RED DEER – The North American free trade agreement has been one of the most significant economic developments for Western Canada in the last 15 years, says a University of Alberta economist.
“For the last 100 years, Western Canada has lived or died by its ability to interact and relate in many ways to the international economy,” said Ted Chambers.
He has examined the impact of internationalization by zeroing in on the export of goods and services as a share of gross domestic product in each province. Interprovincial trade has remained relatively stable for all four provinces. International sales have soared.
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The trade deal stimulated expansion in various economic sectors. Alberta and Manitoba are the biggest benefactors.
“In the Alberta case, there are very significant sectors of the economy which have taken advantage of the free trade agreement,” he said.
Growth has been disappointing in British Columbia.
“In 1988 it was the leading provincial exporter in Western Canada.”
But it started lagging behind in the mid 1990s and remains too reliant on the forestry industry.
Diversification has given Alberta and Manitoba success. While there is still considerable strength in agriculture and energy, other sectors are growing, he told the Alberta Agricultural Economists Association annual meeting in Red Deer.
Last year, Alberta’s total exports reached $56 billion, compared to $13 billion in 1988. Most of the business was with the United States, while trade with Mexico is relatively modest.
“Almost 85 percent of Alberta’s exports now go to the American market,” he said.
Alberta has had success in the energy sector, meat processing and in machinery and equipment sales.
It is also a leader in telecommunication equipment, last year exporting more than $4 billion worth compared to $200 million in 1988.
Another success is furniture manufacturing. It was assumed in 1988 that the free trade agreement would wipe out Alberta’s $50 million business. Instead, it grew to $300 million in export sales for 2000.
The energy sector has spun off export business in production of geographic sensors, precision and measuring instrumentation.
“Alberta has gotten off the energy bottle,” he said.
Manitoba has seen slow, steady growth. It has stronger interprovincial ties with Ontario and Quebec as well as the U.S. It has also avoided the boom and bust economic cycles that afflict the other western provinces.
Saskatchewan has also enjoyed more international trade, but interprovincial business remains flat.
Energy exports remain significant. In total, the West posted $112 billion in exports last year, of which three-fifths were due to energy sales.
Alberta’s energy sales amounted to 69 percent of its total exports. About half of B.C.’s exports consisted of hydro electricity sales. Half of Manitoba exports were hydro and crude oil. Saskatchewan generated only 11 percent of exports from energy sales.
Spikes in energy prices helped boost export income totals, said Chambers.
This may appear positive, but every time natural gas or oil prices increase, it encourages importers to find cheaper, alternative sources of fuel. This signals a need to diversify further.
“One would hope that Alberta’s enormous increase in wealth is going to be applied to something other than drilling more wells,” said Chambers.
