This post is fairly succinct - at least, I hope - because while I enjoy writing articles that sycophant the words of someone else, I prefer not to lavish other writers for too long before I start getting my knickers in a twist. A recent article in the Globe and Mail quite proudly professed about the benefits of trade and how it would strengthen Canada's industries if we established stronger trade relations with countries in emerging economies, namely China, Brazil, India, Russia and other emerging economies.
While I generally support this idea, I do have some thoughts, after looking at the whole notion, as to what and how we're going to approach this. Now, the praise in the Globe and Mail of this idea was derived from the paper Trade, Innovation and Prosperity, which was released by the Institute for Competitiveness and Prosperity.
Innovation, as anyone would agree, is important - it allows the development of new ideas, technologies, methodologies, ontologies and ideologies that progress society as a whole. As such, as a paper that openly has 'Innovation' in its title, I strongly hope to find significant innovative measures and ideas within its 62 page report.
In regards to positive and agreeable things, I do believe that Canada's required to at least establish stronger trade relations with developing economies, and I do believe this needs to be done before these nations reach what the paper defines as 'the innovation tipping point' (Martin 10). This tipping point, while never defined (to the best of my knowledge when reading this report), is inferred that it will give respective developing economies a significant advantage. I will not argue against that point, because innovation is a powerful economic tool.
Now, in regards to establishing trade relations, the paper states that because Canada's market size is small, we must make innovation a more focal point in our development, again something I agree with (Martin 16). Now, the paper then states that US trade versus Chinese and European Union trade is a falling and rising correlation - as US trade diminishes, trade with the Chinese and the European Union increases (Martin 18, 19).
In fact, an interesting point to note is that the Canadian-US market has been in a reduced state of demand in that American markets have dropped significantly within this year, suggesting that we need to look for other trading partners. It is thereby no coincidence that the shrinking of our trade surplus nearly halved within the span of a month in 2010 is indicator we need to rely on more varied markets.
Putting all our eggs in one basket is not a good idea, especially when that basket is falling apart. Thereby, the proposal to establish relations with trade with emerging economies such as Brazil, Russia, China, and India are all interesting and vital ideas, and while the idea to do so is not new or exciting, it is a welcome reminder of our current economic climate: we need to rely on our partners to the south a lot less.
But how should we do it? What industries do we have that we can trade with? PricewaterhouseCoopers notes that by the date of 2050, the multiple emerging markets may become economic superpowers, with China, Brazil and Russia among them (Martin 27). Their strong industrial base and their capacity for innovation gives them a strong advantage in the future over ours, especially when our industrial sector is becoming increasingly automated.
It is here, therefore, that Canada's position as a possible 'trend-setter' is most required, and of course, because our productivity is tied to our development (and while we lose some jobs, more work is being done for less cost, increasing productivity), and depreciation of our dollar increases manufacturing employment. Depreciation means that assets of a particular firm lower their value, making each unit they produce albeit cheaper.
This may be applied to anything from information to development to the currency to part productions, and in this case the depreciation shows that we aren't losing a market, and that Canada still has a role to play in the industrial market.
If we didn't play a pivotal role in the market, then depreciation would have still resulted in loss of jobs because it would have been shipped to an even lower currency anyways. So this means we have a presence in the international market, and we can insert some sort of foothold (Martin 42).
But which one? A look at Statistics Canada suggests that we have grown in agriculture and minerals, professional services and resources, construction the most, on an average of about 8 percent in a span of year. We thereby need to understand what resources are required in each nation, what technologies can be developed and how we can maintain an innovative foothold for when these emerging economies do become world players.
I believe understanding what competitive advantages these nations have are much more important that simply establishing trade relations, because we don't want to:
a. Aggravate local and infant industries (industries protected by government)
b. lose money against corruption, unfair subsidies and corporate theft, all of which are rampant in emerging economies
By understanding where our markets would be fit we can then more slowly 'sprinkle' in Canadian innovative markets to establish trends that allow us to have stronger and better market control and competition in these emerging economies.
We need to take a look past our trade relation with the United States because dependency on one nation is just too risky, especially when we see exactly how difficult it is for them to change their policies and paradigms on free market enterprises and stimulus packages.
That said, do you guys believe that we should stay true to the US and hope they ride the storm out? Or that we should establish these new markets? Is positive historical political amicability between states important to the extent that we should trust them? Or do you think we should insert Canadian-acceptive industries, markets and paradigms into these emerging economies?
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