B.C. should look more - not less - at trade diversification post-COVID, analyst says

The most recent trade data that shows B.C. exports falling by 15% earlier this year highlights both the global economic slowdown and local exporters’ own feelings of vulnerability, a leading trade consultant said.

But that is also exactly why B.C. companies should be looking at trade diversification more than ever, because the pandemic-induced economic crisis may offer firms a rare look at market areas where they are over-exposed and/or under-represented.

“As with everything in exporting, diversification is long-term,” said ASLIN Canada Trading founder Allison Boulton, a veteran of provincial and federal trade policy. “We want businesses to think long-term because diversification is never quick... You can still do it, and we definitely still encourage people to do it.”

One of the ways to diversify in post-COVID times, Boulton said, is to look beyond the traditional definition of trade diversification in terms of international markets. She noted that – given many people are shifting away from going to restaurants and moving into meals-at-home, exporters like food suppliers may consider broadening their direct-to-consumer channels and looking at supplying groceries/online storefronts as a way to diversify from traditional channels such as food-services establishments.

The trend of people looking to eat more healthy may thus open up new opportunities for B.C. agrifood products like cherries and blueberries, Boulton noted. And that notion of sector/channel diversification isn’t the only new way to diversify that B.C. exporters should be considering.

“If you are nervous about the global market, then let’s look more at inter-provincial trade,” she said. “Let’s look at other ways to diversify... This is not at all the time to stop exporting.”

Data from earlier this summer showed B.C. exports falling 15% in Q1 2020, with natural resources (natural gas, 36.6%; coal, 35.6%) and solid-wood products (20.5%) leading the slide. Logs exports fell 75% during that time, and private B.C. forest land owners have petitioned Ottawa to temporarily lift the export limits on logs to reverse the trend.

Even if one looks at traditional international markets diversification, Boulton sees some potential low-hanging fruits: Canada’s Comprehensive Economic and Trade Agreement (CETA) with the European Union remains something worth considering, while Canadian exports are also in a “sweet spot” with Japan – the world’s third-largest economy – due to both being founding members of the Trans-Pacific Partnership (CPTPP, or TPP-11) trade bloc.

But Boulton acknowledged Ottawa’s long push for more diversified trade (away from the dominant U.S. market) will be more difficult in the post-COVID setting.

“I think that trade diversification strategy is going to take a bit of a hit, because what we’ve seen is that, in this time of crisis, you retract and go back to what you know,” she said. “I don’t want to say it’s safe – being an exporter, you never have absolute safety in any market – but you tend to not extend yourself in a situation like now by taking a giant risk, especially when you don’t have the security of going to a trade show and looking someone in the eye. Things are virtual right now, and it’s hard to build up those vital relationships.

Re-examining the U.S. export market also isn’t a bad thing, Boulton noted, adding that the recent activation of the new North American free-trade agreement (CUSMA, or USMCA in the United States) helps in that regard.

“CUSMA coming into effect will give us what business people like,” she said. “It will give us security that we have a deal; we can all breath a little easier on July 2 knowing that – while it won’t solve every problem – we have guidelines to follow. We now know the steps.

“Going to the U.S. will always be a logical stepping stone in a business’s export plan. Should it be the only market? No. You need to have strong markets at home, in the United States and also continue to diversify. You never want to be 100% dependent on one market of any sort.”