Last year was full of bad economic news. Jim Stanford writes:
By any definition, 2015 was a lousy year for Canada's economy: complete with a technical recession, plunging oil prices, and big stock market losses. Lurking in the statistics, however, is an unreported but encouraging good news story. There is growing evidence that the national economy is starting to pivot away from past over-reliance on the extraction and export of raw natural resources (and energy in particular). Instead, Canada's high-technology industrial base is starting to flex its muscles once again. And the first place this economic reorientation is becoming visible is in recent data on international trade.
We reaped the whirlwind of a resource dominated economy which sought to make us, once again, hewers of wood and drawers of water. But, if you look more deeply into the numbers, there is some good news:
In particular, the data indicate impressive growth over the last two years in all of the five value-added sectors (led by a 42 per cent two-year compound expansion in other transport equipment, mostly aerospace). This expansion has offset much of the decline in primary exports. By mid-2015, value-added exports surpassed primary exports as the largest component of Canada's exports. By the end of the year, those five sectors were accounting for around half of all exports, compared to just over one-third in early 2014. (Back at the turn of the century, value-added exports were worth twice the primary exports, and accounted for two-thirds of all exports.)
The trade deals which the Harper government signed were focused on the export of resources. But the future is in value added manufacturing:
We all know that energy and mining have been hammered by the global commodities collapse. But other exports are now starting to fill the gap. Statistics Canada defines five broad categories of "value-added" merchandise exports: industries that rely primarily on technology, productivity, and skilled labour, instead of just the availability of natural resources. These sectors include industrial machinery, electrical and electronic products, motor vehicles and parts, aircraft and other transportation equipment, and consumer goods. These technology-intensive products typically command premium prices on global markets (in contrast to depressed commodity prices).
Based on the most recent trade data (up to October), Canada's exports in these five sectors are growing like gangbusters: up nearly 15 per cent year-over-year, on top of impressive 12 per cent growth recorded in 2014. In just two years, therefore, Canadian value-added exports surged by a compounded 28 per cent. In contrast, exports of "primary" products (minimally processed resources, including agricultural, energy, mineral, and forestry products) declined nine per cent over the same time -- dragged down by slumping commodity prices.
In January 2014, the five value-added categories accounted for just 35 per cent of total Canadian merchandise exports. By late 2015, they accounted for half. In fact, once the year-end numbers are in, it seems certain that Canadian value-added exports will set a new annual record (about $240 billion), finally surpassing the previous peak set back in 2000.
There is a lot of bad news in the air. But opportunity is the flip side of crisis -- if our government is wise enough to reorient our economy.
