of global value chains. The world is moving away from shipping goods manufactured in one country to a destination in another. Rather, trade is increasingly in incremental inputs and services, and investments are made for location-specific advantages which, in turn, feed into regional or global production networks.

In his introductory message, David Emerson, Minister of International Trade said, “On the global front, we are being outpaced by our competitors: not just by fast-growing emerging economies like China and India, but also by our more traditional competitors such as the U.S. and Europe, who are aggressively pursuing international policies to strengthen their competitive advantage.”

Minister Emerson refers to the government’s Advantage Canada initiative, including the Global Commerce Strategy that was mentioned in the spring budget. As far as I can see, as yet without any specifics announced, these plans are still in the making. In the meantime, here is a quote from the July 4, 2007 issue of Embassy, Canada’s Foreign Policy Newsweekly:

“Senior foreign affairs and trade officials are working overtime to defend the department’s existing programs and strategies and prove they are on board with the Conservative government. The priority is to find ways to support the government’s focus on Afghanistan, North America, and the Hemisphere, as well as growing and emerging markets, especially China and India, while fitting in $42 million in cuts and outlining to Treasury Board why its resources are allocated where they are.”


Jon Baird
Jon Baird is the managing director for CAMESE.

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