Natural resources comprise more than half of Canada’s exports compared to 1% for ‘clean tech’

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Appeared in the Toronto Sun, December 28, 2022
Natural resources comprise more than half of Canada’s exports compared to 1% for ‘clean tech’

As we enter a new year, it’s worth remembering that Canada is a mid-sized economy that relies heavily on international trade for its prosperity. But what exactly does Canada sell to the rest of the world? Which industry sectors drive the exports that play a vital role in sustaining our country’s high living standards?

Both economic theory and common sense suggest that Canada enjoys some degree of global comparative advantage in industries that provide the bulk of our exports.

Unfortunately, many politicians—including some sitting around Justin Trudeau’s cabinet table—don’t appear to think this way. Rather than asking what Canada is good at producing and exporting, they conjure visions of a future economy with a far different industrial structure where “green,” “clean tech” and “high-tech” products and services dominate. Tomorrow’s economy undoubtedly will be different from the one we have now. But industrial transitions don’t happen overnight; they unfold over multiple decades or even longer. Nor do politicians and their policy advisors possess the skills, insights or tools to engineer the details of Canada’s evolving industrial structure.

Last year, Canada generated record export earnings of $707 billion, consisting of $577 billion of “goods” exports and another $130 billion of “services” sold to buyers in other countries. Goods consist of natural resource products plus a wide array of manufactured items, parts and components. Exports of services include professional, scientific and technical services (including digital services), transportation services linked to cross-border trade, financial services, international tourism (foreign visitors to Canada) and education (foreign students enrolled in Canadian institutions).

Here's some additional information on Canada’s international exports (as of 2021).

Natural resource products represent more than half of Canada’s total exports of goods and services combined. Energy alone accounts for one-fifth, mineral ores and metals for 14 per cent, agri-food for 12 per cent, and forestry products for 6 per cent of the country’s exports. Within the energy basket, oil is by far the largest earner. The export data confirm that natural resources still carry enormous economic weight in Canada—they are not “sunset” industries.

Transportation equipment also looms large in Canada’s export picture. This category mainly consists of vehicle assembly, automotive parts, and aerospace parts and equipment. Together they comprise 11 per cent of Canada’s exports. Most such exports are shipped to the United States, which underscores the need to preserve and strengthen the integrated North American automobile manufacturing sector and build on the Canada-U.S.-Mexico Free Trade Agreement to facilitate North America-wide market access for all types of manufactured products.

Other significant Canadian export categories are chemicals and plastics (7 per cent of total exports in 2021), industrial machinery and equipment (4 per cent), and consumer goods (also 4 per cent).

The data also highlight the relatively small contribution made by what Export Development Canada classifies as advanced technology products to Canada’s exports. All advanced technology products together supplied just 3 per cent of our exports in 2021. And the “clean tech” products loudly promoted by the Trudeau government constitute at most 1 per cent of Canada’s exports.

At a time when Canada finds it difficult to attract investment and is losing ground to the U.S. and other jurisdictions in overall competitiveness, our policymakers should work harder to improve the business environment for industries that pay the bills today instead of dreaming about a hoped-for economic future whose shape is largely beyond their control.