A new report out of Export Development Canada on the country’s potential for market growth in China adds urgency to the WCR&HCA’s call for the federal government to ramp up funding for trade-enabling infrastructure, the Western Canada Roadbuilders & Heavy Construction Association board heard December 9.
The WCR&HCA is working with federal and regional partners to promote the initiative that is premised on pressing the federal government to substantially increase investment within the National Trade Corridors Fund, which was announced at $1.9 billion in 2021’s budget.
Anything less than a $10 billion federal contribution would be inadequate to task, WCR&HCA President Chris Lorenc said, to attend to the regional corridors in the West, and across Canada that need attention, not just coastal or Eastern Canadian ports.
The update to the WCR&HCA follows the circulation of a report on the need for recapitalization of the federal Trade Corridor Fund, which sits at $1.9 billion. The report summarizes a roundtable discussion, co-hosted by Export Development Canada, the WCR&HCA and the Canadian Construction Association, among regional and national stakeholder organizations September 8.
Two panelists of the roundtable, EDC Vice-President and Chief Economist Peter Hall, noted that Canada has to significantly boost its efforts to diversify its trade markets, not just to alleviate reliance on the United States, but to take advantage of growing middle-class demand in under-developed export markets.
Western Canada is a region with access to west coast ports is indispensable to Canada’s trade profile and productivity and, therefore, its economic health and prosperity. With CP’s pending acquisition of KCS and KCSM – the continent of North America is also very much in play for market growth.
Asia’s growing market
- The fastest annual growing middle class is in Indonesia (7 million); India (20 million; and China (35 million)
- The rate of middle-class growth in Asia outstrips its economies’ capacity to fill domestic needs, thereby creating new trade markets
- Growing exports to Asia will require a massive scale-up of trade infrastructure
“Today, the United States, is the primary customer for Canadian products, accounting for about 75% of all merchandise exports. Unlike Asia, the U.S and other traditional export markets are already quite mature, with demographics that are not favourable to high future growth that matches the scale in the Asian markets,” the report says, summarizing Hall’s comments.
“While China represents only 5% of Canada’s current trade, if the growth rate seen over the last two decades holds, it will surpass the U.S. as the top destination for Canadian goods by 2048. And if Canada can achieve even just half of Australia’s market share for Chinese imports… the point at which China becomes our top destination could be reached much faster – by 2036.”
Guy Saint-Jacques, a former Canadian ambassador to China, said there is huge potential for expanding trade into Asia, particularly China. He cautioned, however, that strengthening ties to China brings risk, noting the severe sanctions China has imposed on Australia.
Australia is among the countries concerned about the use of Huawei Technologies and expressed concerns about the limited access to potential sources of the COVID-19 virus during investigations in China.
Food products make up 31% of Canada’s exports to China so “there is an opportunity to diversify into other areas, such as energy and manufacturing, where Canada lags behind other countries,” the report says, summarizing Saint-Jacques.
“To capitalize on these and other market opportunities, Canada must build the infrastructure required to bring Canadian products to tidewater.”
The need for reliable trade infrastructure was not lost on the federal government, in its financial update presented December 15.
Finance Minister Chrystia Freeland announced that supply chain problems, including port congestion, caused by the COVID-19 pandemic will trigger $50-million in special support for Canada’s ports, to be drawn out of the $1.9-billion National Trade Corridors Fund.
More detail is to come on what criteria such proposals will need to meet.
Lorenc said the perspective must be much wider, because the trade-network across the West needs attention, as Hall and Saint-Jacques elaborated upon at the September 8 EDC roundtable meeting.
The WCR&HCA is working with the Canadian Construction Association, Business Council of Canada, Canadian Manufacturers and Exporters and the Canada West Foundation in its strategy to put the WCTG&CI on the agenda of Canada’s premiers, provincial governments, federal MPs and ministers.
The proposed Western Canada Trade Gateway & Corridor Initiative aims to boost domestic, continental and international trade, particularly in Asia, through a multi-year national program that brings both public and private investments to Western Canada’s multi-modal trade transportation network. That includes investments in existing trade gateways and corridors, plus the long-term build-out of new marine and inland ports as well as road, rail and air transportation assets that will support the freight and passenger flows required for international trade.