A brief primer on B.C.’s export base
The recent release of the provincial government’s much anticipated economic plan – B.C.’s Economic Plan: A Plan for Today, a Vision for Tomorrow – and specifically the part pledging to craft an updated trade diversification strategy, has prompted us to take a fresh look at B.C.’s exports. What follows is an overview of B.C.’s exports of goods and services to other countries. An examination of what a small jurisdiction like B.C. sells to the world provides a useful window into the foundations of the province’s prosperity and highlights the key sectors where we have comparative advantages. This blog should be of interest to anyone who wants to understand B.C.’s export structure. We hope it will garner the attention of policymakers keen to help foster a growing and diverse mix of B.C. exports.
What B.C. currently exports
A fulsome understanding of what drives our economy starts with recognizing the most important feature of exporting – namely, that it leads to an inflow of income into the provincial economy from external sources. Selling goods to non-local customers produces export earnings. But focusing on the flow of income derived from exporting also means that some services, even if partly or mainly consumed domestically, are still part of the export base because they, too, generate inflows of revenues from outside the province. Tourism is probably the best-known example, but film and television production, the provision of transportation services, and education services also result in “foreign” income flowing into the provincial economy.The figure below sorts and summarizes British Columbia’s “detailed” export industries into ten conceptually similar and/or inter-related export sectors. From the review and ranking of the detailed industries, the ten mostly prominent sectors of B.C.’s export landscape emerged.Some comments on the data and the general point of this blog are appropriate here.The data in the figure are from 2018. So, this B.C. export snapshot is from a few years ago. Delays in tabulating service exports make 2018 the most recent year when information is available to permit a comprehensive depiction of B.C.’s export base – one that captures services in addition to goods.Note that even if we had a full suite of export data for 2020 or 2021, the impact of the pandemic would somewhat distort parts of the picture – particularly because of the temporary drop in “export earnings” from international tourism and education services in the past two years.The figure summarizes B.C.’s principal export sectors. It also conveys a sense of the relative size of each broad sector as well as their sub-components.
Figure 1
(To view chart data - check here).Immediately evident is the natural resource sector’s substantial footprint within British Columbia’s international export mix (47% of total exports). The green shading reflects the different elements of B.C.’s land-based resource exports. The collection of forestry-related exports (top left) is the largest, followed by energy, mining and agriculture.[1]Within the forestry sub-sector, softwood lumber is the largest industry export. At $6.1 billion (in 2018) it was also the largest single source of exports across all sectors.The importance of service exports is also clear. Indeed, apart from the non-resource manufacturing sector, service sectors occupy the right side of the B.C.’s export map.The right-hand side of the figure also reflects a diverse mix of B.C.’s services exports. For additional perspective, readers should note that services occupy a larger place in B.C.’s international exports than is the case in Ontario or Alberta, where they comprised 30% and 18% of those provinces’ exports, respectively, in 2018.Some key takeaways:
The resource sector is B.C.’s largest economic engine, providing more than 47% of all international exports in the pre-pandemic context. As a “stylized fact,” one can say the resource sector accounts for almost half of B.C.’s international exports. The share can rise or fall a few percentage points in any given year based on commodity price cycles. Once the liquified natural gas (LNG) projects currently being built in B.C. are fully on-line, the share of natural resources in the province’s export basket will climb above 50% – even in years when commodity prices are depressed.
Non-resource manufacturing accounts for 10% of B.C.’s (2018) exports. As evident in the figure, it is very diversified and includes a large number of industry segments.
Three different service sectors – gateway services, tourism, and professional and other services – rank as B.C.’s third, fourth and fifth largest export sectors, respectively. Each also represents about 9% of total exports. The role played by these sizable service sectors is a point to keep in mind when thinking about how B.C. earns its way in the world.
The remaining service sectors – wholesale activity, technology, film and TV, and education – each account for between 3% and 6% of B.C.’s exports.
Collectively, service exports totalled $32.5 billion in 2018, equal to 44% of B.C.’s international exports in that year.
Goods generated $41.6 billion in export earnings in 2018, equal to 56% of the province’s total export receipts.
All of the export sectors and the individual industries within them make valuable contributions to our economy. But for anyone wanting to understand what drives the provincial economy, it is impossible to ignore the natural resources sector. Any serious strategy to grow provincial exports is immediately confronted with the reality that even small contractions of the resource sector could easily overshadow substantial absolute gains in other parts of B.C.’s export base. Boosting B.C.’s exports requires nurturing existing export-focused sectors and industries while also looking for growth and market development opportunities across the wider economy.The context that mapping exports provides is also helpful to understanding why the structure and proportions of B.C.’s export base in 2028 are unlikely to be markedly different than they were in 2018, despite occasional statements from political figures suggesting otherwise. True, recent provincial policy changes, high costs, and environmental factors will reduce the amount of harvestable timber in B.C. in the coming decade, which in turn will put downward pressure on forestry’s share of overall exports. However, the energy sector will loom larger in the export landscape, owing mainly to the arrival and growth of LNG production and shipments. The B.C. mining sector is also positioned to grow, supported by strong global demand for mineral resources generally and minerals and metals needed to power the low carbon transition specifically. Even with a diminished forest sector, collectively natural resource production and related processing is likely to have a similar or perhaps even a bigger place in B.C.’s export base in the years ahead.In all likelihood, gateway services, tourism and professional and other services will continue to occupy the middle territory in B.C.’s “export map,” as depicted in Figure 1. They are substantially larger in size than the next tier of service export sectors and are also expected to continue growing over the decade.We may see some realignment and reordering on the lower right quadrant of the export map. Many of these sectors have grown rapidly and expanded their export footprints. Film and television stands out for its unusually strong growth track. This sector nearly tripled its share of total B.C. exports between 2013 and 2018 (from 1.3% to 3.2%). It has since continued to grow at a rapid clip. Education also nearly tripled its export share from 0.9% to 2.5% over the same period. For education, sustaining the pre-COVID growth rate may be challenging due to program capacity constraints at B.C. institutions, severe community/campus housing supply and affordability pressures, and policymakers’ belief that the main role of education is meeting domestic needs rather than fostering exports. Advanced technology is another fast-growing sector that we believe will produce steadily rising export earnings for B.C. going forward.What the B.C. government refers to as “clean technology” receives considerable attention in the province’s new economic plan. It has not been singled out so far in this blog because clean technology is not an industry within Statistic’s Canada’s detailed industry export categories. Instead, clean technology exports are counted within different parts of other industries listed in the export map. Statistics Canada does, however, maintain “satellite accounts” that estimate the clean technology elements of other established detailed industries. In the satellite accounts, B.C.’s clean technology exports were estimated at slightly over $1 billion in 2018, roughly 1.5% of total exports.[2]The clean technology sector is growing, fed by the worldwide quest for a lower carbon future and rising demand for technology solutions that reduce the environmental footprint of industrial and other human activity. Both global demand and government policy suggest that clean technology has a bright future, including as a source of exports for our province. However, even if B.C.’s clean technology exports double or triple in value, the sector will continue to be located in the lower right quadrant of the export map – an important but still relatively small slice of B.C.’s overall export earnings.Any policy focus on growing exports is welcome and deserves wide support. Beyond the incremental income that exporting yields to finance and enable British Columbians to purchase imports (mostly consumer products), exporting delivers a broad array of other economic benefits. Selling internationally provides access to much larger markets and allows local companies to gain from economies of scale. This means exporting companies are typically more productive and pay higher wages than non-exporters. But any strategy that seeks to strengthen and diversify exports needs to recognize the structure of B.C.’s export base, which reflects what the province is “good” at producing and selling to customers beyond the local market.Additional details and comments on B.C.’s export sectors and a reconfiguration of the export map that incorporates clean technology exports and environmental goods exports will be available in a forthcoming BCBC report. [1] Dividing resource-based exports into sub-sectors requires some arbitrary allocations. For example, coal is included within the energy sub-sector but could instead have been allocated to mining.[2] The Environmental and Clean Technology Products Economic Accounts (Statistics Canada Table: 36-10-0646-01). These accounts also track environmental products that were roughly $900,000 in 2018. In B.C., electricity and biofuels comprise almost all environmental product exports.