Global trade: how does it look?

Transcription

1 Edmonton, December 2018 Global trade: how does it look? Marie-France Paquet The Office of the Chief Economist Global Affairs Canada

2 Overview 1. Canadian economy at a glance 2. Provincial economy at a glance 3. Trade performance and diversification 4. A new trade deal 5. Challenges ahead 2

3 Canada s economy has seen solid economic growth Percent 5 Canadian Quarterly GDP Growth Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 Q2 Q3 Q4 Q1 Q2 Q Data: Statistics Canada 3

4 Canada s economy has been among the strongest performers in the G7 4

5 Canada forecast to see 2 nd fastest growth among G7 for next two years 3.0 Percent G7 GDP Growth Forecasts Canada France Germany Italy Japan UK U.S. Data: IMF 5

6 Provincial GDP growth ( ) Provincial GDP growth ( ) NL PEI NS NB QC ON MB SK AB BC Sources: Statistics Canada, TD Forecast ( ) 6

7 Jan-2016 Mar-2016 May-2016 Jul-2016 Sep-2016 Nov-2016 Jan-2017 Mar-2017 May-2017 Jul-2017 Sep-2017 Nov-2017 Jan-2018 Mar-2018 May-2018 Jul-2018 Sep-2018 Canadian oil exports experienced a modest decline in September Billion $ Monthly Canadian Oil Exports* Down 16.7% * HS 2709 and 2710 Data: Statistics Canada 7

8 01/ / / / / / / / / / / / / / / / /2018 Although non-crude oil is seeing a decline in quantity exported, crude oil quantities have remained steady Billion L Monthly Quantity of Canadian Oil Exports crude oil HS 2709 (RHS) Million M Non-crude oil HS 2710 (LHS) * HS 2709 and 2710 Data: Statistics Canada 8

9 Jan-2016 Mar-2016 May-2016 Jul-2016 Sep-2016 Nov-2016 Jan-2017 Mar-2017 May-2017 Jul-2017 Sep-2017 Nov-2017 Jan-2018 Mar-2018 May-2018 Jul-2018 Sep-2018 And unit prices of oil exports have barely budged but latest trade data is still Sept Jan 2016 = Monthly Canadian Oil Exports* 150 Non-crude oil HS crude oil HS Data: Statistics Canada 9

10 June Volume of Exports Canadian exports have underperformed its benchmark of world merchandise exports 200 Comparison of Canadian and World Merchandise Export Volumes Index (Year 2000 =100) World Imports Canadian Exports Data: CPB World Trade Monitor, Statistics Canada 10

11 Services exports remain small, but have been growing faster than merchandise exports Canadian Exports (Balance of payments) Index (Year 2000 =100) 60 Balance of Payment Services Balance of Payment Goods Data: Statistics Canada 11

12 Fall Economic Statement: goal is to boost Canada's overseas exports by 50% by 2025 $ Billion $320 $300 $280 $260 $240 $220 $200 $180 $160 $140 Scenarios for Growth in Canada s Oversea Good and Service Exports Target: $285 Billion Current Actual $190 Billion Annual Growth: 2.3% $297 Billion $248 Billion $229 Billion Scenario 1, Conference Board forecast: Annual growth rate of 5.8% until 2022 extended further to $297 billion in oversea exports by 2025, $11 billion higher than the target. Scenario 2, Oxford Economics forecast: Annual growth rate of 3.4% until Oversea exports calculated using current composition of Canadian exports. $248 billion in oversea exports by 2025, short by $37 billion Scenario 3, Historical Exports Growth Rate: Average growth rate from (2.3%) extended further to $229 billion in oversea exports by 2025, short by $57 billion. Data: Statistics Canada Table , Oxford Economics Global Forecast November 2018, Conference Board Forecast March Source: Global Affairs Canada Office of the Chief Economist 12

13 Canadian exports have diversified away from the U.S. in recent years % Share of Canadian Merchandise Exports US EU China Japan Mexico Philippines Other % 4.8% 0.9% 2.2% 0.5% 0.1% 4.6% % 7.6% 4.3% 2.2% 1.4% 0.2% 8.5% Data: Statistics Canada 13

14 A further diversification measure, the Herfindahl-Hirschman Index (HHI) 0.8 Canada's Merchandise HHI HHI Concentrated Moderately Concentrated Diverse HHI less U.S Data: Statistics Canada 14

15 Canada currently ranks as the 4 th most geographically concentrated exporter 0.8 HHI International Comparisons Mexico, Canada 0.4 Hong Kong 0.2 Australia Norway, New Zealand United States France, Great Britain, Sweden, Germany 0 Data: UN Comtrade Database 15

16 Some provinces are more diversified than others 1 HHI Provincial Comparisons NL PEI NS NB QC ON MB SK AB BC NWT YK NV Data: Statistics Canada 16

17 A new trade deal: the CUSMA Announced completion of negotiations toward a new Canada-United States- Mexico- Agreement (CUSMA) on September 30, 2018, and signed at G20 Summit in Buenos Aires, Argentina The outcomes preserve key elements of this trading relationship and incorporate new and updated provisions Updates include: RoO in the automotive sector, dispute settlement mechanism, supply management, increased IP protection New provisions: sunset clause, state-owned enterprises, currency manipulation, non-market economy clause, increased de minimis thresholds Contains 34 chapters, 12 side letters 17

18 What if CUSMA had not come true? Global Affairs Canada CGE, by 2023 CD Howe CGE Royal Bank of Canada Macroeconomic, over 5 years Bank of Montreal Macroeconomic, over 5-10 years -0.19% -0.47% -1.0% -1.0% 18

19 Challenges Ahead In Canada Household debt level in Canada Productivity Around the globe Trade tensions and potential ripple effects Changing financial conditions around the globe Increased oil prices The multilateral trading system 19

20 Global trade tensions: estimates from IMF Steady expansion underway since mid-2016 continues Global growth forecast is 3.7% for (-0.2 pp compared to April 2018) US growth is strong (fiscal stimulus) but revised downwards due to trade tensions; tighter monetary policy to be expected Euro area and UK growth revised downwards China growth revised downwards due to trade barriers and weaker credit conditions Other advanced economies and emerging economies prospects mixed 20

21 U.S.-China trade tensions: what does it mean for Canada? We use GAC s dynamic Computable General Equilibrium (CGE) model with 57 sectors and 140 countries and regions. It can capture impacts on the Canadian economy even though the policy shock stems from a tariff confrontation between two other economies and is not targeted at Canada. Hypothetical scenario that the U.S. and China impose additional tariffs of 25% for all their respective imports up to The analysis does not take into account the financial aspect of Sino-American trade. 21

22 U.S.-China trade tensions: what does it mean for Canada? (cont d) United States and China are not highly trade-dependent countries. Trade intensity accounted for only 27% of U.S. GDP, while it is about 38.5% of China s GDP. In contrast, Canada s trade intensity was around 64% of GDP. Their trade exposures to each other were even less significant: China s trade with the U.S. accounted for 4.73% of China s GDP, and the U.S. trade with China represented 3.7% of U.S. GDP. But bilateral trade was dominated by U.S. imports from China. China s exports to the U.S. accounted for 3.53% of China s GDP, compared to only 1% for U.S. exports to China. 22

23 The Effects of Tariffs on GDP in 2019 and % Changes US$ Billion % Changes US$ Billion ASEAN Australia Brazil Canada China EU_ Japan Korea Mexico New Zealand Taiwan USA Rest of World Total Data: GTAP 23

24 Change in 2030 of Macroeconomic Indicators Country 2030 Capital Change Real Exchange Rate Consumer Price Index Value (US$M) % % % ASEAN 45, Australia -13, Brazil -10, Canada 15, China -989, EU_28-104, Japan 2, Korea 9, Mexico 127, New Zealand -1, Taiwan 6, USA -388, Rest of World -158, Data: GTAP 24

25 Effect on Canada as a result of the trade Disputes Canada could potentially capitalize on the trade dispute by importing cheaper products from China while exporting more products to the U.S. to make up for the decline in U.S. imports from China. Potential gains could reach US$4.5 billion or 0.2% in GDP from the dispute. Export opportunities to China: oilseeds (mostly soybeans) and transport equipment (such as airplanes). Export opportunities to U.S: The model results suggest that Canada could increase its exports to the U.S. by US$18.0 billion, almost entirely in the manufacturing sectors. On the import side, Canadians would benefit from reduced prices for imports from China. 25