foundation of canada asia pacific - Content Tagged with

British Columbia provides a recent example of the results of following (or accepting)
a strategy of more diversified economic relationships. BC has a trade profile quite distinct
from other Canadian provinces, with proportionately far more of its exports going to Asia
than is the case with any other province and less to the US (except for Nova Scotia which
trades heavily with Europe). During the North American recession of 1990-91, BC was
the only Canadian province to maintain its economic momentum as the rest of the country
followed the US slump. In the same way, when the Asian crisis hit in 1998, BC was the
only Canadian province to slip into recession as the rest of the country rode the US boom.
Canada will always have a closer relationship with the US than with Asia, but Asia can
provide an insurance policy against over-dependence. Any further integration — for
instance the adoption of a common currency — would only strengthen our marriage to
the US business cycle. The prudent strategy for Canada is to diversify its ties to countries
that do not necessarily follow the same business cycles as North America. (The irony is
that the closer we become to another economy, the more we are influenced by its
business cycle. The best strategy is to develop close economic ties with many countries.)
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Canada’s automobile industry offers a model of an area of production that is at potential
risk because it has relied on the policy component of North American integration to develop
a very limited range of markets or products. The top Canadian export to the world in
1998 was motor vehicles with engine capacities in excess of 3,000 cc — mostly minivans
and SUVs — accounting for 10.9% of all exports. More than 99.5% of these vehicles
went to the US. If US consumers ever reduce their demand — because tastes change, or
the stock market declines, or they simply become tired of getting eight kilometres to the
litre as oil prices rise — both our export market and the economy of southern Ontario
will be hard hit. The entire basis of this trade is the policy decision by the governments
of Canada and the US to develop a transborder automobile industry. It is a prime argument
for finding additional export markets to enhance economic security.
PLAYING TO THE FUTURE
The greatest flaw in Canada’s North American integration strategy may be that it looks
to the past rather than the future. Today the US dominates the world economy,
contributing an estimated 27.7% of global GDP. But time is on the side of Asia. In a detailed
analysis of Asian growth (written just before the Asian crisis hit), the Asian Development
Bank projected that Asia’s share of world income will rise from somewhere under 40%
today to about 57% by 2025. 6 By that time, GDP per capita in East Asia (excluding China)
will be virtually the same as that in the US. China’s GDP per person is projected to rise
from the 10.8% of the US level it recorded in 1995 to 38.2% over the same period, while
incomes in Southeast Asia will more than double relative to the US. 7 In other words,
Asia will be catching up with the US — and the numbers of people involved means the
size of the markets created will be far larger than those in North America. While few
companies can afford to plan an investment strategy on a 25-year timeline, governments
must. Our bureaucrats have a responsibility to develop policies today that our business
people can exploit tomorrow.
Increased ties with the US also may not provide the greatest benefits to the growth
industries of the 21st century. Integration is generally considered in terms of increased