By Brian Dunn
With only four per cent of Canadian companies involved in exporting, there are plenty of opportunities for Canadian manufacturers to tap into the growing middle class of emerging markets, according to Benoit Daignault, President and CEO of Export Development Canada. China’s middle class is growing by 40 million people a year, while India is adding 15 million to the same category, Mr. Daignault said at the 20th annual Conference of Montreal, organized by the International Economic Forum of the Americas, from June 8-11.
Amadou Diallo, CEO of DHL Freight, added that Canada isn’t capitalizing on its competitive advantages to expand business in rapidly-growing economies of some African countries. He noted that many African leaders were educated in Canada and understand our way of thinking, which, coupled with our knowledge of French, could help us compete with countries like India and China which have been investing billions in Africa. China alone has committed to double trade with Africa to $400 billion by 2020.
“You should be inspired and determined to tackle those opportunities and I don’t think that you see a lot of Canadian entrepreneurs moving around all these markets,” said Mr. Diallo. He said Canada’s expertise in energy development could make major gains since energy is Africa’s biggest need. Among the fastest growing African countries is his native Nigeria, which has big oil reserves and has become part of a major global trade route. But if Canadian companies want to tap these markets, they must have reps in all the countries they want to serve, Mr. Diallo added.
International Trade Minister Ed Fast said there has been a “dramatic shift in trade flows” since NAFTA was signed 20 years ago, but what hasn’t changed is “the persistent threat of protectionism which remains one of the most significant and toxic threats to the global economic recovery.” Mr. Fast was about to embark on his third trade mission to Africa to promote mining, renewable energy and power sectors.
Asia offers similar opportunities, said Louis Lévesque, Deputy Minister of Transport, Infrastructure and Communities, Canada, who noted 35 per cent of the world’s economic growth is happening in Asia, especially China where iron ore imports from Canada have tripled in the last six years. “A changing world calls for ongoing adjustments in trading patterns,” he said. Ottawa is working on the trade side by expanding the scope of transportation agreements with countries like Chile, Peru and China, while continuing to invest in infrastructure at home, including highway, rail and port infrastructure through the $14 billion New Building Canada Fund.
A global city requires a smart infrastructure, according to Bill Johnson, Director, Miami-Dade Water and Sewage department and former Director, Port Miami. “Intermodal connectivity is a key to growth as much as trade agreements. From the Port of Miami, we can reach 70 per cent of the U.S. population in less than four days by rail.”
Port of Montreal boss Sylvie Vachon noted 40 million consumers can be reached within one trucking day from the port and 70 million within two days by rail, figures that were shown in a new short promotional video for the port. “We have an electronic navigation system to allow Post-Panamax ships to call on the port and we have an opportunity to develop trade with emerging markets and with a new economic agreement with the EU. We have everything to make the Port of Montreal a success.”
One in five Canadian jobs is linked to exports, while U.S. trade with Canada and Mexico has increased over 265 per cent since NAFTA went into effect twenty years ago, noted Bruce Heyman, United States Ambassador to Canada. “NAFTA reflected trade in the 1990s. We need to stay current with new initiatives like Beyond the Border (for perimeter security and economic competitiveness) and the Trans-Pacific Partnership of 11 countries, including the U.S. and Canada which provides new and meaningful market access.”
Foreign manufacturers interested in doing business in Asia have to understand the Asian market’s character and its preference for higher value products and smaller rather than bigger cars, said Naoyuki Yoshino, Dean, Asian development Bank Institute. “In Southeast Asia, there is lots of infrastructure needed. In China, the environmental industry is a growth area. Small and medium-size enterprises are good innovators, but short on capital.”
Closer to home, the Arctic region is “fast transforming itself into a new economic playing field,” said Òlafur Ragnar Grimsson, President of the Republic of Iceland. “During the Cold War, the Arctic remained closed territory. Only in the last twenty years has it opened up. The Chinese are looking at a centre [shipping] route near the North Pole. “With mining and gas possibilities, the leading economic powers of the world are now interested in Arctic development. More than half of the G20 countries are now sitting at the Arctic table and Iceland and Canada’s splendid isolation is over.”
Even South Korea has a Master Plan for the Arctic, while Singapore has a government department devoted exclusively to the Arctic, said Mr. Grimsson who added that Bremen, Germany, has signed a deal to build a harbour in Iceland.
“China, India and Korea have concluded that it’s impossible to be a major world trader without playing a major role in the Arctic region. We must get our act together to deal with some of these challenges. There were 1,200 participants at the first annual assembly last November in Iceland to discuss the future of the Arctic.” Whenever Mr. Grimsson meets Asian and European leaders, the first thing they ask him is about the Arctic. “It’s becoming a bilateral issue. The prime minister [Stephen Harper] has to prepare to deal with these intervening countries.” With increased shipping likely in the region, new hubs will have to be built, Mr. Grimsson suggested at another round-table session. “If a sea route really opens up, we have no idea of the scope of the infrastructure needed to build Arctic harbours, but it will be much bigger than existing harbours. There is also a large potential for wind power in the Arctic.”
In terms of infrastructure projects in place or planned, an Arctic Round Table, called Arctic 360, was held last year. It involved all the Arctic countries, including Canada and Russia where it was estimated that close to 460 billion euros ($676 billion) worth of infrastructure investments will have been made between 2010-2020, primarily on airports and ports, according to Jens-Peter Saul, Group CEO of engineering firm Ramboll of Copenhagen.
If that seems like a lot of money, Mr. Grimsson was quick to point out that the term Arctic is misleading as it refers to all Arctic regions and not just the Canadian Arctic. He added that it will take a lot of cooperation from all countries, including Russia, to make sure the Arctic doesn’t turn into an environmental wasteland.
Referring to the crisis in the Ukraine, Mr. Grimsson said a conflict in another part of the world shouldn’t affect cooperation in the Arctic, noting that the biggest landmark players in the Arctic are Russia and Greenland. “And the biggest players in the oil industry in the Russian Arctic are Russia and the U.S.”
Asked what India’s interest was in the Arctic, Mr. Grimsson said they are keen on oil and gas exploration and that the Indian minister of shipping wanted to know what kind of cooperation India could get from Iceland and Greenland. One area of concern is that less than 10 per cent of the Arctic is charted which would be a problem for ships in a rescue operation.