A little more on exports

My column yesterday was on exports and how they have seriously tanked in the past few years.  I got an email suggesting that exports had tanked across Canada because of the recession.  This is true but New Brunswick’s export decline started way before the recession but it was masked by the refinery expansion back in the early 2000s.  If you take you the increase in exports from the oil refinery, the combined exports from every other industry are down 31%.  No other province has witnessed such a decline in export value.

I didn’t put it in my column but Industry Canada used to say that each $1 billion in exports sustained something like 32,000 jobs.  This would vary significantly by industry but on average this was their estimate.

That translates into 54,000 jobs lost in New Brunswick because of the decline in exports.  I admit that seems high but if we look closely it may not be so far off the mark.  

From 2000 to 2009, we had a huge expansion of the public sector.   The New Brunswick government budget in 1999-2000 was $4.3 billion.  By 2010 it was up to nearly $7 billion.   That $2.7 billion increase drove much of the gain in employment over the decade along with the call centre sector and some smaller growth areas.  I would say the few large industrial projects (potash, refinery, Lepreau refurb, etc.) also injected significant short term spending into the economy.

In other words, this spending masked the loss in export industries.  Even though our employment growth was second worst in the country over the decade, the public sector spending kept at least some growth in the economy.   If export growth had just stayed constant New Brunswick’s economic picture would have been far better.

The question is where do we go from here?   There is virtually no way the provincial government budget will increase by 63% over the next decade.  The government’s deficit reduction plan calls for spending growth of 1% per year until 2015 – at that assumes above average GDP growth during that period.

I think the data is clear.  Without a significant boost in exports – this can be services as well as products – New Brunswick is in for a bleak decade.  The federal transfer programs should help somewhat but as we have talked about before even those are likely to contract in coming years.

Where will these exports come from?

I think there is a little room for growth in the forestry products industry but it will never return to the heydays of the early 2000s.  The markets have changed and there just isn’t enough fiber.  But I think we could see a few hundred million in increased forest products exports if things go well.

Seafood?  I am not sure about that one.  It’s been a big export industry but it also has a very seasonal and low skilled workforce.

Energy exports?  Wind, nuclear, nat gas?   I have been studying this industry a lot lately and I think there is potential in the medium term – the middle part of this decade onward – assuming New England keeps to its renewable energy targets.  The challenge here is the employment multiplier on energy exports is relatively low.  Finding ways to put that energy to work in New Brunswick would have a much higher economic impact (i.e. attracting industries that are energy intensive) but that becomes a issue of price – and we know that industrial electricity and industrial nat gas prices are very high in New Brunswick.

Information technology?  Maybe – but we would need to see thousands of jobs in this sector if it was to be anchor of economic growth over the next decade.    Think about it in straight economic terms.  If provincial government spending only goes up 20% over the decade, that means we will need to see the private sector make up that 43% gap – just to keep the same level of tepid growth in the 2010s that we saw in the 2000s.

It is likely the call centre sector is out.  I suspect some of the firms will still grow but others will decline.

If a person was audacious – they would say that Rayburn Doucet will build a cluster of several thousand jobs in industrial fabrication up in Belledune and AREVA will build a 2,000 high wage jobs energy part somewhere in the Saint John area.  They would further say that Fredericton will become a centre of advanced learning technologies and attract 2,000 high wage jobs in this sector.    Moncton?  Still trying to figure out it’s potential growth path.

Throw in a few thousand jobs in IT and a modest rebound in forest products activity and you can start to see a fuzzy growth picture start to emerge.

I’d like to see us set some specific targets and craft credible plans for hitting them.