The global see-saw in trade policy perspectives meant that there was lots to discuss with exporters this spring. In a nutshell, our Global Export Forecast theme covered the general debate on trade, the expected outcome, the effect on the global economy and implications for Canada. EDC Economics’ perspective on this led to a lot of great questions. In fact, during my 13-city cross-Canada Let’s Talk Exports forecast tour, I was asked over 50 questions by conference attendees. What exactly was on the minds of Canadian exporters?
Top of the list was the US political situation. Add it all up and this group accounted for 18 per cent of the questions received. This was particularly notable, given that one-third of the presentation dealt with this subject. I suppose we expected that would address most of the questions people had, but it seemed to probe them further, increasing the appetite for more insight. Within this subject, the questions were quite varied, but a number of them dealt with possible strategies for dealing with the new reality, from diversification elsewhere to relocation and negotiation strategies. They kept me on my toes!
Top spot was shared by another key issue: domestic policy, on a whole range of subjects. Recall that during the May-June period, there was an election in British Columbia that threw the issue of trans-mountain fossil fuel pipelines into limbo. There was also minimum wage talk in Ontario, speculation on how federal and provincial policies were hurting or helping the trade policy situation with the US, the standard concerns about government debt levels, US corporate tax reductions and the oft-asked questions on infrastructure. There was a lot up in the air, and in general it remains there, so there was little that could be said definitively in response to these questions outside of describing the economic context and speculating on possible outcomes.
Industry inquiries were close behind, accounting for 16 per cent of all questions asked. These were all over the map, and were essentially focused on regional issues, and in response to recent developments. For example, in Quebec there were questions on the aerospace industry, largely related to the Boeing threats of action against Bombardier. Most popular were a group of questions on the outlook for the oil & gas and mining industries. Housing was a hot topic, as ever, and the softwood lumber dispute led to questions on possible outcomes.
Tightening economic conditions and central bank activities piqued interest in the near term view of interest rates. Given that the presentation included a discussion of near-term monetary policy in Canada and the US, questions were probing the likely effects of tighter liquidity. The response was generally that policy is moving from ultra-loose to a normalization of conditions – with some uncertainty about what that really means. Audiences generally wanted to be assured that higher rates would not kill economic activity, which we were able to do as we believe that rate increases will accommodate nascent growth and prevent it from getting out of hand.
Following closely were questions on currencies. In general, there was worry that policy turbulence and the associated uncertainty would cause currencies – especially ours – to do strange things. As our core forecast presumes no major changes in trade policy, with good reasons given to back up this view, it was then a matter of walking audiences through our currency model, which looks at commodity price movements, Canada-US interest rate differentials, global events that impinge on the value of the greenback, and Canadian domestic developments. As such, our forecast makes the case for currency stability – against both the US dollar and the Euro – amid the policy storm.
The remaining questions dealt with country issues (‘next’ markets were a popular topic), local issues and the balance, an amalgam of questions that were so diverse that they can’t really be classified. Among them were two very interesting questions on the impact of automation on the longer-term outlook.
The bottom line?
Audiences were very engaged right across the country, and in a few cases, we had to shut down the question period to respect attendees’ schedules. Policy turbulence suggests that such sessions will be lively for some time to come. If you have any burning questions, please send them along.