By Boris Alex and Cora Hilgert
Canada’s economic outlook has once again improved. Analysts from Canada’s central bank expect an increase in gross domestic product (GDP) of 1.7% for 2016. Following the slump in world market prices for crude oil and natural gas, the country’s economic engine ground to a halt. As a result, Canada’s economy grew by only 1.2% in 2015, the worst outcome since the 2009 financial crisis.
October 2015 was the beginning of fiscal policy change in Canada with the election of the Liberal government led by Justin Trudeau. To give the economy new momentum, the newly elected government has presented a multi-billion-dollar stimulus package for the country in its first budget.
The additional expenditures are primarily intended for infrastructure investments. In the next decade, a total of CAD$120 billion will be provided for this purpose. The investment program will serve as a boost for economic recovery. The government hopes to raise GDP growth once again above the 2% mark by fiscal year 2017/18 as a result of these investments.
New priorities: energy sector
The incumbent Liberal Party has set new priorities in many areas. In March 2016, the federal government in Ottawa and the provinces have agreed to develop a common strategy for the decarbonization of the Canadian economy, including establishing a fund of over CAD$2 billion for projects to lower carbon emissions. In particular, the environmental technology sector will be able to benefit from these funds. According to a forecast from the consulting company Analytical Advisors, clean-tech sales in Canada will increase 5% per annum, reaching CAD$ 18 billion by 2022. The expansion of electricity generation from renewable energies, especially wind generation, is expected to be pursued in coming years. According to the Canadian Wind Energy Association (CanWEA), wind turbines across Canada contributed capacity of 11 gigawatts (GWs) to the energy grid at the end of 2015. The organization estimates that new capazity of an additional 1.4 GWs in 2016 and 1.4 GWs in 2017 should be contributed. CanWEA estimates that CAD$15 billion will be invested towards this expansion by 2018.
New challenges: mining sector
In addition to the developments in the Canadian energy sector, Canada is a leading mining nation as well. Falling commodity prices on the world market, however, are forcing companies to significantly reduce investment in existing and new projects. Prospecting activities have continued to weaken, as they did in the previous three years. According to information from Natural Resources Canada (NRCan), expenditures on prospecting and exploration of mineral deposits have decreased by 15%, dropping to CAD$1.7 billion in 2015. For 2016, the Ministry of Natural Resources expects a further 18% decline in investment to CAD$1.4 billion. The number of active mining projects has decreased by approximately one-third since 2011, according to estimates by NRCan. At this year’s mining trade fair “PDAC Convention” in Toronto, battery storage technology was one of the top themes. The battery storage industry relies on lithium as a raw material and with the expansion of electric vehicles and energy storage, the demand for lithium is expected to grow rapidly in coming years. It is estimated that the value for the raw material’s market volume will quadruple in the next 10 years to reach USD8 billion.
Canada as a business partner
From the European perspective, Canada will gain importance as a business partner in the future. After the United States, the European Union is Canada’s second most important trading partner: Nearly 10% of Canada’s foreign trade is between the 28 member states of the EU. European and German companies currently invest in and export to Canada in high volumes. The planned joint Comprehensive Economic and Trade Agreement (CETA), will further strengthen this relationship.
The agreement reduces, inter alia, 99% of customs duties, which will improve market access for industrial goods, agricultural products and services on both sides of the Atlantic. Within the scope of CETA, Canada will open public procurement on a municipal and provincial level to European suppliers. According to the European Commission, the implementation of the agreement is expected to increase the bilateral trade volume for goods and services by 23% across the EU. European companies could save approximately €470 million each year because of the reduction in customs duties. The European Commission expects the GDP of the EU to increase by approximately €12 billion each year.
In particular: Canada, Germany and CETA
The German Federal Ministry for Economic Affairs and Energy anticipates that a decision from the European Council on the signing and provisional application of the agreements on tariff reduction and public procurement could be made in fall 2016. Approval of the agreement by the European Parliament would then be sought afterward. The provisional implementation could possibly take effect by the first half of 2017.
With CETA constituting the future of how trade and investment is conducted between Canada and Europe, the Canadian German Chamber of Industry and Commerce Inc. (CGCIC) is becoming an increasingly important partner for Canadian and German companies. CGCIC acts as a service partner and supports bilateral business relationships. It is closely connected with business, politics and administration in both countries, which enables the around 25 employees in the Toronto and Montreal offices to offer an array of services to German companies interested in Canada and vice versa. These services include payroll and accounting, market- and industry research, immigration and market entry consultation.
To acknowledge Canada’s role in both, renewable and clean energy and mining, CGCIC established two competency centers that work on those topics. With its extensive network and expertise, the Competence Centre for Energy & Cleantech not only en- ables German companies to participate in this rapidly developing sector but also facilitates dialogue between Canada and Germany. The Energy & Cleantech Competence Centre, located in the CGCIC Montreal office, grew out of the numerous activities and projects implemented within the export initiative’s “Renewables/Energy Efficiency – Made in Germany” from the German Federal Ministry for Economic Affairs and Energy. The Competence Centre for Mining & Mineral Resources is located in the CGCIC Toronto office. Established in 2012, it has since become an important first point of contact for Canadian and German companies and organizations interested in enhancing bilateral strategic and business partnerships in the mining and mineral resources sector. Funded by the German Federal Ministry of Economic Affairs and Energy, its mandate is to support the implementation of the German government’s raw materials strategy to safeguard a sustainable supply of non-energy mineral resources for Germany by providing market information, direct contacts and a platform to foster bilateral business partnerships. Furthermore, it supports German mining supply companies in expanding their activities in the Canadian market.