As countries shift towards value-added sectors there are significant opportunities for Canadian companies to evolve and grow, according to a new HSBC Canada report.
Rapid industrialization and increasing wages, coupled with maturing consumer demand in many of the countries along the South-South corridor are driving different types of global trade growth, according to the latest HSBC Global Connections Trade Forecast.
The report details a shift towards the production of higher value-added goods around the world, presenting opportunities for forward thinking companies looking to expand. “A highly educated and productive Canadian workforce will continue to underpin growth of capital goods exports from Canada,” HSBC Canada executive vice-president Linda Seymour said in a statement.
“In fact, outside of natural resources, we expect that as emerging markets mature and grow in size they will demand more value-added goods from Canada, in particular transportation equipment and industrial machinery.”
The top three markets for Canadian exports are currently the U.S., China and the United Kingdom.
However, according to HSBC, the fastest growing corridors of Canada’s export growth by 2030 will be Asia and the Middle East, and exports to Vietnam, China and India are expected to increase by 12 per cent annually from 2021 to 2030.
The reports for countries such as Vietnam and Bangladesh show a shift from basic commodities trading in sectors such as cereals or sugar to become a refiner or producer of branded goods based on those raw materials.
In many of the developed markets there is a shift towards increasingly specialized sectors such as chemicals and pharmaceutical products as companies seek opportunities for higher returns.
This shift towards the production of higher value-added goods is particularly evident in Asia, with a clear pattern emerging as Chinese export growth in information & communications technology and industrial machinery gathers pace.
This balances a declining rate of growth in sectors such as textiles, giving rise to opportunities for companies in the smaller, faster growing countries around the region to win contracts to produce these more basic goods.
“Emerging markets are developing at a phenomenal pace and are set to reshape world trade patterns over the next 20 years,” HSBC’s global head of trade and receivables finance James Emmett said. “By expanding their operations in to new, higher value sectors, they are driving more developed nations to specialise and diversify to compete. Understanding which sectors are growing in which markets, delivers huge opportunities for businesses as they plan for the future and aim to capitalise on these trends.”
Countries making the move up the supply chain most notably are Malaysia and Argentina, HSBC said. Malaysia’s top exportable goods will shift from lower-value sectors such as animals and vegetable oils to higher-end industrial machinery, which will make the largest contribution to Malaysia’s export growth by 2030. Argentina’s top export sectors will change from animal products to transport equipment and industrial machinery.
Industrial Machinery, ranging from large power generating machinery to small parts for domestic electrical items, will extend its dominance as the world’s top export sector, and will encompass around 25 per cent of goods exported among the top 25 trading nations by 2030, and contribute over a third of the growth in total merchandise exports from 2013, according to the forecast.