Launch of the new Chinese renminbi (RMB) currency trading hub in Canada this week will help Canadian exporters lower costs and reach new customers in Asia. Yet despite the wealth of growth opportunities for trade and investment in Asia, Canada has largely focused on supplying natural resources such as coal, metals, agricultural and forestry products, to the neglect of other goods and services. Canada will need to diversify its exports if it wants to remain competitive in Asia, according to two new Conference Board of Canada reports.
“Canada’s economy and living standards have benefited tremendously from Asia’s seemingly insatiable demand for natural resources over the last decade,” said Jacqueline Palladini, Senior Economist, Global Commerce Centre. “But with Asian economies shifting gears to slower growth in demand for raw materials, it’s time for Canada to see what other fast-growing opportunities are available.”
The report, Raising Our Game Across the Pacific:The Changing Nature of Canada's Trade with Asia, reveals that bilateral trade with Asia almost doubled in the last decade, making it Canada’s second largest trade relationship. However, Canada has struggled to maintain its share of Asia’s market. In 1993, Canadian goods accounted for 2 per cent of Asian imports, but by 2013 Canada's share had been cut in half. During that period, Canada dropped from being the 15th largest exporter of goods to Asia to 23rd place. In addition, growth in investment and commercial services sales are weak.
Within Asia, demand is changing as aging demographics change consumption patterns, rising wealth enhances consumer tastes, and young developing countries require infrastructure and education. Moreover, China is shifting to domestic-driven growth and the commodities supercycle is drawing to a close. The report, Beyond Coal: Tomorrow's Fast-Growth Opportunities in Asia, identifies goods and services where Canada has export strength and represent fast-growth opportunities for Canadian business in Asia. They include: autos; pharmaceuticals; iron/steel; nickel; rubber; food products; health services; finance and insurance; engineering and architectural; education; and digital services.
Some of these products are already being exported to Asia – for example insurance services – but there is further potential for growth. Canadian businesses will need to think about new ways to leverage their strengths to meet Asia’s fast growing needs. Trade and investment deals with Asian nations, and launch of the RMB hub in Canada, can support Canadian businesses as they expand abroad.
Each growth opportunity will require on-the-ground research and planning by Canadian firms to be successful. In addition, Canadian businesses will need to establish local connections to develop strong networks and adapt products and services to Asian markets.
Source: Conference Board of Canada