Gantry cranes and shipping containers are seen at the Port of Vancouver, on March 11, 2020.DARRYL DYCK/The Globe and Mail
Trade confidence among Canadian exporters is at a historic low as most companies with markets abroad report declining sales and are bracing for an economic recession they predict will last well into 2021.
In a new survey by Export Development Canada, companies also say they’re adjusting export and international investment strategies to accommodate concerns of rising protectionism abroad and they’re seeking new markets for investment and export opportunities.
Confidence in Canadian trade has been dropping since mid-2018, according to EDC’s biannual trade confidence index, but the latest drop of 19 per cent, from 69.3 per cent six months ago to now 56 per cent, puts current near-term confidence among Canadian exporters at an all-time low.
“It’s a big drop in our trade confidence index survey this time around,” said Stephen Tapp, deputy chief economist at EDC. He said the decrease is large but not unexpected since other recent surveys and reports had been showing similar indications since the start of the pandemic.
According to the report, about three-quarters of the 823 companies surveyed have seen a negative impact on sales since January and almost half said they were experiencing a “high” negative impact.
All sectors have lowered trade confidence levels over the past six months, according to the report, but Mr. Tapp said it’s clear from the data that the harder an industry was hit by the pandemic, the more their trade confidence is likely to have been affected.
Transportation, which includes aerospace and automobiles, showed the biggest downturn, with a decline of 18.3 points, or 25.6 per cent, since the end of 2019. Mr. Tapp said companies in the extractive sector, which includes oil, have also shown signs of high pessimism.
Sixty-four per cent of respondents said they expected weaker sales because of the pandemic to continue into 2021 and slightly fewer than half said they expected recovery to look like “multiple waves of rebound and recovery,” or a “W shape” recovery as opposed to a sharp rebound.
Mr. Tapp said that one thing he found surprising was the stark increase in concerns of global trade protectionism. Six months ago, 35 per cent of respondents expressed concern that protectionism would increase within the year. In the latest survey, that number grew to 69 per cent, with about one-third of the companies citing a negative fallout from Canada-China trade tensions. Canadian exports of aluminum are currently in the crosshairs of the United States for possible tariffs if Canada doesn’t agree to export quotas.
Many Canadian companies, around 39 per cent of those surveyed by EDC, say they’re considering this as they strategize their international exports and investments.
Dennis Darby, president and chief executive of Canadian Manufacturers & Exporters, told The Globe and Mail that Canada and other countries will “undoubtedly see some calls for protectionist measures” as a result of the COVID-19 crisis, but that he believes the measures aren’t the right option for Canada.
“We should be focusing on developing the right business environment that will allow Canadian manufacturers to grow our share of global markets,” Mr. Darby said.
Mary Robinson, president of the Canadian Federation of Agriculture, says that an increased concern over protectionism makes sense considering all the disruptions that have happened over the past six months as a result of the pandemic.
A downward effect on the usual levels of imports and exports globally may be a “natural reaction,” Ms. Robinson said.
The Canadian agricultural industry produces more food than Canadians can consume, she said, but some countries don’t have the same capacity and natural resources. “For those that aren’t in that situation, certainly prioritizing feeding their own population would become a top priority,” she said.
EDC’s latest survey showed a much higher than usual interest among companies to expand exports and investment activity to new countries. Fifty per cent of respondents said they’re exporting to new markets, while 69 per cent said they were planning to do so.
The U.S., already the top export destination for Canadian companies by far, is also seen as the No. 1 destination by two-thirds of those companies planning to export to new markets, followed by Britain and Germany, respectively.
“I think companies are looking for customers wherever they can get them right now,” Mr. Tapp said. “We’re seeing that happen both through new export markets and through direct investment.”
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