Opinions abound in economics. The Flip Side offers two opinions together to give you a bigger – and better - picture of a single economic issue important to Canadian ag. Throughout the year, we’ll share these ‘debatable’ perspectives on a variety of topics.
China or India: Who'll be bigger for Canadian exports?
Canada is a world leader in agriculture and agri-food exports. Canadian export success relies on access to markets with consumers who can afford to pay for imported goods and to its continuing status as a healthy, vibrant industry able to exploit growing opportunities to meet world demand. China and India, with a combined one-third of the world’s population, are two big reasons world demand is growing. Canada is negotiating trade agreements with both.
Martha Roberts and J.P. Gervais weigh in on the potential of each country to impact Canadian agriculture and agri-food exports by 2026.
China will have greater impact
In 2015, China was Canada’s second-largest agriculture and agri-food market. Food exports have been growing since 2010, and agriculture exports since 2012, on the basis of the rising wealth of its growing middle class. They can afford imports of Canadian food and demand it. However, China’s greatest impact on Canadian businesses will come from its growing capacity to influence world prices.
3 reasons why
1. Nobody eats GDP!
Canadian exports to China will continue to grow as the Chinese economy transitions to a more consumer-based economy. Higher wages won’t increase gross domestic product (GDP), but they’ll lead to higher disposable income. Growth in food demand results from (among other things) what disposable income consumers have available and not gains in GDP. India is likely to have higher GDP, but China’s got more middle-class wealth to spend on food.
2. Chinese consumers care about food safety and quality
China’s growing middle class will continue to increase the demand for Canadian food, especially high quality, premium food products. They’re located primarily in cities, where the number of urban households keeps climbing along with disposable income. The process of urbanization also leads to different food habits and preferences. China’s rate of urbanization is higher than India’s, suggesting it will spur greater food availability there -- and particularly, food supplied by Western businesses.
3. China’s food self-sufficiency policy to be replaced by market reforms
The market conditions Chinese producers will face in the next ten years as a result of policy changes will trigger significant adjustments as domestic prices drop. The pig herd liquidation of 2014-15 and this year’s corn reform (to reduce enormous stocks) are examples of things to come. Because China’s buying power is increasingly shaping both supply and demand on a global scale, it will sustain farm prices at levels that are higher than the long-term average Canadian producers have received.
India will have greater impact
India is currently Canada’s fourth-largest agriculture market and it largest market for pulse crops. India’s GDP and population growth are projected to outstrip those of every other country, emerging as the world’s next economic “superpower with potential” over the next ten years.
3 reasons why
1. India has the world’s largest group of 10 to 24-year-olds (356 million in 2014)
India has one of the world’s fastest growing populations. It’s expected to overtake China as the world’s largest population by 2026. That youthful workforce needs the tools and education that will fulfill their promise and India is reforming its educational access to ensure that happens. The quality of India’s education system ranks 29th in the world (out of 138 countries) according to the 2016-17 Global Competitiveness Index.
2. World-leading GDP growth leads to higher income and different food choices
India’s economy is expected to lead the world in GDP growth in 2016-17. And that leads directly to continued investment and growth of its consumer base, expected to reach a threshold of 89 million households by 2025. With rising incomes and wealth, educational attainment and urbanization, India’s standard of living, including healthier lifestyles and food choices, will also improve. Canadian lentils will be even bigger.
3. India’s now better at global business
A global hub of the telecommunications industry, India easily outstrips China on the communication front. Increasingly tech-savvy, well-educated and with a good command of English, India’s population will surpass China’s rate of mobile phone adoption. Plus, they benefit from a democratic government with no “Great Chinese Firewall” that inhibits widespread academic use of the Internet.
China or India: Who'll be bigger for Canadian exports?— Farm Credit Canada (@FCCagriculture) October 6, 2016