B.C. Business Matters:
Ken Peacock >>
Rising Exports will Support Strong Economic Growth in BC
By Ken Peacock
Exports are vital to sustaining and increasing BC’s standard of living because they allow us to pay for imports of goods and services not produced locally, they support hundreds of thousands of jobs, and they provide local firms with opportunities to grow and benefit from economies of scale. The discipline of having to compete in the international marketplace encourages firms to invest in productivity enhancing equipment and processes. In turn, this means that export-oriented industries tend to have above-average levels of productivity and therefore are able to pay above-average wages/benefits.
BC’s export base remains heavily tilted towards resources. Altogether, about 72% of the province’s international merchandise exports consist of natural resources or related downstream products. This share is down from almost 85% a couple decades ago, reflecting significant increases in export shipments of high technology products, plastics, and a host of other non-resource goods. Machinery and equipment exports, for example, have grown by more than 40% since 2004 (dropping off during the downturn but more than recovering over the past four years). BC’s merchandise exports remain dominated by natural resources, but growth of value added, advanced products in machinery and equipment category has resulted in greater diversity of BC’s export profile.
Despite a soft global economy, BC’s export sector will help underpin economic growth over the next couple of years. The weaker Canadian dollar and the upswing in the US economy should reinforce the up cycle in exports that has been in place for a few years now. In 2014, international merchandise exports grew at a healthy pace to reach a new high of $35.7 billion.
The new high was due in large part to the recovery of US home construction and the accompanying rise in wood product exports to the US. But as the figure below shows, strong gains were also seen in machinery and equipment exports and the value of mineral products shipped to other countries. In fact, with the exception of coal, all commodity groups grew in 2014 (only the top 5 are shown in the figure below).