OJPC Report: Ontario Must Expand Exports to Emerging Markets
Ontario seems to finally get it, that diversifying trade with emerging Asia and especially China will be a key strategy for the province’s long-term future prosperity. That’s the first of several conclusions of this week’s Ontario Jobs and Prosperity Council’s (OJPC) Advantage Ontario report.
For decades, as the manufacturing heartland of Canada, Ontario has been shipping most of its products south of the border. In fact, fully 77% of the province’s exports went to the US to the tune of some $150 billion last year. While the US remains Ontario’s (and Canada’s) biggest customer, OJPC points to the rapidly rising middle class in Asia and other regions of the developing world that will drive most of global consumption of higher value-added goods and services going forward. In a short decade or more, citing a report by Morgan Stanley Smith Barney, over 50% of global consumption will be from there as the US and EU continue their slide.
But, Ontario firms have been slow in diversifying export markets. While Ontario’s exports to the US have steadily declined over the past ten years plummeting to $127 billion in 2009 from the peak of $180 billion in 2002, only 1.4% of Ontario products and services goes to China and a paltry 0.3% to India, underscores OJPC.
The Council urges the Ontario government and firms to work together and focus on sectors where the province possesses inherent advantages and where global demand is rising – agri-food, advanced manufacturing, tourism, health care, education, housing, infrastructure, financial services, natural resources, IT, and life sciences. While manufacturing remains by far the mainstay of Ontario’s exports (85%), Ontario must increasingly concentrate on advanced manufacturing on a global scale. The export capacity of Ontario firms is under-utilized and they must do more to leverage Asian and other ethnic communities in tapping into global markets.
In addition, in light of major mineral discoveries such as the massive Ring of Fire chromium and other base and precious metal deposits, OJPC says the province must open up undeveloped regions of the north to Chinese and other Asian firms for resource extraction while promoting northern tourism. The Canadian Press reports that China bought over 50% of world’s ferrochrome (for the making of stainless steel) supply last year that ensures stable demand from emerging markets over the coming years.
But, especially worrying for OJPC is the lagging export performance of Ontario’s small and medium-sized enterprises (SMEs). Only a small fraction of them export (a mere 6.4% in 2008) and the average value of the products they do export remains very low. Given the limited resources of most SMEs to explore and develop emerging global opportunities, the OJPC proposes the creation of a simple, integrated one-window online portal for SMEs to access government information and support.
The government should also boost partnership programs such as the Global Growth Fund that spotlights the building of Ontario SME export capacity. A coinciding recommendation is to set up large “reverse trade missions” centered on key emerging markets in partnership with the private sector. Reverse trade missions combine current efforts at building export capacity (market seminars, incoming buyers’ sessions and market studies, and so on) into bigger, integrated and high-impact events aimed at key markets.
Ontario SMEs should also take advantage of the under-utilized “soft innovation infrastructure” embodied in the Ontario Network of Excellence (ONE) that includes public-private-academic consortia like MaRS, Communitech and Invest Ottawa to support ‘born global” start-ups and accelerate their export growth. Finally, in addition to drawing upon recent immigrants and international students for export expansion, OJPC advocates significantly increasing the number of international students at post-secondary institutions and expanding programs to keep the most talented and entrepreneurial after they graduate.
OJPC hopes the Ontario government will reconvene the Council within a year to review progress and update Ontarians.