Todd Hirsch, Guest Columnist – Troy Media
Albertans know the importance of being a global trader — and these days, the chatter is about new and burgeoning global markets.
“China is the hottest market in the world! We’ve got a free trade deal with Mexico, don’t we? What about Canada’s talks to expand exports to Europe? And don’t forget the nearly 200 million Brazilians!”
For all of this excited talk about global markets, the reality for Alberta is one country: the United States. And of everything that goes south of the 49th parallel, one single state accounts for a significant portion: Illinois.
On the surface, Albertans pay little attention to the state of Illinois. They may think of Chicago’s impressive skyline or of it being Barack Obama’s political base. They may think of cornfields (the largest agricultural crop in the state) or the Oprah Winfrey Show But it’s most likely, that when Chicago comes to mind, Albertan’s thoughts turn to the Blackhawks.
Despite Albertans not thinking a lot about Illinois, more than 20 per cent of everything we’ve sold abroad over the past decade has gone to this one state. It is by far the number one U.S. state for Alberta exporters, who sold more than $23 billion there last year alone. (Incidentally, the state to which Alberta sells the least is Hawaii with a mere $2.7 million in sales of grain.)
The reason for Illinois’ lofty status is, of course, that Chicago (and surrounding area) is home to vast numbers of oil refineries and natural gas collection hubs. This highlights our trade dependence on not only one country, but one industry.
There’s nothing specifically wrong with a trade concentration in energy products. The most nicely diversified provincial economy with the least dependence on one export market is Manitoba. I’m unaware of any Albertan who would say “Yah… if we could just get our economy to be more like Manitoba’s, we’d be in better shape.”
Still, a lack of trade diversity poses challenges — the most famous being Alberta’s famous boom and bust economy. Diversification of the economy and our trading partners is something that has bedevilled countless governments and economic development offices in this province. And hence the push to expand the province’s trading partners.
The new opportunities for exporters are clearly in Asia, especially China. Of the non-U.S. export markets, China has risen to the number 2 spot, having surpassed Japan nearly a decade ago and leaving Mexico (with which Canada has a free trade agreement) in the dust. That isn’t a surprise given China’s stunning economic ascension as a global superpower and trading giant.
This is one reason why the Enbridge Northern Gateway pipeline from Edmonton to the west coast is seen as such a priority. But the pipeline will be a long time in the making. Even setting aside the significant environmental opposition and land right-of-way challenges, the pipeline will take years to build. Not a drop of oil is likely to flow through it this decade.
Takes time to build relationships
Other international markets such as India, Brazil and Indonesia hold potential as well. The challenge for Canadian businesses is that we’ve fallen behind other competing countries such as Australia in terms of building trade relationships. It takes years to establish those linkages and learning a new and different business culture isn’t easy.
In many ways Canada has had it too good for too long. Doing business in the U.S. has been easy since we share a similar culture, language, legal system and even time zones. Denver looks shockingly like Calgary, and Chicago is just a bigger, windier Toronto. But step off a plane in Mumbai or Shanghai and the world is a much different place.
Illinois may be Alberta’s single largest market — and energy the single largest export commodity. That has served us well and will continue to pay a lot of our bills in the future.
Yet it’s a big world out there brimming with opportunities. Efforts to expand our trade connections with the rest of the world need to be redoubled or Alberta will find itself missing out on lucrative markets.
Troy Media business columnist Todd Hirsch is a senior economist with ATB Financial.