Trade has been a cornerstone of BC’s provincial economy for more than a century, thanks to abundant natural resources, an entrepreneurial population and prime location. But, over the last decade, geopolitical, social and economic unrest have generated instability. Conversations around the North American Free Trade Agreement (NAFTA) have re-entered the news cycle and industries, like our forest sector, are being threatened with heightened tariffs in a more volatile international marketplace.
As a small market jurisdiction, exports of both goods and services are the foundation of the BC economy. Selling goods and services to other markets provides income from external sources, which in turn enables BC households and businesses to purchase and pay for a vast array of imports. Growing BC export-capable industries is critical to raising real incomes and boosting prosperity in the long term. For this reason, government policy should ensure that the province continues to be an attractive jurisdiction in which to invest capital as well as a place where exporters can effectively compete in North American and global markets. BC has been fortunate with respect to the development of the “export economy.” Because of the province’s strong resource orientation, merchandise exports tend to be cyclical, but over-time they have trended higher. At the same time, the province has become much more active in selling services to outside markets.
Accessing external markets allows BC’s local companies to grow larger than would be possible if they were confined to the domestic market. By selling into external markets, BC forest products companies have been able to grow in size and take advantage of economies of scale. This has made large capital investments in mills and machinery and equipment worthwhile for the industry. Thanks to trade linkages and export sales, the BC forest products sector has become a multibillion-dollar industry providing tens of thousands of jobs and hundreds of millions of direct and indirect revenues for governments. The forest sector also supports many other BC industries through purchases of locally-produced services, such as accounting, legal, transportation, environmental computer systems and technical services. The logging, lumber and pulp and paper industries also purchase machinery and equipment, energy products, construction and maintenance services from BC suppliers.
Because of the pivotal role of exports in a small open economy, policy decisions must account for the competitive landscape facing locally-based export industries. BC policy makers should work to make sure our various export sectors can compete in the international marketplace.
While the recent downturn in some commodity markets has been challenging for a number of resource-reliant regions in the province, the outlook for 2017-18 is brighter: Prices are forecast to rise for lumber, natural gas, coal, aluminum, copper, zinc and others, in some cases on the heels of sizable price gains last year. With the anticipated uptick of B.C. businesses looking to export, we need continued investment in local trade infrastructure. Only with a renewed emphasis on trade-supporting investment will B.C. maintain its position in a rapidly shifting, global trade landscape. Right now, the main worry surrounds the impact of the long-running, Canada-U.S. softwood lumber trade dispute on the B.C. wood-products industry. On a positive note, despite the lingering effects of the earlier commodity downturn, but aided by the competitive Canadian dollar, B.C.’s natural resource exports grew by over 10 per cent in 2016, led by wood products, agricultural products, metallurgical coal and some minerals. The export outlook for 2017-18 remains promising for most resource sectors.