West Coast Shows the Way

It’s not what you’re thinking. Typically, British Columbia is lauded for its rapid, multi-faceted, diversified export profile, and its particular attraction to fast-growing Pacific Rim economies. Those features are still all in place, but recent shifts in the makeup of world growth have had a marked impact on the profile of BC export growth. Is the province still the pace-setter when it comes to diversification? In what sense is the West Coast showing the way?

First and foremost, BC is still an export growth leader. In the post-recession period, it has consistently been at the top of the pack among the provinces, duking it out with Ontario and Prince Edward Island for top honours. It maintained that top-three standing even in the wake of the recent commodity price plunge, demonstrating impressive resilience, and was top-ranked in merchandise export growth in 2016, notching a 9 per cent gain.

It sounds a lot like what we’ve come to expect from BC. At this point, most would conclude that it’s probably the China effect. True, it has been in the past, but not this time. Actually, BC exports to China have stalled. Torrid growth from 2000 to 2013 took the province’s trade with China from just 2 to 20 per cent of its overall exports, and from 27 per cent to two-thirds of its trade with emerging markets. But since then, merchandise exports to China have backed off slightly, resting for the last two years at a total of $6 billion.

At the same time, growth to other emerging markets has actually moved ahead. Performance to these markets was turbulent in the immediate recession period, but it resumed solid trend growth in 2013 and hasn’t looked back. India has been particularly interesting. Since 2009, it has averaged compound annual growth of 40 per cent, not because of a volatile year or two, but due to consistent, stellar annual performance. Another standout market is Indonesia. BC’s Indonesian exports faltered in the wake of the recession, but have catapulted back, racking up annual growth of 31 per cent since 2013. BC is clearly leveraging the solid potential of these ‘next’ emerging markets.

Although less dependent than most provinces on the US market, it is still the dominant one for British Columbia. Thus, it should be no surprise that the real story behind recent success is exports to the US market. Revival in the lower-48 has been good to the province, with growth up almost 11 per cent annually since 2012. Clearly the partial revival in the US housing market has had its benefits, as have an array of other key shipments of goods. Exports to European countries are more of a mixed bag; overall they haven’t fared as well, likely mirroring the sluggish performance of the Continental economies. Even so, there’s more than just hope for a turnaround in their nascent revival.

What about future growth? BC’s trade diversification will pay dividends well into the forecast horizon. Budding trade with India and Indonesia sets BC up to benefit from what promises in both cases to be a very long run of expansion. But don’t count out China; brighter times in the US and Europe will be good for China’s exports, and an invigorated Chinese consumer class will be a global force to reckon with for a long time to come. The same is generally true for other emerging markets. Their collective longer-term growth potential will be much greater than for the average OECD market, suggesting a large organic element to BC’s ongoing diversification.

Concurrently, commodity prices are expected to see a gentle lift through the forecast that will add to the swift rebound we saw in 2016. In large part due to our views of medium-term emerging market performance, there is an upside for commodities that bodes well for BC shipments to all destinations, but especially to hot-growth emerging markets.

This is exciting news, and there’s a whole lot more to say. I’ll soon be embarking on my cross-Canada Let’s Talk Exports tour, and I hope you will be able to join me at one of our 13 locations, and notably our premium event at the EXCELerate conference in Vancouver on May 5.

The bottom line?

Global growth is well-illustrated by the pattern of export growth in British Columbia. Some may argue that diversification is done; if anything, it has taken a back seat to the restart of growth; the numbers suggest is it bound to resume.

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