Still buoyant

Central to the outlook for the Canadian economy is our export trade.

That accounts for just over 30 per cent of our GDP, obviously a mainstay for our prosperity. Most of us are not particularly interested in our foreign trade, but a review of recent results provides grounds for optimism, and are a kind of thumbnail sketch of the world’s economy.

Nevertheless, it appears that trade’s share of the general economy is becoming less important. Why?

Previously, say up until 2008 and the financial crisis of that decade, international trade had been increasing at a phenomenal rate. We developed a taste for foreign goods, importing luxury items such as exotic luggage and foreign-designed clothes, U.S. new technology, German and other continental automobiles.

Labels from distant lands became status symbols. Cross-border trade increased at a surprising 7% annually, much more than GDP rate.

A reversal seemed inevitable. It was less prestigious to have foreign-made goods as they became commonplace, and furthermore our economy was experiencing a slowdown. What are the factors at work nowadays?

Our companies’ inventories have been built, Italian suits became more ordinary, luxury cars no longer a rarity attracting attention when parked on streets. Productivity here improved so domestic goods had quality improvements, became more plentiful and were less expensive than imports.

Dynamic increases in the volume of imported goods became harder to come by. Parts and materials exported became less important as foreign nations started concentrating on meeting the demands of their own markets.

Then too world trade barriers arose as nations started to focus on domestic markets and goods produced domestically in order to improve their trade balance. Also world trade barriers were imposed recently for political reasons, adversely affecting international movement of goods and services.

As for Canada there have been other impediments to our foreign trade.

An unusually cold winter led to factory shutdowns and curtailed retail trade. There was less need to replenish inventories because of the weather-related shutdowns. The reviewed weakness of energy prices certainly hurt our exports.

As a result Canada reported a record shortfall in exports, but most believe that this will be reversed before long. Already energy prices have climbed 20% from their lows.

The U.S economy has resumed its upward trajectory and that will draw in more Canadian exports. There was another factor as well. A west coast labor dispute curbed our exports, but that dispute has been resolved.

Thus, the slowdown in international trade and Canadian exports reflects many things, but should not be a concern. The Canadian export market looks particularly buoyant, a major plus for our economy.


Bruce Whitestone