Unheeded warnings have spelt disaster at various points in history. Past prophets of future events that actually occurred were tuned out, jeered, or much worse. In many cases, their predictions seemed too fantastic, and required such drastic measures that the fateful ‘wait-and-see’ option was taken by most. Trade diversification toward Asian markets is a much more believable inevitability, as it is already in the works, and is predictable by very simple math. If so, why are so many Canadian exporters in denial, or dismissive about it?
The top reason is our big market to the south. Without a doubt, it should be our biggest concern, the market that we nurture the most; in short, the big draw. But like naysayers of old who shunned warnings by assuring everyone that things would always be as they now are, prominent Canadian economists claim that growth dynamics notwithstanding, it is impossible for other nations or regions to supplant the U.S. market as our ‘number one.’ We need to be reminded that it is actually already in the works; that it’s going to continue, as potential growth in Asia is far greater than in the U.S., for far longer; that growing Asian per capita wealth is increasing its need for the goods we produce; and we have a comparative advantage in goods and services that Asia has a critical need for.
If diversification of global GDP is inevitable, our participation in it isn’t. Other parts of the planet are eyeing this burgeoning business and aligning their strategies to service it as best as possible. Germany has zoned in on China’s needs, and awakened European interest in broader Asian prospects. Australia has long since incorporated China and other fast-growing Asian markets into its strategy, with resounding and transformational success. Had it decided to stick to traditional markets, Australia would today be a much poorer place.
One of our key impediments in Canada is that we seem to have a natural aversion to the risks, perceived or real, of dealing in Asian markets. When our traditional business is doing well, we tend to put the bulk of our eggs into that basket. Trouble is, risks in our traditional markets have risen substantially: the new North American trade deal is still up in the air; U.K. trade is being compromised by the Brexit impasse; CETA promises more EU trade, but hasn’t yet caught on here. Threats to our ‘safe trading space’ may be creating space to think about other markets.
Canadian government policy is increasingly aligned with the realities of diversification. We have a newly-signed CPTPP, and more deals in the works. Federally, we have a minister not just of international trade, but of international trade diversification. Provincially, there is more emphasis on non-traditional export markets, and it’s no longer just a West Coast phenomenon.
Business economists are actively discussing diversification. The dynamics of the numbers are increasingly compelling, and suggest that Canada is on the cusp of a revolution in the direction of our trade. If current trends persist, China could be Canada’s top merchandise trading partner in just over a quarter century. It’s almost inevitable inside a half-century. Most exporters are stunned by these figures, and don’t have a plan to match. Today and tomorrow, a roundtable of trade experts organized by Global Affairs Canada is discussing trade diversification issues in Vancouver, unearthing facts that will hopefully up the volume on the clarion call to exporters.
The best advocates for Asian trade diversification are the prescient Canadian exporters that are already doing it. But even their results aren’t convincing Canadians in other industry sectors that the bonanza is also coming their way. One clear message from those currently engaging in Asian export business is that demand is not, and has never been, the risk; if there is something that keeps them up at night, it’s creating enough capacity to reliably meet future demands. There’s nothing automatic about that; scaling up is essential, but doesn’t happen without considerable planning and investment.
The bottom line?
Future relevance requires a good read of where things are going. Current activity is sending out signals that map out the inevitable, strongly encouraging a diversification discourse that goes far beyond what we have experienced to date.
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