Time for companies to cross trade bridges Ottawa has built
EDC is playing its part by getting creative, Kevin Carmichael writes.
Twitter informs me that Jim Carr’s performance as natural resources minister was mixed, but he sure is making the trade portfolio look easy. This week, he hosted a dozen carefully selected counterparts in Ottawa to see if they had it in them to stop the United States and China from wrecking the global trading system. They agreed to meet again in January, so this Rideau Group (my name, not his) might be up to the challenge. “Our resolve for change must be matched with action: we will continue to fight protectionism; and we are committed politically to moving forward urgently on transparency, dispute settlement and developing 21st century trade rules” at the World Trade Organization, the ministers said in a statement Thursday. Those are fighting words by the standards of diplomatic consensus building; the kind of thing I assume Prime Minister Justin Trudeau had in mind when he announced in his victory speech that Canada was back as a visible player in international affairs. If Carr’s initiative makes a difference, his boss might be able to state credibly that he lived up to his Election Night promise to the globalists that voted for him. Even better was the news that the Senate had signed off on the enabling legislation for the Trans-Pacific Partnership, the agreement left for dead when Donald Trump quit the club within days of becoming president. The TPP-11 now are a symbol of how freer trade can proceed, despite Trump’s protectionism and China’s loose commitment to the spirit of the rules it accepted when it joined the WTO in 2001. The agreement takes effect when six of the signatories complete legislative ratification; Canada was fifth, fulfilling Trudeau’s promise to be among the first movers. Australia is reportedly close, so Canadian exporters could be months away from preferential access to at least a half-dozen Pacific nations. “For those industries that already have experience in Asia, this will be extremely valuable, and in a hurry,” Carr said in an interview Friday. “And for those who don’t, there will be a greater incentive to use our 1,000 trade commissioners scattered all over the world so they can be helped to become trade ready.” That’s clunky. But I wanted to get those words on the record because they show that Ottawa finally understands that the only Canadian companies that tend to take full advantage of trade agreements are the biggest ones — and we have relatively few of those. Data show that Germany and other European traders embraced the new CanadaEuropean Union commercial arrangement much faster than their Canadian rivals. Between 2002 and 2016, Canada posted the weakest growth in exports of goods and services in the Group of 20; about three per cent over that period, compared with increases of about 14 per cent for China (first), eight per cent for Australia (seventh), and four per cent for Japan (second last). “Through more recent history … Canada’s trade performance has disappointed,” EDC states in its submission to the 10-year review of its legislative mandate, published Friday. “This poor performance can be attributed, in part, to Canada’s relatively low level of trade diversification and an over-reliance by Canadian exporters on the U.S. market, where — notwithstanding (the North American Free Trade Agreement) — lower cost countries such China and Mexico have dramatically increased their market share at Canada’s expense.” Gravity is as powerful in trade as in nature. EDC’s research suggests that 65 per cent of Canadian exporters go first to the world’s largest economy, conveniently next door; about 22 per cent make another rich, developed country their first international market, while only 13 per cent of Canada’s exporters are “born global.” The agency identified risk aversion as the main reason Canadian traders choose the U.S. market over others. That’s a limitation that the government should try its best to overcome. Most growth in the decades ahead will occur in Asia and Latin America, and yet Canada isn’t there. EDC is playing its part by getting creative; rather then lend exclusively to Canadian companies, it says it is having success at “trade creation” by lending to big companies in India and elsewhere with the condition that they consider sourcing from Canadian firms. EDC also is supplying more information on international markets because it noticed the relatively few Canadian companies that have gone abroad tend to (understandably) hoard that knowledge. The Trudeau government may also have more tricks planned. I asked Carr how he was going to make sure exporters take advantage of Canadian negotiators, who over a decade of hard work have levered open access to big chunks of Europe and Asia; he told me to wait for Finance Minister Bill Morneau’s budget update on Nov. 21. “As we create these bridges, I think that when (exporters) know about these bridges, and the services available to help them take advantage, there will be a lot more activity,” Carr said. “There will be a strategy that we will reveal over the next number of months of ways we will bolster capacity to give capacity to make these trade agreements and the diversification strategy of the government to succeed.”