Canada is often touted as a great trading nation. Perhaps, we are. In 2019, Canada’s share of exports in Gross Domestic Product (GDP) was 32%, according to data compiled by the Business Council of BC (BCBC). That is somewhat higher than the share of the Organization of Economically Developed Countries (OECD) at 28%. The US, for example, was listed at 12%, the UK at 31% and Germany at 47%.
Since 2000, however, Canadian exports have fallen as a share in GDP, while almost all other developed economies have increased their exports as a share in GDP. This is not surprising, given persistent structural problems in the Canadian economy.
Peacock and Finlayson of BCBC calculate that, in Canada and BC, exports as a share in GDP fell sharply by 12% and 10% respectively from 2000-2019. The OECD showed an increase of 5%. The US increased by 1%, the UK by 6% and Germany by 16%. Amongst the causes of Canada’s declining share of exports, say the authors, has been, “sluggish private sector capital investment (especially … in machinery, equipment and intellectual property)”. The CD Howe Institute calculates for every dollar of capital investment by an average firm in the OECD, the average Canadian firm invests only 60 cents.
To improve capital investment, says David Wilson of BCBC, structural reforms are necessary to outdated federal and provincial tax systems, to “byzantine” regulatory systems, to corporate taxes on scaling (higher tax rates on larger firms) and to high inter-provincial trade barriers (estimated to be equivalent to a tariff of 7%). In BC, Wilson points to the Provincial Sales Tax, which is inefficient relative to the Harmonized Sales Tax, and the BC carbon tax, which is more onerous than the federal carbon tax.
In Canada, Alberta has by far the strongest investment record. Alberta enjoys a more competitive tax system (no PST) and a world class, innovative petroleum industry operating at scale. BC’s record is slightly below the country as a whole, and is weighted more heavily on residential investment.
Exports are vital to the economy. Greg D’Avignon, President of BCBC, explains that growing exports is, “a simple and effective way to grow the economic pie and inject revenues into BC from customers who want what we sell.” The earnings, he adds, allow us to buy things that we don’t produce domestically.
If Canada and BC are going to have a promising economic future, governments must embrace the reforms advocated by BCBC and other experts. A number of domestic sectors are already competitive, as reflected in export figures. In BC, the top export products include: Wood products - $12.5 billion, Pulp and paper products - $4.0 billion, Agriculture and food products - $5.0 billion, Metallic ores and products - $8.2 billion, Energy products - $15.3 billion, and Machinery and equipment - $5.2 billion.
Exciting opportunities exist in BC to increase exports in numerous, potentially, high-growth sectors. First, BC LNG is very clean relative to competitors’ LNG. It has a ready and massive market. Currently about 2500 coal-fired power plants operate world-wide. Many will be recommissioned as or replaced with gas-fired plants. And LNG offers a viable source of energy for energy-starved Europe. One LNG plant is under construction in BC, and two are in development. There is ample opportunity for more.
Second, the hydrogen sector presents opportunities in BC. Vancouver-based Ballard Power, with a staff of over 900, designs and manufactures commercial fuel cell engines, and sells them around the world. A number of other firms, primarily in the lower mainland, manufacture fuel cells and produce and distribute hydrogen. BC boasts about half of the companies in Canada in the hydrogen sector.
Third, mass timber enables the construction of multi-floor and large dimension wood buildings, formerly requiring the use of concrete and steel. Mass timber manufacturers fuse smaller pieces of wood together with dowels, nails or glue to form large structural components likes beams, columns and panels. Hundreds of mass timber buildings have been constructed across the province. Several BC mass timber makers are already exporting widely. One such plant, Structurlam, is located in Penticton.
Fourth, about 300 wineries are based in British Columbia, producing a wide selection of quality wines. The Okanagan contains 86% of the vineyards and a majority of the wineries in the province. Although the industry enjoyed winery revenue of $443 million in 2019, and claims an economic impact of $2.8 billion, it is not currently a large exporter. In 2016, exports were $9.7 million. BC performs impressively in international wine competitions. So as the industry develops, exports are destined to expand.
These are just a small sample of new and upcoming industries. BC is gifted with innovative technologies, people and companies. Governments need only free them of unnecessary burdens. Effective structural reform, if undertaken, will improve competitiveness and amplify exports.
Bruce W Uzelman
I grew up in Paradise Hill, a village in Northwestern Saskatchewan. I come from a large family. My parents instilled good values, but yet afforded us, my seven siblings and I, much freedom to do the things we wished to do. I spent my early years exploring the hills and forests and fields surrounding the village, a great way to come of age. My parents owned a successful general store. My siblings and I were required to help out in the business, no choices allowed there!
I attended the University of Saskatchewan in Saskatoon. I considered studying journalism at one point, but did not ultimately pursue that. However, I obtained a Bachelor of Arts, Advanced with majors in Economics and Political Science in 1982.
My career has consisted exclusively of small business, primarily restaurant and retail. I was originally based in Alberta, and then BC, first in Summerland, then Victoria and finally Kelowna (for over 20 years). I was married in Alberta, and we have two daughters, who have returned to Alberta as adults for career reasons, as did my now ex-wife. My daughters are successful, and now have families of their own.
I have maintained a healthy interest in politics throughout my adult years, and wish to put that and my research skills to work as a political columnist.