Low confidence blamed on foreign trade barriers and domestic disruptions such as railway strikes and blockades
Canadian exporter confidence is at its lowest level in eight years, according to a recent survey conducted by Export Development Canada.
“It’s a relatively pessimistic outlook that we’re hearing from Canadian exporters,” said Stephen Tapp, EDC’s deputy chief economist.
The mood isn’t as dire as it was during the global economic meltdown of 2008 but the confidence level of 69.3 is six percent below the historical average and more than nine percent lower than mid-2018 levels.
Almost one-third of the 1,000 businesses surveyed said protectionism is affecting their global strategies and 90 percent said they expect it to stay or increase in 2020. As a result, EDC expects a soft start for exports in 2020.
Wade Sobkowich, executive director of the Western Grain Elevator Association, said grain exporters are certainly experiencing a difficult trade climate.
“The grain industry has never been in an environment where there has been so much uncertainty as it relates to trade,” he said.
In addition to the tariff and non-tariff barriers they are facing abroad, there are disruptions at home in the form of railway strikes and road and rail blockades.
Some factors can’t be controlled, such as landslides and foreign policies, but others like the recent political protests can and should be controlled, said Sobkowich.
“We have people that are breaking the law and we have a government that is not upholding the law,” he said.
“If we don’t deal with these types of things swiftly, what does it say for the next group that wants to stand in front of a train and not allow grain to get where it needs to go in order to make their political point?”
The EDC survey of 1,000 exporters was conducted between Nov. 18, 2019 and Dec. 15, 2019.
On Dec. 16, 2019, the U.S. and China announced they had the framework in place for a two-year trade agreement. That agreement was finalized on Jan. 15, 2020.
Tapp said that pact should help reduce trade uncertainty. However, coronavirus is having the opposite effect.
Sobkowich said Canadian grain will eventually find its way to market but it may be delayed and will most definitely have additional costs due to the domestic and external disruptions.
There are vessel demurrage fees, contract extension penalties and the loss of price premiums due to missing out on prime shipping dates and the most desirable markets.
Sobkowich said those losses will be shared by farmers, grain handlers and exporters.
Tapp said one tactic exporters are employing to avoid increasing tariff and non-tariff barriers is to diversify their operations by investing abroad.
The survey showed that 17 percent of the exporters have investments outside of Canada, which is the highest level ever recorded and well above the recent average of 14 percent.
“Firms are trying to overcome barriers at the border or tariffs by setting up production facilities closer to end customers,” he said.
Meanwhile, 25 percent of the exporters plan to increase their overall investment, which is the lowest level in the last five years and well below the 40 percent response in 2015.
Finding skilled labour was the second-biggest challenge facing Canadian exporters, ranking behind foreign tariffs and barriers. However, fewer exporters plan to hire in the next six months than they did one year ago.
About one-quarter of exporters felt the next global recession will be in 2020. That is down from the 41 percent who felt that way when surveyed in mid-2019.