Global Supply Chains and Canadian Competitiveness STEP Canada Trade Summit TCU Place, Saskatoon Octo

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Global Supply Chainsand Canadian
CompetitivenessSTEP Canada Trade SummitTCU
Place, SaskatoonOctober 29, 2008
Peter Hall Vice-President and Chief Economist EDC
Economics
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Stock market woes, emerging markets(Index losses
since mid-2008)
Source Bloomberg
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and in industrial economies(Index losses since
mid-2008 peak)
Source Bloomberg
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Crude oils Eiffel Tower
-55
Source Bloomberg.
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Bonds risk recalibration underway(JPM EMBI
Global Sovereign Index, spreads, basis points)
Source Bloomberg.
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Interbank lending at risk?(TED spread, LIBOR vs.
US treasuries)
Source Bloomberg.
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The dollars wild ride(Canadian dollar in U.S.
cents)
-27
Source Bank of Canada.
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Competitiveness threats, opportunities

• The global slowdown
• Our key price
• Specific price movements
• The demographic conundrum
• Increased government presence
• The fear factor

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World Trade Intensity(Exports Imports)/World
GDP ()
Source EIU, EDC Economics.
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Global slowdown

• Suddenness is disarming
• Past reaction protectionism
• NAFTA reopened?
• Financial gridlock
• JIT tested

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Our key price

• Value of the dollar
• Oil gas prices
• Non-energy commodity prices
• Interest rate spreads
• US dollar movements

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Oil market dynamics

• Huge incentive to speculate CFTC data proves it
• Historical perspective
• 1970s
• End-1998
• Mid-2005 to mid-2006
• Demand-supply issues real in 2007sort of
• The China factor trend forecasting problem
• Price spikes tend to undo themselves
• Prices will be higher, but 65-75 is reasonable

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Impact of the dollar, by industry
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Oil no longer a threat to globalisation
Source Bloomberg.
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2007-08 food shortages(Wheat prices, USD/metric
ton)
Source Bloomberg.
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Demographic conundrum

• Ageing is upon us
• and others
• Policy focus immigration
• Shortages and wages
• Mismatches
• Labour and location
• Skills and comparative advantage
• Importing labour, new millennium style

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Increased government presence

• Fannie, Freddie, AIGand others
• 700 billion bailout fund
• Europe worse off?
• Keynesians are smiling
• but its temporary

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The fear factor

• The source of fear
• The proponents of fear
• The futility of fear

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Testimonials

• Of pins (its not that hard)
• and screens (re-thinking is necessary)
• Stressed industries and diversification
• Its an investmentfor the long term

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Competitiveness threats, opportunities

• The global slowdown
• Our key price
• Specific price movements
• The demographic conundrum
• Increased government presence
• The fear factor

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• Visit us at
• www.edc.ca/economics