Ambassador Bridge at the Canada-USA border crossing in Windsor, Ont. on March 21, 2020.Rob Gurdebeke/The Canadian Press
When the COVID-19 pandemic hit Canada and the longest international border in the world between two countries closed to non-essential travel, export traffic going south to the United States actually increased from some Canadian exporters.
Shipments doubled or tripled from certain sectors in the immediate aftermath of the border restrictions, says Dave Stone, manager of pricing and operations at Langley, B.C.-based Focus West Logistics, which helps companies ship goods across North America.
“Surprisingly, we saw an increase in volume and business picked up, mainly due to companies panic-shipping,” says Mr. Stone. “You have companies that maybe are shipping one truckload a month thinking, ‘Is the border going to close next month? We better ship three truckloads.’ They were trying to move as much over the border to their customers as possible and stockpile.”
Fears that export traffic to Canada’s largest and most important trade partner would stop have not borne out, and shipping levels have largely returned to normal, he says. There haven’t been additional delays at the commercial border crossings and his trucks flowed smoothly, Mr. Stone adds, although transport rates did see a bump as drivers pushed for additional compensation.
But the pandemic has highlighted both the strength of Canada’s trade relationship with its neighbour to the south, and the need to diversify markets.
Canadian exports saw a sharp decline in the first few months of the pandemic. Overall, Canadian merchandise exports decreased to $105.7-billion in the second quarter from $140.4-billion in the first quarter of 2020 – a nearly 25-per-cent decline, according to Statistics Canada.
But exports rebounded in June, due largely to an increase in shipments to the U.S., which were up 21.8 per cent to $27.5-billion from $23.2-billion in May. For comparison, exports to all other countries in June amounted to $12.2-billion, according to Statistics Canada.
And while exports of energy products, including oil, gas and electricity, and motor vehicles and parts declined over the quarter, exports of food products from both agriculture and fisheries actually increased.
“The border is closed to travellers but the border is still open to the movement of goods, so Canadian exports and imports from the United States are still going through,” says Sébastien Pouliot, principal agricultural economist at Farm Credit Canada, which provides financial services to farming operations.
The pandemic did cause a shift in economic activity on both sides of the border, Mr. Pouliot says. Exports of cattle and hogs, for example, were slowed by closures of packing houses in the U.S. due to COVID-19, he says. There were also changes in consumer demand early on that altered trade patterns.
“At the moment the crisis started, there was some hoarding of staple products, like flour and beans, for example. Even milk, early on,” Mr. Pouliot says.
Focus West Logistics.Supplied
Demand has returned to normal, for the most part, but for many countries the pandemic has highlighted that they are very reliant on trade for their food supply. In the longer term, that may impact Canada’s agricultural exports.
“The realization that [their] food supply might actually be vulnerable may prompt some countries to make efforts toward [being] more self-sufficient in terms of their food needs,” Mr. Pouliot says.
“There may be areas where we exported products and the demand coming from these countries is going to decline” as they increase their own supply, Mr. Pouliot says. “That just means it’s more important to diversify the portfolio of countries where Canada exports.”
Diversifying Canada’s exports and finding new markets is an important goal, says Dennis Darby, CEO of the Canadian Manufacturers and Exporters.
But doing so takes a long time and there are challenges, he says.
“We have such historical and physical links between Canada and the U.S., and to some lesser degree Mexico, in supply chains,” Mr. Darby says.
The CME is working with the federal government to help facilitate trade with Europe and Asia, but Canada is competing with countries that are, under normal circumstances, as competitive and probably more productive, he says.
“I think it probably makes sense that Canada has to do well in its trading relationship with the U.S. and Mexico,” he says.
Despite efforts, Canada has not seen any significant gains in western Europe or parts of Asia, he says. This country is not a low-cost producer, but rather a high-tech, high-quality producer.
As a result, “breaking into other markets is difficult,” Mr. Darby says.
While the U.S. may have been somewhat unpredictable in recent years, the coveted Chinese market is more so, he says.
These images show Focus West trucks loaded with construction vehicles.Supplied
“China is another one that’s very uncertain in terms of how that relationship will go, in terms of how the Chinese will deal with trade, because to them trade is inextricably linked to politics,” Mr. Darby says.
Canada will likely see a high, single-digit drop in manufacturing output this year, so the North American trade agreement and its most important trading partners the U.S. and Mexico, should remain the focus right now, he says.
“That’s a huge economic hit. It’s going to take a couple of years to recover,” he says. “I think companies right now are trying to stabilize their markets and their supply chains, trying to see what consumer demand will look like.”
Most of the world is experiencing similar economic upheaval. Other countries and other companies are being cautious, as well, he says.
“We’re glad that with our biggest trade partner supply chains kept going, because that’s important,” Mr. Darby says.
“We take it for granted. By and large the North American economy, for the movement of goods and information, has been effectively open for the last 25 years so as soon as anything happens that slows it down, it has an incredible effect on us.”
At Focus West Logistics, Mr. Stone says many of his regular customers have quickly adjusted to the pandemic economy. One customer that exported sandpaper and abrasives for welding now also produces and ships masks and rubber gloves.
“What I’ve seen is a testament to the versatility and the ability of small businesses to roll with the punches,” he says.