This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Canada's Exporters Stuck In Neutral By Not Tapping Into Vast Emerging Market Potential: CIBC

Stocks in this article: CM

Chinese experience shows Canadian companies can compete and win

TORONTO, April 16, 2013 /CNW/ - Canadian exporters have shown they can compete and win in the highly competitive Chinese market but too few companies are tapping into broader emerging market opportunities, limiting the ability of the economy to grow, finds a new report from CIBC World Markets Inc.

The report notes that despite the fact that Canada has nine free trade agreements beyond the U.S., we have largely failed to tap into a global trade market that has grown some 70 per cent since 2002.

"The volume of Canadian exports today is at the same level it was a decade ago," says Benjamin Tal, Deputy Chief Economist at CIBC, who co-authored the report with CIBC Economist Andrew Grantham. "Regardless of how you look at it, this was a lost decade for Canadian exports. The lone bright spot has been in the very competitive Chinese market."

"Although the share of Chinese imports stemming from Canada remains at just a little over one per cent, it has at least edged up over the last 10 years. In contrast, most other developed countries have seen their share of Chinese imports fall over that same period. And it is not an oil story, with petroleum only a small proportion of Canadian shipments destined for China."

Mr. Tal notes that Canadian companies have shown strength in performance against their southern neighbours. Of the top 15 Canadian exports to China, 10 face U.S. competition. "But even with a strengthening Canadian dollar that is a battle some sectors have been winning. Improvements in market share within areas such as oil seeds, grain and fruit, along with pulp and aircraft, are proof of that fact."

He also says Canadian exporters are holding their own against Chinese manufacturers seeking to further expand exports to Canada's top trading partner.

This success demonstrates that Canada can and should compete in other emerging markets says Mr. Tal. He notes that Canada has had some success diversifying. The share of non-U.S. exports in total Canadian exports rose from 13 per cent at the start of the decade to 25 per cent today. But we've been stuck at 25 per cent for more than four years. And almost all of the improvement has come from two sources: the UK and developing countries.

"A closer look at the trade flows to the UK reveals that virtually all of that gain was due to the 300 per cent increase in the price of gold—hardly an inspiring diversification story. So we are left with developing countries as the key source of Canada's export diversification of the past decade. And this diversification story is also very concentrated, and becoming more so.

"Since 2003, China has accounted for more than half of the growth in developing market exports. But in the past five years, it has accounted for all of the growth. Exports to all other developing countries (with the exception of tiny Bulgaria) have actually seen declining shares of our emerging markets exports. So despite intensifying efforts, Canadian export diversification is losing momentum. In fact, on a year-over-year basis, our exports to non-U.S. destinations are now falling."

The report notes that this over dependence on China also holds risks as growth there has slowed and authorities are starting to refocus the economy more towards domestic consumption. That will require a different product mix that Canadian companies may not be positioned to fill. At the same time, competition is becoming "fierce and rising fast" as more companies seek to fill the needs of a growing consumer society.

While many commentators have pegged the slide in Canadian exports on the surge in the value of the Canadian dollar, Mr. Tal says this argument is too simple.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,600.58 +243.71 1.40%
S&P 500 2,039.93 +27.04 1.34%
NASDAQ 4,707.4120 +63.10 1.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs