Fall economic statement sets target of 50 per cent export growth by 2025

Finance Minister Bill Morneau's Fall Economic Statement puts more money where the Trudeau government's mouth is on its trade diversification strategy, in an attempt to nudge more businesses into pursuing export markets beyond the United States.

A new export diversification strategy allocates $1.1 billion over the next six fiscal years, starting in 2018-19, to improve infrastructure and provide more resources and services for exporters.

The goal is to boost Canada's overseas exports by 50 per cent by 2025, particularly in sectors that have demonstrated potential in certain parts of the world.

For example, when Morneau and International Trade Diversification Minister Jim Carr were in Beijing earlier this month, they set a goal of doubling Canada's agrifood exports to China by 2025, and growing farm exports globally to $75 billion annually by that same year.

Wednesday's economic statement noted that agriculture makes up more than six per cent of Canada's gross domestic product. The government is allocating $25 million over the next five years to "enhance federal capacity to address situations where Canadian agricultural producers may be prevented from selling goods in international markets."

The Liberal government's trade agenda touts the economic growth potential of opening up new markets for Canadian goods and services. While Canada has negotiated preferential trade deals with every G7 country, its exports of non-energy goods which represent about two-thirds of total export volumes have remained largely unchanged over the last decade.

The economic statement notes that 99 per cent of Canada's oil is exported to the U.S., creating a "near-total reliance" on the U.S. market. Canada will face pipeline transportation constraints until the TransMountain pipeline extension, now owned by the federal government, is built.

A recent analysis of import and export data for the first months following the implementation of the Comprehensive Economic and Trade Agreement (CETA) with the European Union found that Canadian exports weren't significantly up, or weren't growing as fast as EU exports to Canada, under the terms of the new deal.

Canada's share of goods exported to emerging economies (developing countries) is also lower than the share claimed by the countries it wants to compete with internationally. The Department of Finance attributes this to a reliance on the U.S. market but given the protectionist measures implemented by Donald Trump's administration, too much focus on American customers is risky.

Morneau's statement Wednesday announced that, out of the $597 million collected so far through Canada's recent retaliatory tariffs (introduced in response to U.S. steel and aluminum tariffs), $250 million will be put into an existing strategic innovation fund to pay for new investments in the sector.

New transportation infrastructure funding

While relying on the American market has drawbacks, taking advantage of new market opportunities presented by American trade policy decisions can be equally difficult. Take soybeans, for example: retaliatory tariffs put in place by the world's biggest soybean buyer, China, have all but shut U.S. farmers out of a key market as other countries have moved in. But Canadian soybean exporters were prevented by limited rail transport and port capacity from moving significantly more of their crop to Asia.

Morneau's fall economic statement takes nearly $774 million from infrastructure spending announced in the 2016 budget intended to be spent over ten years and moves it up to fund investments in marine ports, rail infrastructure and highways over the next five years.

An additional $13.6 million over the next three years will be spent to improve rail passenger and freight data, to help Canadian supply chains operate more predictably and efficiently.

The Canadian Trade Commissioner Service will get $184 million over the next five years, boosting its ability to provide advice and services in areas like digital technology, e-commerce and intellectual property.

Its Can Export program, which helps Canadian businesses find new markets, will be tripled in size. Its technology accelerator program, which has helped Canadian firms raise capital in Boston, Philadelphia, New York City and Silicon Valley, will receive an additional $17 million to expand to Delhi, Hong Kong and Tokyo.

Other measures in the update meant to help Canadian exporters include:

• An expansion of a program to help small and medium-sized businesses in the steel, aluminum and manufacturing sectors explore new export markets created by recent trade deals with the EU and Pacific Rim trading partners. A $50 million investment was announced last June, and this economic statement provides $100 million more over six years.
• $13.5 million for a 'mentors' program for "high-potential exporting firms."
• $10 million for partnerships with other levels of governments and business organizations to help small- and medium-sized businesses compete internationally.

No clear amounts for dairy compensation

Anyone hoping to find specifics about compensation for Canada's supply-managed agriculture sectors in Wednesday's statement came away disappointed.

The Comprehensive and Progressive Trans-Pacific Partnership will take effect on Dec.30, opening up new slices of Canada's protected dairy, egg and poultry markets to foreign competition. This market access was a concession Canadian negotiators deemed necessary in order for Canada to receive other benefits from the new deal.

At the time the original Trans-Pacific Partnership was negotiated, the former Conservative government proposed a large compensation package for these industries, worth up to several billion dollars. The Trudeau government has not yet committed to any specific measures, but has formed two working groups to discuss the future of these industries generally, and compensation specifically.

A table included in Wednesday's documents includes a line for "non-announced measures" which could include whatever the federal cabinet eventually settles on as a compensation package but it's not known what percentage of these figures could be spent on compensation.

Scant progress on interprovincial trade barriers

Morneau's statement also re-tells an old story about how the Canadian economy would be more competitive if internal trade barriers were reduced between jurisdictions in Canada.

Canada has had an internal trade agreement in place since July 1, 2017. Public procurement was opened up across provinces, and discriminatory treatment of businesses from other jurisdictions is now not allowed. A new dispute resolution process is also being implemented.

But it's not clear how many regulatory barriers have been addressed in the months since.

It's an issue Canada's premiers have been wrestling with for years. The next meeting of Canada's First Ministers, scheduled for Dec. 7, will revisit the subject again.

Wednesday's statement includes a list of 23 items in a "work plan," prioritized in four categories: goods transportation (including trucking), food inspection, construction services and alcohol liberalization.

While the federal government participates in the federal-provincial committee on internal trade, most of these action items fall under provincial jurisdiction. The federal government has addressed just two of them: by eliminating restrictions on organic labelling for aquaculture products and by repealing inspection requirements for some agricultural products.

Wednesday's statement announced some new funding for the National Research Council to make access to national building codes free to help small businesses and to provide a boost to the construction sector. Ottawa is working with provinces and territories to encourage them to adopt the national codes, so the industry isn't dealing with different rules across Canadian provinces.