Canada’s Export Strategy
Global economies have been heavily impacted in the wake of Covid-19. The coronavirus has created dramatic negative impacts on global growth and trade. The government response to restrict large components of the economy to safeguard public health resulted in massive job loss, reduced tax revenues, diminished consumer confidence, and increased public debt. As a result, Canada’s economy is expected to contract about 6% this year, reflecting about $100 billion less in economic output. Losing 6% of our economy is like loosing the entire contribution of the Atlantic provinces.
Meanwhile, 2020 continued to demonstrate the impacts that climate change is having on our planet. The increased frequency of extreme weather events such as the wildfires along the west coast of the United States has only emphasized our need to be better stewards of our planet. In the wake of these circumstances, Canada needs to be strategic in how it pursues an economic recovery. Canada should focus on the simultaneous goals of decreasing the domestic emissions intensity of our products while increasing exports where these exports lower global emissions.
Canada depends heavily on international trade, with goods and service exports representing almost a third of the national economy. Exports will play a key role for Canada in any economic recovery. Merchandise exports alone account for ~$538 billion CAD while services represent another ~$130 billion CAD. The majority of Canada’s trade currently occurs with the United States; however, an increasing portion belongs to rapid-growth countries in Asia. Canada has been successful negotiating trade agreements with some of the largest markets in recent years, including renegotiating with the United States and Mexico, a free trade deal with Europe, and with countries in the Pacific. These agreements are likely to increase both Canada’s opportunities and dependence on exports for economic wellbeing moving forward.
Canadian exports are dominated by the resource sector, including energy, agriculture, forestry, mining, and the processing and refining of products from these sectors. Canada’s abundant natural resources, including water, land, forests, and minerals, create a natural advantage in many of these industries and help to explain why Canada’s exports exceed its proportionate share of the global market. Export-related sectors also employ a large number of Canadians. One in five Canadian jobs stem from goods-producing industries, including manufacturing, resources, and agriculture. Additionally, industries with direct ties to exports typically offer higher than average wages. For example, weekly earnings in the mining, and oil and gas industries are approximately double the national average, earnings from jobs in the forestry sector are typically 15% higher than the national average, and earnings from jobs in the manufacturing sector are typically 10% higher than the national average. Therefore, Canada’s export industries are vital in creating long-term jobs, a healthy middle class, and a vibrant Canadian economy.
Common criticisms of current green-based economic strategies are that they harm the existing economy and that they risk shifting the location of emissions as opposed to reducing global emissions. However, a new pattern of thinking about “green” economic recovery is beginning to emerge. Studies that show the benefits of promoting domestic industries that have a carbon advantage are starting to be released. A study by the Business Council of British Columbia is one example. Earlier this year, it released work showing the resource sectors of B.C.’s economy that have a carbon advantage over other international suppliers. Another example is found in the work of the U.S. based Climate Leadership Council that released work showing the United States enjoys a carbon advantage in many sectors of its economy relative to its trading partners. The Climate Leadership Council went on to assert that competitiveness and climate actions may be both compatible and mutually reinforcing. The studies authors also claimed that a simultaneous approach to competitiveness and climate can be done unilaterally as it does not specifically require international agreements to undertake policies such as border carbon adjustments.
Canada has a strategic advantage with a low emission electricity grid and the opportunity to continue to add low/zero-emission power. All Canadian exporting industries have both the potential and the imperative to continue to reduce their emissions intensity. One of the easiest ways is to further increase the use of electrification within these sectors using zero-emissions power or switching to natural gas where this electrification is not possible. Another is to leverage the many initiatives and Canadian efforts on clean technologies and industrial solutions to reducing emissions.
The global recession does not provide an excuse to lose Canada’s progress towards emissions reductions. Canadians understand the importance of sustainable resource use and responsible consumption; the solution to an economic downturn does not involve putting the planet or the future at risk. Instead, Canada requires a plan that respects the need for reduced emissions, both domestically and internationally, while supporting economic recovery. Canadian products – with low-embedded carbon – can reduce global emissions. An added benefit of this type of climate-focused export strategy is the opportunity to help to heal regional rifts by facilitating the success of the existing economic engines of each region in Canada while challenging them to continue to reduce emission and become world leaders.
Now is not the time for an economic experiment. In the wake of an unprecedented economic downturn related to Covid19, there is an opportunity to be purposeful in recovering Canada’s economy by building on our existing strengths as a nation of exporters. We have the opportunity to build a common vision of Canada’s environmental, economic, and social future – one where Canada is the preferred vendor of low-carbon goods and services to local and global markets.