Carr tasked with expanding Canada’s trade horizons beyond the U.S. market

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Jim Carr has spent the past 32 months as federal Natural Resources minister promoting the need to diversify Canada’s oil and other resource exports to overseas markets. Now, Mr. Carr will expand that pitch to an economy-wide effort as he takes on the newly named portfolio of Minister of International Trade Diversification.

The name change is an unsubtle signal from Prime Minister Justin Trudeau that Canadian businesses cannot rely on smooth access to their traditional markets in the United States, given U.S. President Donald Trump’s penchant for imposing tariffs and his threats to rip up the North American free-trade agreement.

In the name of diversification, Mr. Carr championed Kinder Morgan Inc.'s Trans Mountain pipeline expansion to increase oil exports to the Pacific Rim, a policy that culminated in Ottawa’s $4.5-billion purchase of the pipeline assets when the Texas-based company balked over British Columbia’s efforts to throw up roadblocks.

The Winnipeg MP, who previously led the outward-looking Business Council of Manitoba, is taking on the job of Canada’s top travelling salesman as the country chases a goal it has pursued in fits and starts for 45 years: diversifying its trading relationship beyond an undue reliance on the United States.

Without mentioning Mr. Trump by name, Mr. Trudeau said Mr. Carr’s mandate to promote trade diversification has some urgency.

“I think there’s no question that the international context is constantly changing,” the Prime Minister told reporters. “There is certainly a level of clarity for Canadians, for businesses, for everyone across this country that we need to diversify our markets. We need to ensure that we are not as dependent on the United States, and promoting small businesses to export more.”

As Natural Resources minister, Mr. Carr led trade missions to China, India and other countries to win better access for forest products and energy exports, while encouraging foreign companies to invest in Canada. As minister of trade diversification, he will pursue the same themes on a wider scale, he said on Wednesday.

The United States still accounts for about 75 per cent of Canada’s total exports, a percentage that fluctuates with the price of oil and natural gas, which are exported almost exclusively to that market. China is the second largest market for Canadian exports, at about 5 per cent. In 2002, the United States received 87 per cent of Canada’s exports.

Canadian exports to emerging markets have risen to 13 per cent of the total last year, from just 5 per cent in 2000, according to Export Development Canada, which provides insurance and other support for businesses selling abroad. The 2008 recession reduced the corporate appetite for risk and slowed progress, EDC’s chief economist Peter Hall said.

Since 2000, "diversification has been positive in every single province … and every single industry category with the exception of wheat has seen positive movement on the diversification front,” he said.

However, Mr. Hall said exporters should not turn away from the U.S. market, even with the political threats from Mr. Trump.

“Diversification is not about abandoning the thing that is driving most of our exports business,” he said. “It’s about nurturing that and taking care of it as much as possible, but there is this other thing out there that is growing in importance.”

At the same time, the focus on good exports can miss the broader picture, which must take into account trade in services and attracting direct foreign investment, said Daniel Schwanen, vice-president for research at the C.D. Howe Institute in Toronto. He said Canada must now deliver on the benefits of recently concluded trade deals with the European Union and Pacific Rim countries.

Mr. Carr and the federal government can only do so much; companies must make the effort to broaden their horizons, Mr. Schwanen said.

“Is the firm itself diversified, open to innovation, open to engagement by a wider range of employees, open to other cultures?" he said. "Because if they are, it makes it easier to successfully seek third markets.”