An advantage in oil and gas extraction
The country’s share of global trade has dropped over the past two decades. Canadian exports have grown 141% in that period, compared with 242% worldwide and 250% in the U.S., Weinberg wrote today in a research note. While Canadian exports have climbed 23% over the past decade, China’s have surged 325%.
Weinberg said Canada should stick to making products that require more sophisticated technology and higher capital, citing the aircraft, telecommunications and transportation industries. While the country also has an advantage in oil and gas extraction, prices for commodities are plunging, he said.
Unit labor costs for Canadian workers, expressed in U.S. dollars, have roughly doubled since 2002 according to an index published by the federal statistics agency.
“Labor costs are so much lower in Asia that Canada has lost most of this business, and it will surely lose all of it in time,” Weinberg said. “No plausible devaluation of the loonie can restore Canada’s competitiveness,” he said.
Manufacturers of “higher-tech goods” are better able to deal with lower overseas labor costs, including makers of aircraft and telecommunications products, Weinberg said.
Canada’s dollar has weakened about 7% against the greenback since Bank of Canada Governor Stephen Poloz dropped language about the potential need for future interest rate increases in October. Manufacturing accounts for about $175 billion of Canada’s $1.63 trillion economy.