The trade game has changed for Canada. Over the past decade, China’s and other emerging markets’ rapid economic growth created a surge in demand for Canada’s natural resources, driving gains in Canada’s exports and wealth.
But now, the commodity super-cycle is drawing to a close, and Canada can no longer count on high resource prices. As we start 2016, it will be key for Canadian companies to look for new opportunities to grow their international business—and Canada’s living standards by extension. We have therefore identified five trade trends for 2016, based on Conference Board of Canada research.
The US economy is back!
Trade with the US essentially flat-lined over the past decade. But, fortunately for Canada, our dominant trading partner s economy is rebounding. We expect robust growth in U.S. demand over the next few years. Forthcoming Conference Board of Canada research suggests that Canadian industries such as food manufacturing, commercial services, and machinery manufacturing could take advantage of this strong U.S. demand. That is, if they invest in their capacity and their people, and ensure their products and services can compete in the highly competitive U.S. market.
Emerging markets are slowing down
Emerging markets have had a great run, but their growth is slowing down. That said, they still offer better long-term growth prospects than many of Canada’s traditional markets. They also face serious energy, water, and food challenges, among others. Canada has expertise, products and technologies in all of these areas and can be part of the solution. Companies will need to pick their spots in these highly competitive and very different markets. They will need to identify niches, understand customer needs in specific markets, and differentiate themselves through constant innovation.
The world is increasingly demanding high-value services
Three of Canada’s top 5 fastest-growing exports over the past decade have been high-value services which represent some of the fastest-growing parts of global trade. The U.S. represents the largest global market for high-value services, such as computer and information services. Europeans are demanding professional and technical expertise. Asian markets for high-value services are both large and fast-growing, and our research confirms that Canada is not fully tapping into these opportunities. Canadian companies have expertise and a workforce aligned with this demand, whether they sell such expertise on its own or as part of their product offering.
Free trade agreements will open doors
Canada has had an active free trade agenda, including the recently signed Trans Pacific Partnership and the Canada-EU Comprehensive Economic and Trade Agreement. If both these deals come to fruition in the next few years, Canada will sit at a hub, with freer access to many of the largest or fast-growing global markets. Both deals are exceptional in that they set the rules for the future of global trade. They go far beyond eliminating tariffs to facilitating people movements and investment, reducing the impact of non-tariff barriers, and opening up government contract markets. Companies that are forward-looking should walk through the free trade doors that have been opened, with innovative products and services to offer in these markets.
The only guarantee is change
The future of global commerce will be affected by the impact of climate change, disruptive innovations and other game changers. We will examine these trends in future Conference Board of Canada research. Game changers such as technological advances bring challenges, but also opportunities. Companies should be preparing for these. Automated vehicles, as but one example, will present huge technology opportunities for Canadian companies.
Danielle Goldfarb is director of the Conference Board of Canada’s Global Commerce Centre. She will be hosting a webinar on these issues on January 14, 2016.
MORE ON EXPORTING AND INTERNATIONAL TRADE:
- 5 Reasons to Be Optimistic About Doing Business in the U.S. »
- What Free Trade with Europe Means for You »
- Should You Be Exporting to the BRICs? »
- Why Canadian Exports Are Playing Catch-Up »
- Is Your Brand Ready to Go Global? »
What trends in global trade are you planning to take advantage of this year? Let us know by commenting below.