Globalization at the Brink? Interview with Peter Hall – Chief Economist at EDC
On May 25, Peter Hall, Chief Economist at Export Development Canada (EDC), was in Quebec City to give his annual presentation “Let’s Talk Exports”. Larouche Marketing Communication attended the presentation and had the opportunity to interview him. Here’s a summary of his remarks.
Globalization affects every region, every business, and every individual, worldwide. It has become an integral part of life. It has given consumers access to affordable products from around the globe and lifted millions of people out of poverty. Yet globalization has gotten a bad name. Recent political events such as the elections in the U.S. and France have brought an anti-trade movement to light. However, protectionist measures will be highly damaging to any country that puts them in place.
Don’t worry, the Americans won’t put an end to globalization
Way too many jobs are on the line. In fact, 32 U.S. states have Canada as their primary export customer. It’s much easier to set up trade barriers than to make the investments required to offset the lost trade. The electorate would run out of patience before the benefits of such measures were felt.
By putting measures such as Buy America and Buy American in place, the government accepts that costs will rise because they will have to take into account the cost of products manufactured in the U.S. This money has to be recovered in one way or another—by slashing jobs, for example. As Mr. Hall explained, “If thousands of Americans lose their jobs because of Make America Great Again, they may stop supporting the idea.”
Americans are the most price-sensitive consumers in the world. They didn’t create Walmart and Target for nothing. Imposing trade tariffs on Mexico and China can’t help but have an impact on “everyday low prices”! Trade barriers end up penalizing those who put them in place.
Furthermore, technology is an inherent part of globalization and will not disappear in a more protectionist environment. Anyone, anywhere on the planet will be able to continue doing business internationally, thanks to technology. Shareholders are unlikely to come out against globalization.
Economic growth is evident at the moment. Since the last economic crisis, millennials have returned to the labour market. They are the new generation of consumers and will be a powerful force in the economy. The European Union is also firming up, and unemployment rates are improving. Tightening US and EU markets will benefit to emerging markets.
Emerging markets provide fabulous export opportunities, particularly because of their growth rates. The growth rate in OECD countries is around 1.1% and in North America, 2.5% to 3%. In India it can be up to 8% and in China it’s about 6%. The risks are higher in these markets, but the potential is huge.
To illustrate this potential, Mr. Hall cites the example of Nova Scotia, which in 2000 exported hardly any seafood to China. Since it broke into the Chinese market, however, the little province has been exporting $200 million worth of seafood annually. In 2000, 5% of Canadian exports went to emerging markets, and in 2013 that figure was 15%. So it has tripled in 13 years. The agrifood industry is particularly well positioned in this market.
In short, we shouldn’t be too worried about America First or other protectionist approaches. It would be almost impossible to change the architecture of globalization without triggering a global economic crisis. It’s true that there is a certain amount of political turbulence, and that’s making investors hesitate. However, we are definitely seeing growth, and according to Mr. Hall, this is a great opportunity for businesses!
La mondialisation en péril? Prévisions à l'exportation 2017. Printemps 2017.
Hall, Peter. Parlons exportations. Conférence. 25 mai 2017.