Canada\u2019s poor trade performance<\/strong> Source: Statistics Canada CANSIM Table 380-0064.<\/p>\n Since the turn of the century, Canada has not only fared poorly relative to its own past performance, but also compared with the OECD, as the growth of our real export volumes ranked a disappointing 33rd<\/sup> out of 34 countries.<\/p>\n Source: Calculations using OECD Economic Outlook 98 database, Annex Table 39<\/p>\n Stanford says that deterioration in the average quality<\/em> of Canada\u2019s exports is just as troubling as the weakness in the quantity<\/em>. Our export composition shifted to primary sectors (agriculture, energy, mining and forestry) and away from what he calls \u201chigh value-added\u201d sectors (auto, aerospace, industrial machinery and equipment, electronics and consumer products).<\/p>\n Source: Calculations using Statistics Canada, CANSIM Table 228-8059.<\/p>\n The shift to exporting more primary goods was encouraged by higher global prices for these commodities, of course, but there\u2019s more to the story. Stanford also partly attributes Canada\u2019s lack of international competitiveness in the high value-added sectors to an over-valued currency (which was associated with the resource boom). He points to underlying structural weaknesses \u2014 namely, failing to build a sufficient base of innovative, export-oriented businesses in Canada that sell value-added products and services that world markets demand.<\/p>\n As an example, he points out that Canada has essentially lost its stature as a leading source of knowledge, innovation and productivity as it fell from being ranked<\/a> as the 6th<\/sup> most technically complex economy in 1980 to 33rd<\/sup> by 2013. Moreover, aside from short-lived capital inflows in the resource sector, Canada hasn\u2019t been a particularly appealing site for foreign direct investment in recent years, either.<\/p>\n Canada\u2019s ambitious trade agenda<\/strong> Source: Stanford 2016<\/p>\n Foreign investment agreements have recently added China as well as several Eastern European and African countries:<\/p>\n Source: Stanford 2016<\/p>\n Time for a new policy focus<\/strong> Stanford argues that mutual trade and investment liberalization has probably caused more harm than good for Canada in the 21st century, because our economy simply hasn\u2019t been competitive, based on either cost (mostly due to an overvalued currency) or quality\/innovation.<\/p>\n Canada\u2019s structurally weak productivity and innovation record means that our firms have been unable to fully capitalize on new opportunities abroad (including those resulting from recent trade and investment deals). Yet those deals have simultaneously exposed Canadian firms to increased foreign competition at home, which can undermine, rather than strengthen, Canada\u2019s productive capacity when our firms are incapable of meeting this challenge.<\/p>\n Stanford therefore suggests that Canada shift its policy focus away from implementing more big trade deals. And even within such debates, he says our attention should shift to concretely and empirically evaluating the impacts of those deals based on the interests of the Canadian economy and Canadian industries (rather than assuming that trade liberalization is always mutually beneficial, as predicted by conventional economic theory).<\/p>\n He says that Canadian policymakers should explore other ways to support the development and growth of globally oriented, innovative, technologically intensive firms in Canada. Policies need to help these firms to upgrade their activities and project themselves more effectively onto the global stage.<\/p>\n To strengthen Canada\u2019s business sector, policy should encourage the growth<\/em> of Canadian-based firms so that they can become large and outward-looking enough to penetrate global markets. Instead, our current approach often subsidizes small companies with perverse incentives that discourage growth (e.g., lower tax rates for small firms).<\/p>\n At the very least, Stanford says that Canada\u2019s trade policy community should be more open to the possibility that signing more FTAs may not be a magic bullet for Canada\u2019s trade woes. He argues that the effects of such deals can be positive or negative, depending on their provisions, the trading partners involved and the readiness of Canadian industries to grow exports and attract mobile investment.<\/p>\n Stanford judges that over the past decade trade negotiations have probably done more harm than good to Canada\u2019s trade and foreign investment record. Going further down this same road with more blockbuster trade deals might just make things worse, he says. I encourage you to read the full chapter here<\/a>.<\/p>\n Photo:\u00a0Volodymyr Kyrylyuk \/ Shutterstock.com<\/p>\n Do you have something to say about the article you just read? Be part of the\u00a0<\/em>Policy Options\u00a0discussion, and send in your own submission.\u00a0Here is a\u00a0<\/em>link<\/em><\/a>\u00a0on how to do it.\u00a0<\/em>|\u00a0Souhaitez-vous r\u00e9agir \u00e0 cet article ?\u00a0<\/em>Joignez-vous aux d\u00e9bats d\u2019<\/em>Options politiques\u00a0et soumettez-nous votre texte en suivant ces\u00a0<\/em>directives<\/em><\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" The past decade has featured both an abysmal Canadian trade performance and an ambitious policy agenda to further liberalize Canadian trade. For many trade commentators, the way to improve Canada\u2019s poor results on trade is to implement the big outstanding deals \u2014 the Comprehensive and Economic Trade Agreement (CETA) with the European Union and the […]<\/p>\n","protected":false},"author":913,"featured_media":293552,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","ep_exclude_from_search":false,"footnotes":""},"categories":[],"tags":[],"article-status":[],"irpp-category":[],"section":[],"irpp-tag":[],"class_list":["post-293554","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"acf":[],"yoast_head":"\n
\n<\/strong>Canada\u2019s trade intensity rose significantly in the 1990s \u2014 primarily through adjustments to the new Canada-US free trade deal. However, since 2001 our exports as a share of GDP have given back most of these earlier gains:<\/p>\n![\"1\"](\"https:\/\/policyoptions.irpp.org\/wp-content\/uploads\/2025\/08\/1-1.png\")
<\/a><\/p>\n![\"2\"](\"https:\/\/policyoptions.irpp.org\/wp-content\/uploads\/2025\/08\/2-1-scaled.png\")
<\/a><\/p>\n![\"3\"](\"https:\/\/policyoptions.irpp.org\/wp-content\/uploads\/2025\/08\/3.png\")
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\n<\/strong>Interestingly, the deterioration in Canada\u2019s international trade performance occurred alongside a period of ambitious trade and investment liberalization. Comparing the current state of Canada\u2019s negotiations with just a decade earlier reveals much action. Canada\u2019s trade deals have added countries in South America, and the government is hoping to include many more in Europe and the Pacific Rim:<\/p>\n![\"4\"](\"https:\/\/policyoptions.irpp.org\/wp-content\/uploads\/2025\/08\/4.png\")
<\/a><\/p>\n![\"5\"](\"https:\/\/policyoptions.irpp.org\/wp-content\/uploads\/2025\/08\/5-1-scaled.png\")
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\n<\/strong>But Stanford finds that Canada\u2019s trade flows to free trade agreement partners have performed even worse than our trade with the rest of the world, particularly for manufactured goods. Export growth was slower with FTA partners than with other countries, but import growth was faster. And while the correlation between trade liberalization and poorer trade performance does not prove causation, Stanford\u2019s results and questions raise the bar for trade deal advocates to provide empirical evidence of the practical benefits of recent deals.<\/p>\n
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