“Conventional wisdom is that Canada’s trade is overwhelmingly focused on the U.S. market,” says Export Development Canada (EDC) Senior Analyst for Daniel Koldyk. “This view relies on customs-based export data, which does not capture Canada’s broader integration into global value chains. When we incorporate value-added export data and foreign affiliate sales, it becomes clear that Canadian companies are growing and prospering overseas. In fact, foreign affiliate sales in emerging markets alone are projected to overtake those in the U.S. by 2018.”
A new study led by EDC researchers has been published in the latest report from the Institute for Research on Public Policy (IRPP). In this report Koldyk, Lewis Quinn and Todd Evans detail a new way of calculating trade diversification using value-added export data and foreign affiliate sales, as well as the traditional customs based export data.
The good news for Canadian businesses who have adopted an integrative trade approach is that overseas activities can allow them to increase revenue streams, tap into the new growth centres, generate exports and contribute to the Canadian economy.
“More work overseas does not mean less activity in Canada,” says Koldyk. “In order to be successful in the offshore market, you need a strong domestic operation. This means that you need more professional services, researchers, and administration at home. In other words, as companies grow offshore, they grow at home as well. Offshore growth also enables companies to achieve scale, which allows them to compete with their global rivals and increase their market value.”
In an advance chapter from the volume Redesigning Canadian Trade Policies for New Global Realities (forthcoming), the authors provide a fuller picture of Canada’s economic links with the world.