OTTAWA — Yes, there’s an unstoppable chain of Chinese freighters headed toward the U.S. coastline. And U.S. goods are just as speedily going in the other direction.
But don’t count Canada out of the race for trade just yet — even if it could be losing the most cherished trader status with the United States, the world’s biggest economy.
Add up the latest data, however, and China — the No. 2 global engine — does appear set to overtake us, maybe not this year but likely in 2016.
Blame the collapse of oil prices, the weak Canadian dollar and a still-hurting manufacturing sector for our slide from the top.
According to Commerce Department data, trade in goods between the U.S. and China was worth US$441.6 billion in the first nine months of 2014, while Canada and its neighbour mustered US$438 billion.
But that’s not the full story, yet.
“I wouldn’t say by any stretch that China has surpassed Canada in terms of importance of relationships or economic-trade relationships,” said Stuart Bergman, deputy chief economist at Export Development Canada, the federal credit and financing agency.
EDC has crunched the numbers — including trade data on services, not just goods — as of the third quarter of this year. The total of trade in both sectors between the U.S. and Canada amounts to US$948.9 billion, compared with US$942.6 billion between the U.S. and China, according to the EDC.
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“When you look at the full trade in goods and services between Canada and the U.S., the relationship is still (the strongest) — not by much — (but) it is, potentially, just a matter of time,” Bergman said.
“If you look at trends, China is an enormous economy. So, as a result, it has a scale that Canada doesn’t have. Not just in manufactured exports but also in terms of services. We know that half of China’s economy is now services.”
Even so, size may not matter in the big trade picture.
“In terms of ranking … it’s a little imaginary. It’s doesn’t necessarily mean much whether you’re ranked first or second. Of course, it is symbolic, ” Bergman said.
“We have very strong ties with the U.S. We share common business culture, language, integrated transportation networks, unified markets — all these types of things.”
But slippage in Canada’s trade performance has been a worry among policymakers, including the Bank of Canada, since the 2008-09 recession. The central bank — first under the previous governor, Mark Carney, and then from his successor, Stephen Poloz — urged businesses after the downturn to increase their investments in machinery and people in order to expand their exports.
That has been slow in coming.
For sure, the weak Canadian currency has made our exports less expensive, but there is still the need to explore new markets — and not just in the United States.
“Part of this is a long-standing story about China gobbling up market share in the U.S. at the expense of pretty much everybody — including Canada,” said Douglas Porter, chief economist at BMO Capital Markets.
“But some of it is a U.S. export story, and that’s something that has changed this year. They’ve definitely been struggling … and their sales to Canada have been hit much harder than they have been to China. Chinese consumer spending is still chugging — it’s actually been quite a success story,” he said.
“That reflects a number factors, but notably the steep decline in business capital spending in the oil sector this year has hit the U.S., as well.”