(Peter Hall – Export Development Canada)
Throw all the eggs into one basket, and if it’s the right basket, you can do alright – as long as the basket is OK. But if anything happens to the basket, you are fresh out of luck. It’s exactly the same with industries. Those selling only narrowly-defined products are vulnerable to market shifts and innovation. Those dependent on a single buyer or market are similarly exposed to movements that are largely beyond their control. Diversification is well-known wisdom, but oh-so-easy to forget in boom times. How is Canada faring in our industrial diversification?
Progress on trade diversification over the past 15 years is likely one of the most remarkable developments in Canadian economic history. A strong dependence on traditional markets was only enhanced by the Canada-US FTA, which saw exports to the US soar to over 85 per cent of the total. But a big shift began in the New Millennium. Beset by a thickening Canada-US border, the tech wreck and a rapidly-appreciating loonie, Canadian exporters looked to fast-growing emerging markets for growth. They hit a goldmine. While US exports barely budged, exports to emerging markets soared by an average annual pace of more than 10 per cent, raising their share of total exports from 5 per cent to over 12 per cent – a trend that is still on the rise. If the same patterns continue, emerging markets could account for almost one-third of total Canadian merchandise exports.
How are we doing industry-by-industry? The results are telling. Canada’s top three merchandise export industries are, in fact, highly concentrated. Close to 100 per cent of oil and gas exports, which in 2014 accounted for almost one-quarter of total goods exported, go to the US market. Add in refined product exports, also highly concentrated, and you get another 5 per cent of exports. Click here to read more.