Gwyn Morgan Misleads on Global Trade
Gwyn Morgan may have made a lot of money for EnCana shareholders, but I have rarely found his economic commentary in the Report on Business to be very well-informed.
The main point he makes in today’s column “New Economic Order Demands New Attitude” is accurate if familiar – Canada participates in the global economy primarily as a commodity producer and importer of manufactured goods from “workshop countries”. (I can’t find the link on the Globe web site.)
But he makes a real blooper in his effort to laud the merits of being a resource exporter in a world where manufacturing production is shifting to China. He states that “Canada is the only G8 country to consistently achieve current account surpluses.”
That is just wildly wrong. Germany and Japan have consistently run HUGE current account surpluses for at least the past decade (about 6% and 3% of GDP respectively in 2010), and French and UK deficits on current account are quite modest. Meanwhile, Canada’s current account went into deficit into 2009, and was not especially large before then compared to those of Germany and Japan.
Not to mention that the mild UK deficits have been chronic since the mid-eighties when it started gutting its manufacturing capacity. Germany has two times the export market share (of the high income OECD export trade) of Britain the bulk of which consist of manufactured goods. What the Canadian and UK cases demonstrate is that neither the export of resources nor the export of services = current account surpluses. Come to think of it the US confirms it too. There is a reason China chose exports in manufactured goods as a modernization plan.
If china had a Canadian bourgeoisie they would have tried to modernize by exporting rice and bamboo. And the local Chinese economists would have justified it by a 2X2 HOS trade model rooted in Ricardian comparative advantage and a quantity theory of money dubbing it a Worthwhile Chinese Initiative.
Facts be damned, my national bourgeoisie right or wrong.
The Globe printed a correction on page B2 today.
And he also wrote it on a day when both the Globe and other headlines trumpeted the fact that policy makers were growing increasingly concerned that employment was again heading south.
My only question is what will he say when Alberta finally bans the use of their decreasing water supplies for oil sands production.