Over the past year, the United States has taken steps to restrict Canadian imports, and the President has threatened to ramp this up with tariffs on vehicles and auto parts.
Responding to public anxiety, Prime Minister Justin Trudeau has created a Ministry of International Trade Diversification — though in fact, we’ve been trying to reduce our dependence on the U.S. for decades, with no clear pattern of progress. Canada sent 68 per cent of its exports to the U.S. in 2008; that figure was up to 76.3% in 2016.
The new federal trade minister, Jim Carr, says there’s “an awful lot of affection for Canada” among our non-U.S, trading partners: but from the statistics, we have bigger problems with Europe or Japan than we do with the United States. The value of Canadian exports to China more than doubled from 2008 to 2017; exports to the U.S. grew by 50 per cent; to the European Union, 15 per cent; and with Japan, there was no growth.
In British Columbia, we ship to a diverse list of countries. Fifty-one per cent of B.C. exports went to the United States in 2017, versus 82 per cent in Ontario. Our trade with the U.S., on the surface, is not going well. B.C. has been a target of the “America First” agenda since 2017, with steep American tariffs on softwood lumber. However, the results to date are something of a muddle.
The U.S. administration imposed preliminary lumber duties through mid-2017 and a “final” formula targeting individual lumber producers in November 2017. Tariffs run as high as 25 per cent. The value of B.C. lumber exports to the U.S. shrank in early 2018, but the picture is improving; as of the end of June, softwood lumber shipments were down just 4.5 per cent from the first half of the previous year.
At the same time, lumber sales from B.C. to China are declining. Maybe it’s because U.S. producers are dumping logs in China, maybe it’s because the Canadian railways have capacity problems. But looking at the overall picture, total wood products sales for 2018 are well above average historic levels. They are likely to account for something like $9.5 billion, or more than 20 per cent of B.C. exports. The share prices of B.C. lumber producers have also done well in 2018.
Trade numbers are always volatile. However, the total value of B.C. exports showed an upward trend in the first six months of 2018 (see the monthly data on the BC Stats trade page.). This is despite the drop in lumber sales, and a much bigger drop in the value of energy sales to the United States. Revenues from natural gas shipments south were down by a whopping $430,000,000 to June 2018, and sales to the U.S. of electricity, coal and crude oil were also down sharply.
So in a year where me might sell (guessing) $42 or $43 billion worth of stuff, where is B.C. succeeding in spite of Trump’s trade wars?
- Coal. Not rated as B.C.’s most environmentally friendly export, but important to communities in the Kootenays. We are on track to repeat last year’s performance, with more than $6 billion in sales. High diversification score: $1.7 billion worth of coal will go to Japan, $1.3 billion to Korea, $900 million to China, $800 million to Europe, and substantial amounts to southeast Asia and India.
- Machinery and equipment. With luck, B.C. could see a record $5 billion sales in 2018. 65 per cent of this type of product goes to the U.S., with auto parts representing only a marginal share; scientific and electrical equipment are more important. Europe, which appears to block most Canadian products other than coal, is taking 15 per cent of our electrical equipment in the current year.
- Wood pulp. Likely to hit $4 billion in sales this year, with more than 90 per cent going to non-U.S. customers, especially the Asian industrial powers. Pulp is used for the production of paper and sometimes chemicals.
- Copper ore. B.C. may export a record $3 billion this year. Well over half goes to Korea, Japan or China, with zero going to the U.S. The slag heaps around the B.C. copper town of Logan Lake are vast; the product helps to produce batteries and electronic equipment.
- Fish. A $1.3 billion item in 2018, modestly above recent averages. Close to 30% of this will go to China and Japan; other Asian markets are growing, while demand in the U.S. is easing.
- “Food preparations for manufacturing and health products.” What is this? Beats me, but it will account for $1.4 billion in sales, with 70 per cent of that going to the U.S. With recognizable food (another $1.4 billion), we are similarly tied to the U.S., selling them fruit and nuts, vegetables and baked goods. One exception is our modest meat trade (c.$160 million), destined mostly for is with China, Japan and elsewhere in Asia. Canada as a whole sells about as much meat as B.C. sells coal, with two thirds of this going to our neighbours.
This list of trade goods from B.C. includes a lot of unprocessed or lightly processed raw materials. People have argued for decades that we should be focusing on the development of services for international markets, because services create more and better jobs for the same dollar of investment. And we have made progress in this area, with a growing international profile for our movie and TV productions, tourism attractions, scientific research and luxury real estate.
On the other hand (in this trade discussion, there always seems to be another hand), Canadians are buying more goods and services externally than ever before, and our combined goods and services current account deficit is sitting at near-record levels.