Chance to boost food exports
Low loonie offers opportunities.
We are getting our fill of economic news.
The loonie nudges and bobbles. Economists bravely play the game of forecasting. (Science it is not.) Consumers, weary of being the engine of the economy, shudder under the weight of too much debt, attempting to mentally balance the macro upside of a slumping dollar (increased exports) against the sharp micro pain of, well, actually living (cauliflower at $6.99). Let’s try to pry loose a few facts. The Global Markets Action Plan, set by the previous federal government, laid out a stark statistic. Of the more than 1.09 million SMEs operating in Canada, just 41,000 were exporters.
SMEs are small and medium-sized enterprises, the “small” employing fewer than 100 workers, and the “medium” employing fewer than 500. We know these to be the businesses often described as the “backbone” of the Canadian economy.
So. A lower loonie benefits exports, but the act of exporting is something that Canadian companies, or at least a preponderance of them, are not very good at.
This is problematic. A report last spring by the Toronto Region Board of Trade chastised Ontario compa- nies for missing the boat on global trade. Yes, the (formerly) stronger Canadian dollar was an inhibitor. But is something else at play? Wariness? Timidity?
The report pointed out that 69 per cent of SMEs in Switzerland, which has a population smaller than Ontario’s, are exporters and that “Ontario and Toronto would do well to draw inspiration from the Swiss example.”
Here’s another comparison: In 2004, Ontario’s exports to China, at $1 billion (U.S.), were slightly higher than Illinois. By 2013, Illinois’ exports to China hit $5.7 billion, more than a fivefold increase, while Ontario’s barely doubled.
The comparison is useful as economic size and distance from market are seen as important trade volume indicators. Ontario and Illinois are neck and neck by definition, but miles apart by outcomes.
Leaving aside China’s severe retraction and therefore its diminished demand for Illinois harvesters or its high-sulfur coal — the state’s exports to China dropped sharply in 2014 — the fourth and fifth largest exporting industries from Illinois were food and beverage
“One obvious reason for Ontario’s poor export performance in recent years was the rapid appreciation of the Canadian dollar,” the report stated. “It eroded the competitiveness of the province’s exporters. But the dollar cannot tell the full story. Another key reason is the failure of the province’s exporters to penetrate fast growth markets, particularly China and other parts of Asia.”
“Failure” is a strong word. Here’s a sectoral slice: China has in fact supplanted Japan as the second largest destination for Ontario food exports, after the United States. Exports through the first three quarters of last year are up 13 per cent over 2014, the latest figure being $716 million. (That includes Hong Kong.)
Ontario wines, not just of the ice variety, are growing in popularity. Canadian processed food is in demand. Chinese retailer Beijing Hualian Group, or BHG, opened its first international procurement office in Toronto last year. BHG is big in hypermarkets and supermarkets. There’s a whole other story there. Why am I telling you this? Here are a few cocktail party stats: There are 900 food manufacturers in the city of Toronto. There are 60,000 workers employed in that industry within the census metropolitan area.
Measured by employees, Toronto is the second-largest food-producing cluster in North America, after Los Angeles. In 2011 it was in fourth place, following L.A., New York and Chicago. Of course, it hopes to be number one.
This is the flip side of the top-line industry stories in recent years. A dollar at par didn’t help win favour from international conglomerates that took the opportunity to pull back on Canadian operations. You might think of Christie’s, or Heinz.
That’s branch-plant thinking. But we are good at this, people. We are good at food. A lower dollar should help us prove the point. jenwells@thestar.ca