OTTAWA, Feb. 11, 2016 /CNW/ - The revival of the U.S. economy offers Canadian industries expanded opportunities for growth in a new trade era, but relatively few Canadian industries are well-positioned to take advantage of the opportunities.
The commodity supercycle is over and emerging market growth is slowing, while the U.S. economy is finally able to put the recession behind it. A new Conference Board of Canada report from the Global Commerce Centre identifies the industries that possess all the components needed to take advantage of U.S. growth: increasing demand, strong capacity to meet rising demand, and a competitive position in American markets.
- The U.S. economy has revived and growth in emerging markets is slowing, which means that Canadian industries can once again look south of the border for growth opportunities.
- Four of the five industries best-positioned to take advantage of the strengthening U.S. economy are service industries.
- Six industries can capitalize on rising U.S. demand if they build the capacity to ramp up production. All six are manufacturing industries, and include motor vehicle parts, wood products, aerospace and transportation, pharmaceuticals and clothing.
"In many ways, this new trade era will be reminiscent more of the 1990s when Canada saw strong growth in exports to the United States, but much has changed since then," said Jacqueline Palladini, Senior Economist, Global Commerce Centre, and author of Canada's Next Trade Era: Which Industries Are Prepared to Take on U.S. Demand?
"Companies had to make big changes to their operations in the 2000s to stay competitive during what was a tough time for many. Although many firms scaled back operations or even closed during that period, the companies left standing may be some of the most competitive Canada has ever seen. Five industries are ready to capitalize from re-energized U.S. growth right now, while six more need to build their production capacity to take advantage."
Five Canadian industries that meet all three requirements to succeed in the next trade era include:
- transportation and government services;
- other commercial services (e.g., wholesale trade and administration);
- computer and information services;
- food manufacturing;
- financial and insurance services.
Four of these five industries are services, a sector that has been among the fastest-growing in terms of exports over the last decade. This strength has allowed services exporters to build up capacity in their industries, and positions them well for the next trade era.
Six industries are identified as having strong demand and are competitive in the U.S., but lack sufficient capacity to ramp up production quickly in response:
- wood product manufacturing;
- pharmaceutical and medicine manufacturing;
- aerospace product and parts manufacturing;
- other transportation manufacturing (e.g., rail and shipbuilding);
- clothing manufacturing;
- motor vehicle parts manufacturing.
All six industries are in the manufacturing sector, which struggled mightily during the last decade. Many manufacturers now lack sufficient capacity to boost production quickly in response to growing U.S. demand.
These six manufacturing industries, however, have found ways to enhance their competitiveness or have otherwise benefited from the lower-valued Canadian dollar. This makes them prime candidates for investments in capacity, whether by expanding their plants, upgrading their machinery, or hiring more workers. These industries must be strategic about where and how to invest in physical capacity and in hiring workers with the skills and training needed.
Governments can support firms in this new trade era by focusing on improving labour mobility and skills and transportation networks.
The Conference Board of Canada will host a webinar titled Canada's Next Export Era: Bringing Trade Back to the Future on February 25, 2016.
The Conference Board of Canada's Global Commerce Centre provides evidence-based tools to help companies and governments respond successfully to the trends reshaping the global business environment.
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