When we say goodbye to 2016, few will weep nostalgically. So let us look forward to 2017 with a survey from the experts on what to expect for trade and exports.
Hope in a desperate hour
Peter Hall, Export Development Canada’s Chief Economist, sees hope for 2017.
“There is potential that we’ll see growth accelerate into 2017,” Hall said, and added that the fundamentals are strong in Western Europe and the United States. Even with concern over the future of trade thanks to the Trump victory in the U.S. and Brexit in Europe, strong fundamentals usually mean good things for Canada.
On the subject of NAFTA and Brexit, Hall said 2017 will see policy action on both fronts.
“But right now, I don’t think anyone can say what they will be,” he said. “As we look to 2017, there is a huge grey area on the policy file — we’ve got very little to go on. The UK is talking about declaring article 50 [the Lisbon Treaty clause for leaving the EU], but there’s a debate as to whether it’s even possible without getting the full consent of Parliament. And with the gulf between reality and rhetoric being so wide in the U.S. election, we don’t know what to expect.”
Hall said the final story of 2017 will be the uncertainty and fluidity that comes with it.
“There are markets that are ready to open up again, like Iran, Argentina and Cuba,” Hall said. “It looks like things could soften between the U.S. and Russia and so, a great feature of the coming year is how the current geopolitical situation could shift.”
EDC resources to help you export
Questions around NAFTA
Hendrik Brakel, Senior Director, Economic, Financial & Tax Policy at the Canadian Chamber of Commerce, said the biggest challenge for investors in 2017 will be knowing whether to invest in Canada given that there are questions about the future of NAFTA.
“Even if we tell you it’ll probably be fine, you could ask what those assurances were based on,” Brakel said. “Trump was really clear on renegotiating NAFTA. Sometimes the easiest decision in business is to hold off.”
The strong U.S. dollar was Brakel’s second story for 2017.
“The U.S. economy is firing on all cylinders,” he said. “Its unemployment rate is down to 4.6 per cent. Third quarter GDP was growing at 3.2 per cent. On top of that booming economy, Trump’s plans call for $1 trillion in infrastructure investment. They call for reducing the corporate tax rate and lowering personal income tax rates for the top marginal income. This is a huge amount of stimulus on top of an overheated economy.”
Finally, Brakel said, 2017 will see the rise of the already-strong service sector in Canada, concentrated in Montreal, Toronto and Vancouver.
“In the Bank of Canada’s last policy report, it did a really good piece on how all the incredible growth that’s going on is being done in the service sector,” Brakel said. “The top five sectors were financial services, engineering, professional services, agriculture, and information technology services. Four of those are services and that’s really the future. 70 per cent of GDP is in services now and it’s just going to increase.”
Jan De Silva, President and CEO of the Toronto Board of Trade, said 2017 will be all about CETA.
“The headline I’d like to see is ‘Canada sets the pace for trade agreements through its engagement with the European Union.’ The question is how do we take full advantage of this? There’s a wealth of opportunities available to us.”
Next in 2017 will be NAFTA 2.0, according to De Silva.
“There’s an opportunity for Canada to deal with some pain points with the U.S’s continuing focus on drywall and lumber and then hopefully we can use city-to-city co-operation to foster some reasonable understanding,” De Silva said. “I can see Canada being the friendly party at the table. Our prime minister is well positioned to pull that all together.”
Finally, she said, Brexit will remain in the headlines.
“Coming out of Brexit, I think there’s a higher degree of interest than ever before for London to be looking toward Canada,” she said. “The UK consul general thinks there will be heightened interest in working with Canada because of the increasing number of trade agreements and market access that we can provide. If Brexit hadn’t happened, I don’t know that there would have been such a push to engage with us.”