Mike Holden, CME's Chief Economist, discusses Canada's trade competitiveness at Senate Committee on behalf of Canadian manufacturers.
Our position on trade generally is this: we support free and fair trade for Canadian manufacturers. That is to say, we believe in securing trade agreements that eliminate all market access barriers and, more importantly, result in increased value-added exports and domestic production.
While we assume that free trade will generate new export growth, too often we end up disappointed with the results. Not including NAFTA, which has been unambiguously positive for all three countries, Canada has signed 12 free trade agreements which cover 42 countries around the world.
Since each of those 12 agreements came into effect, Canadian value-added exports to those 42 countries have increased by just 1.3 per cent total. Meanwhile, imports have risen by 15.6 per cent.
Our failure to make meaningful market access gains from free trade speaks to a number of overlapping challenges that need to be addressed. I would like to highlight three of these today.
The first is that we need to ensure that our trade agreements provide reciprocal market access and level the playing field for Canadian manufactured goods. Non-tariff barriers like discriminatory regulations, direct export subsidies, procurement exemptions and currency manipulation can all impede market access. We need our trade agreements to provide strong protection against those practices.
Second, governments need to do a better job of demystifying their export support programs. In our most recent biannual survey of Canadian businesses, we asked companies about their experience with a wide range of programs or services like EDC, the Trade Commissioner Service, the CanExport program and so on. The good news is that companies that used these programs found them to be helpful. The bad news was that most companies had never used them or didn’t even know they existed.
Finally, and most importantly, we need to take a long hard look at our business tax competitiveness in Canada. If we want to succeed abroad, we need to be competitive at home. However, recent trends suggest a major looming problem: businesses are not investing in Canada.