Economist says Saskatchewan produces many products in demand by ‘hungry markets in the world’
Trade policy bluster from the administration of President Donald Trump is just that, bluster, says a leading economist.
“It’s about getting a better deal,” said Peter Hall, chief economist at Export Development Canada.
“The idea is to move the needle this way and that’s why individual industries (softwood, dairy) are being picked on. They are showcases to demonstrate that they mean business,” he said May 9 during his economic update in Saskatoon, sponsored by Saskatchewan Trade and Export Partnership.
“But undo the whole thing is way too risky, way too damaging.”
Hall said people need to consider how trade restrictions would hurt Americans.
“We have to look at how policies that inhibit trade would hurt the average American. And some of those are very deep effects on average Americans and average American businesses,” he said.
“If you pick on something that’s actually going to undermine your very growth architecture, then you’re in a lot of trouble from the very people that you are trying to make better off.”
Trade with Canada creates many jobs in the United States. Thirty-two states count Canada as their number one international customer and nine more as number two. Hall said 1.7 million jobs are at risk if there is a trade disruption between Canada and the U.S.
However, looking past the ongoing policy turbulence, Hall is confident about future economic growth and particularly export markets in Canada.
“Growth is actually happening out there and I’m very excited about that for us here in Canada and the world situation. I’m also excited about what it means for the architecture of policy, because nobody wants to wreck what is actually a good thing that is going on out there in the marketplace,” he said.
Hall’s robust forecast sees world economoic growth will rise to 3.8 percent from 3.5 percent. In Canada, he predicts modest increases in commodity prices and the dollar remaining below US80 cents.
However, he cites low interest rates as it relates to an overbuilt housing market throughout Canada for a dismal domestic economy.
“Our consumer indebtedness ratio is the same as it was roughly speaking as it was in the United States just before the recession occurred. We’ve enjoyed low interest rates but we’ve overdone it a bit,” he said.
However, the backdrop for Canada’s export economy looks solid. EDC believes exports will grow six percent this year and five percent next year.
Saskatchewan’s exports are expected to rise nine percent this year thanks to a rebound in energy exports and a further three percent next year.
While conditions will remain stable, the province’s agri-food sector exports will slow to about two percent over the next few years, mostly because of global conditions and current inventories across a number of commodities.
Chris Dekker, chief executive officer of STEP, said a two percent increase in a large sector like agriculture is significant.
“Over the last two or three years, the agriculture industry has really been the saviour of the economy in light of very low commodity prices for our other propulsive sectors….”
Hall’s strong forecast sees an even brighter future on the near horizon.
“Hang on to your hat because what we are seeing is the reinvigoration of world growth, starting in the United States, spilling over into western Europe and going into the emerging markets space will resume a very powerful growth force in the world economy,” he said.
“When we see pent-up demand in key economies around the world, that’s one of the surest signs that things are about to ramp up.”
As a result, diversification, particularly for Saskatchewan’s high export ratio, will grow.
“Diversification will happen automatically because of the differential rates of growth…. So that enables Canada to actually gain market share in those high growth places…,” he said.
Hall said Saskatchewan export prospects are well positioned for the medium- and long-term.
“We at EDC are paying attention to that … because you are producing all those things that are needed by these increasingly hungry markets in the world.”
“They’re consuming food in a brand new way that creates a lot of demand for Saskatchewan product.”
Hall said EDC is for the first time offering market intelligence to its customer base.
“That’s one of the first things companies are looking for…. We’re there to mitigate the risks that Canadians feel going into markets that they’re not familiar with.”
Hall said EDC’s aggressive expansion means that its customer base will rise from its current 7,500 clients to about 30,000 by 2020.
“We’re very serious about that given global conditions and given the new ways that we’re actually doing business,” he said.