International trade with Asia is becoming increasingly important to B.C. businesses. Trade with Asia is on the increase and may be helping us recover more quickly from the recession.
Further, according to a recent report by the Asia Pacific Foundation of Canada (2013 National Opinion Poll: Canadian Views on Asia), British Columbians were more likely than any other province to view trade with Asia as important to their province’s prosperity.
Businesses in British Columbia are already taking advantage of the opportunities presented by our trading partners, and if increased trade is any indication, the good news is not over yet.
International trade is generally good for our economy. It gives us access to new markets for our goods, allows us access to goods we can’t produce (or can’t produce cost-effectively) and is a huge source of job creation in this country.
In fact, it is estimated that one in five jobs in Canada relies either directly or indirectly on exports.
Not all of Canada’s international trade involves Asia. According to “Canada’s State of Trade: Trade and Investment Update 2012,” the United States was by far Canada’s biggest trading partner, making up 61.7% of Canada’s total trade of goods. These exports were primarily comprised of mineral fuel and oil ($103.9 billion), vehicles ($57.6 billion) and machinery ($20.5 billion).
Asia Pacific, on the other hand, made up 15.9% of Canada’s total trade (imports and exports) in 2012. This was largely comprised of natural resources and infrastructure-related items. While trade with Asia Pacific is not yet in the same league as the U.S., it has been on the increase, having risen 16.5% from 2010 to 2012.
Most notably, Canada has experienced an increase in exports to Asia Pacific (increasing for instance by 28.2% from 2010 to 2011). That said, our export growth has been volatile due to the nature of those goods. Natural resource items are priced in world markets and sales can fluctuate dramatically based on demand and exchange rates.
Infrastructure-related items (such as telecommunications equipment and aircraft) are relatively more expensive and rely on prevailing economic conditions.
But this robust international trade reality is all good news for Canada. Exports of goods in 2012 reached 95% of their pre-recession value at $462.5 billion and imports eclipsed pre-recession figures reaching an all-time high of $474.5 billion.
Before we celebrate our triumphant international trade recovery, it should be noted that for every dollar of goods we send to Asia Pacific, they are exporting two dollars of goods into Canada. That is not the ideal economic scenario as typically a country would want to export more than it imports. However this may be less of a concern with Asia Pacific.
For one thing, this deficit is balanced by trade surpluses with other trading partners, and it is hoped that the trade deficit with Asia Pacific will be marginalized over time.
As Asia Pacific economies continue to develop, their role as a trade partner with British Columbia could be much more significant. This will in large part be determined by Canadian, and especially British Columbian, perspectives on Asia Pacific.
The Asia Pacific Foundation of Canada conducted a public opinion survey in March 2013 to determine exactly what these opinions are.
A majority of Canadians recognize the benefits of increased trade with Asia and believe that strengthening economic and political relations with Asia should be a top foreign policy priority for the government. Canadians see the growing economic power of India and China as more of an opportunity than a threat.
Despite this, Canadians’ interest in opening free trade agreements with Japan and China is falling, and only 18% of Canadians see Canada as a part of the Asia Pacific region.
Most Canadians also continue to oppose direct investment from Asian state-owned enterprises, yet continue to support Canadian and Asian companies visiting both sides of the Pacific.
British Columbians were most likely to view Asia as important to their province’s prosperity. There was more support among B.C. residents than those in any other province for opening provincial trade offices in Asia. British Columbians were also most likely to rank China highly in terms of importance for Canada’s prosperity and to view the growing importance of India as an economic power as being more of an opportunity than a threat.
These opinions are certainly echoed in our client base. BLG has an extensive Asia Pacific practice including dedicated teams for China, Korea, Malaysia, India and Japan.
In the course of providing services supporting trade going in both directions, we have noticed a significant increase in interest in foreign investment in Canada, as well as increased determination by our Canadian clients to enter Asia Pacific markets.
Whether this amplified interest is the result of past successful experience or a determination to take advantage of improved marketplace conditions, one thing is for certain: if you aren’t looking for opportunities to engage more with Asia Pacific, your competitors will be. •
