Export-led Growth: Getting Back to Basics and Moving Ahead

Archived Topic Box from the 2003 Third Annual Benchmark Report

BC has been the poorest export performer among Canada's provincial economies for much of the past three decades. With the exception only of 1987, during the past quarter century BC has had the lowest percentage of its GDP attributable to international and inter-provincial exports – a mere 46.1% of GDP between 2000 and 2002 compared with 69.8% in Ontario, 62.2% in Alberta and 59.5% in Quebec. Added to this, BC ranks last among all provinces in export growth from 1993 to 2002, with a compound annual growth rate of only 5% compared to a Canadian average of 8%. This is a very worrisome trend because imports have been rising without an offsetting increase in exports to pay for them.

A review of the basics of why exports are critically important to an "open economy" like BC further illustrates the importance of export performance. The income derived by an economy, GDP, is traditionally defined by five annual spending flows so that:

An "open economy" like British Columbia needs to import much of what it consumes whether it is furniture from Quebec, consumer electronics from Asia, or fresh fruits and vegetables from warmer climates. Imports are a net drain on GDP as they represent "leakages" from our provincial economy to other jurisdictions.

By implication, this means that we have to export to pay for the imports we require. At the same time, government spending (G) is being reigned in and consumers face high debt levels ultimately limiting their spending (C). And businesses may be loath to invest (I) if they cannot sell their products to consumers in BC, governments, or customers outside of the province. With G and C under pressure, I on the sidelines, and M growing, it becomes critical for us to significantly increase export activity to improve GDP and increase investment (I), which in turn, will further boost GDP.

This ties directly in with the Progress Board's three core economic targets for BC – that is, placing first or second for the annual growth rate of real GDP per capita by 2010; first or second for the level of real personal disposable income per capita by 2010; and, first or second for the employment to population ratio (ages 15-64) by 2010.

Peter Maskell of the Copenhagen business school describes the challenges facing small open, export-dependent economies in a recent publication as follows:

"All small nations are faced with this same dilemma of openness: They need access to foreign resources and can only pay for their way by exporting commodities or services at an internationally competitive price. This in turn forces the domestic producers to match or outstrip foreign firms in competitiveness and the only feasible way to ensure that the domestic firms keep pace with the best is by eliminating all trade barriers. Protectionism is simply not an option for small nations."

So, exports matter – in fact, they matter a lot. And BC's poor export performance over the past several decades has clearly hurt its economic performance. On the bright side, if the province – including individuals, business and governments – can get exports right, we can recapture the prosperity of earlier decades.

The answer to "getting it right" is within our grasp – a staggering array of firms across BC's regions can serve as exemplars and guides. A number of businesses from a variety of industries are active exporters, selling goods ranging from coal, lumber and gas to manufactures and services ranging from tourism and transportation to finance, communications and management. Even public services such as museums, parks, education and health care are exports. A few recent BC-based, non-traditional examples of export businesses illustrate the diverse opportunity for shoring up BC's export base.

• Mining Expertise – during 2003, scores of small and medium sized junior mining firms based in Vancouver have put their knowledge and skills to use outside BC, especially in Asia.


• Technology – many well-known companies engaged in biotech, information technology and fuel cells have concluded deals abroad using BC knowledge and expertise.


• Structural Steel – a Surrey based firm is fabricating new steel-based residential, institutional, industrial and commercial buildings in India.


• Furniture Manufacturing – a Penticton firm exports high quality furniture around the world.

These examples merely skim the surface of recent export activity by small firms across BC. Excluded are huge export successes in education (at all levels and by both public and private sector providers), and increasingly in health care. The examples are symbolic of the diverse export capability that resides in BC that must be publicized and emulated to dramatically increase the level and breadth of our exports.

There is nothing mysterious or overwhelming about exporting from anywhere in BC given the right product or service, and the vision and energy to sell outside British Columbia. In the final analysis, BC must draw from the experience of both traditional and non-traditional firms in all economic sectors to improve provincial export performance.

Author: Michael A. Goldberg, Fullerton Professor of Urban Land Policy, Sauder School of Business, University of British Columbia.
Sources: BC Stats, Exports, June 2001, July 2001, June 2002; Statistics Canada; Peter Maskell, Learning in the Village Economy of Denmark, (Copenhagen, Copenhagen Business School), August 2002.