Government moves to restrict wealth-building resource activities have grave consequences as the automotive industry sheds jobs.
For Canada's top 10 export products in 2017, results were mostly positive as 7 of the 10 recorded an increase in exports during the year.
According to federal government publication Canada’s State of Trade: Trade and Investment Update – 2018, the largest gains occurred in exports of energy products, which grew 33.1 percent (up $27.3 billion) to reach $109.8 billion.
Energy products include crude oil, which is Canada's single largest export product, as well as natural gas, coal and electricity. 2017 saw energy regain the top spot in Canada’s export rankings by category. Energy made up over one-fifth of total exports.
Crude oil exports alone are nearly as valuable as the entire auto sector (cars, trucks, engines and parts) with one very important distinction. Oil reliably generates a massive trade surplus, while autos just as consistently produce a sizeable deficit.
This proves that the economic future of the country is definitively tied to the successful development of natural resources. Canadians should be concerned about the effect of federal policy measures that curtail responsible resource development. Furthermore, the various attempts at the provincial level to further thwart national economic stability, such as deliberate interference in decisions made by senior government, should be understood as a grave threat to Canada's economic viability.
All major components of energy products exported to the U.S. market – crude oil, refined oil, and natural gas – grew markedly in 2017. In the case of oil, roughly two-thirds of the increase was due to higher prices; this proportion was up to four-fifths in the case of natural gas.
Automotive sector exports shrank in 2017, as did the value of aircraft and gems.
While higher prices were a driving force behind the growth in energy exports, they were not the only factor responsible. The contribution of higher prices to export value growth was roughly two-thirds in the case of crude oil, just under 60 percent for refined oil, over 80 percent for natural gas and over 95 percent for coal. The remainder of the contribution was accounted for by higher volumes of exports.
With GM's surprise announcement to shutter its Oshawa operations, the export picture weakens. Now that we can't count as much on healthy auto exports, there will be a much greater reliance on the energy, mining, aquaculture and forestry sectors.
Yet the federal government is enacting legislation, in Bills C-69 and C-48, that countless critics say is specifically designed to restrict and curtail the export of crude oil products. Meanwhile, concerns about foreign interference in Canadian policy have not been properly acknowledged, and as a result the slow-motion diminishment of the oil industry continues.
Balance of trade
While the sheer magnitude of major export categories is of interest, the role of exports in trade balances cannot be overlooked. Crude oil, despite the cold shoulder it gets from too many politicians, in 2017 created nearly double the trade surplus of automobiles. It is for this reason that some economists like to say that crude oil "pays the rent" for Canada.
Automobile manufacturing does many positive things in things in the economy, but it is not the one that pays the rent. When automobiles are considered along with trucks, parts and engines, this broader auto sector produces the trade deficit shown below.
The strong economic dependence on crude oil comes at a time when everyone has legitimate questions and concerns about climate and fossil fuels. Only by maintaining a strong energy sector that sustains innovation activities can Canada expect to be a player in global oil and gas evolution toward a decarbonized economy.
Settling for low crude oil prices because of the lack of pipeline takeaway capacity is a hazardous course of action. We need more pipelines now, or else Canada will face an increasing balance-of-trade problem.