How the US and Canada can Work Together to Drive Economic Growth in the New Global Environment By David Strongin On April 26, SIFMA and the Investment Industry Association of Canada (IIAC) jointly hosted the 4 th annual Canada - US Securities Summit. The event convened experts from the US and Canada to discuss the most pressing economic issues in North American capital markets.
The United States and Canada share a common history and value system. Our two countries' bilateral cooperation reflects these common interests and a mutual commitment to address the most challenging bilateral and global issues including: international regulatory cooperation, free trade and developed well-functioning capital markets.
Perhaps the biggest challenge the US and Canada face today are lower rates of domestic growth in part due to lower levels of international trade. Governor of the Bank of Canada Stephen S. Poloz discussed this phenomenon, calling the new, slower rate of global trade growth, a "new balancing point."
What is causing the slowdown in global trade growth?
Governor Poloz noted that global trade growth has slowed significantly in recent years. In the early part of the last decade international trade growth was around 7 percent, today it trails behind even the pace of GDP growth. Initially the slump in trade growth occurred, nearly exclusively, in developed economies. The pace of global trade growth slowed, but not significantly, as those countries that were still industrializing, like China, were continuing to grow.
The end of the latest wave of globalization is the largest determinant of the decline in trade. Countries which were formerly industrializing are stabilizing at a lower rate of growth. This decline in trade can have a profound effect on domestic productivity growth and in turn GDP growth.
What can public policy do to encourage productivity growth?
The US and Canada share public policy objectives which can help drive the factors which increase productivity growth. Clearly, international trade is an important component for domestic economic growth. US Ambassador to Canada, Bruce Heyman called on policymakers to support the Trans-Pacific Partnership, between the US, Canada and 10 pacific nations.
"We now have the opportunity to spark trade throughout the Pacific region with a trade agreement that reflects today's global economic realities and takes advantage of new opportunities. And that is just what the Trans-Pacific Partnership offers."
Governor Poloz further explained that productivity growth is also stimulated when there is an increase in the number of new firms created domestically. The US firm population is growing at a healthy 3 percent annual rate and while Canada is behind, it is expected to follow suit.
Capital markets are essential to new business development; they fuel economic growth and increase prosperity by allocating capital to finance innovative companies and create jobs. SIFMA President and CEO Ken Bentsen called on regulators in the US and Canada to balance market efficiency as they develop new regulations.
What is next for US and Canadian markets and the economy?
The Canadian economy is concentrated heavily in natural resource exportation, and our two countries share common energy objectives. In order to achieve sustainable economic growth for generations to come, the US and Canada have decided to work together to find new technologies to provide cleaner energy. In 2015, the US and Canada committed to this policy agenda by signing the Paris Agreement. The financial industry will be a crucial component to meeting our commitments which will in turn contribute to economic growth.
"…While addressing climate change is a significant challenge, it also represents a significant economic opportunity where investors can put their unique drive and innovation to work to enhance our shared prosperity." - US Ambassador to Canada Bruce Heyman
The US and Canada face a "new balancing point," but there is still reason for optimism if policymakers, regulators and the finance industry are able to work together towards our shared objectives.