In November 2020, China and 14 Asia-Pacific countries (including Japan and South Korea) signed a free trade deal covering 2.2 billion people and nearly 30% of the international trade. This new treaty (Regional Comprehensive Economic Partnership) shows that the Pacific region continues to reinforce its place as the world’s leading trade hub. Canada and, more precisely, the Prairie provinces have to use the opportunities given by the consolidation of East Asia. Indeed, Alberta and Saskatchewan own assets for trading in this region.
The trading potential of the Prairies
The prairies have essential mining and agricultural sectors. For Alberta, the mining, quarrying, oil and gas extraction represented in 2019 16% of its GDP and was the first economic sector of this province. For Saskatchewan, this sector produces 25.7% of its GDP and agriculture, forestry, fishing, and hunting at 8.8%. Indeed, the primary sectors were fueled by the diversity of resources in the soil of these provinces. Moreover, prairies are competitive for primary sectors investment and development: the Fraser Institute’s Annual Survey of Mining Companies ranked Saskatchewan the most attractive jurisdiction in Canada for mining investment in 2019. This survey also ranked Alberta and Saskatchewan as the first and third Canadian provinces for mining policies’ attractiveness. This situation gives the prairies crucial assets for the reinforcement of an international trade-oriented economy.
Both Alberta and Saskatchewan are oriented towards international trade, mainly with the USA but also East and South Asia. In 2017, the oil and gas industry in Alberta and Saskatchewan was the single largest contributor to the export success of Western Canada (including Manitoba and British Columbia): 41% of the values of the region’s exportation come from this sector. More precisely, 72% of Alberta’s exports are related to minerals (including fuels) and 10% to agriculture. For Saskatchewan, 24% of its exports are crude oil, 22% potash, and 53% to agriculture products.
Asian countries as key trade partners
If the US stays the leading partner for the exports from Alberta and Saskatchewan with respectively 103 and 16 billion Canadian dollars, Asian countries are major destinations for the Canadian exportations. For Both Alberta and Saskatchewan, China is the second trade partner with 4.26 and 3.1 billion Canadian dollars, followed by Japan with 1.71 and 1.1 billion. For both provinces, India, Indonesia, and Bangladesh are significant destinations. For Alberta, export for South Korea also represents a value of 1.25 billion Canadian dollars. These elements show that Asia can be a substantial market for the prairies trade.
Moreover, the gravity center of trade has shifted in the pacific ocean. The biggest container ports are in Asia. Based on the World Shipping Council data, on the first ten ports, six are Chinese (7 with Hong Kong), one is in South Korea, and Singapore is the second container port. Most of the first 50 first ports are on the pacific ocean: 17 are Chinese, 3 of the five American ports in this ranking are on the western coast. For Canada, the Vancouver port is ranked 45th, making it the most important Canadian one. Finally, World Shipping Council data also show that the most prominent maritime trade road is Asia-North America.
Towards an Asian free-trade policy
Some policies have already helped trade between the prairies and Asia. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, as a trade agreement between Canada and countries of Asia like Japan and Singapore but also Oceania (Australia and New Zealand), open new markets by eliminating tariffs on many sectors like agriculture, agri-food products, and industrial goods. Both Alberta and Saskatchewan have profited from this freer trade for their key exports. Moreover, the Saskatchewan government will open trade offices in CPTPP countries like Singapore, Japan, and India, another key market that is not part of this zone. This initiative shows a real will to boost trade in the Asian world.
This agreement must be an example of a policy to achieve, to develop the prairies’ trade and must be reinforced with other countries. With the COVID recession and the expansion of Chinese influence in Asia and beyond, it becomes urgent for Canada and its provinces to take the initiative and position themselves in new markets. People’s lives and work are currently suffering from the economy’s closure; it is time to open it.
Alexandre Massaux is a research associate at the Frontier Centre for Public Policy.
Photo by Timofei Ryazanov on Unsplash.