U.S. most risky market, exporters say

In a dramatic shift, Canadian exporters now see the United States as their riskiest market, the first time it has surpassed Asia in this category, a federal agency said yesterday.

Fully 33 per cent of companies polled by Export Development Canada for its fall 2008 survey - which also showed exporters have descended into a mood of "abject pessimism" - rated the U.S. market, by far the largest destination for outbound Canadian shipments, as the most perilous, compared with just 20 per cent a year earlier.

By contrast, the proportion that rated Asia as the most problematic region in which to do business fell to 30 per cent from a little more than 40 per cent, the EDC survey found.

Precisely how the exporters define "riskiest" is not clear.

"We leave it to respondents to determine what the actual risks are, and unfortunately, we don't ask them to identify the risks they are referring to," Peter Hall, the EDC's chief economist, said in an e-mailed response to questions. "In this survey, it could be access to capital, weak demand, the fact that they are overexposed to the U.S. market, or other issues; we can speculate, but the truth is, we simply don't know."

More predictably, perhaps, EDC's latest semiannual survey showed that its trade confidence index fell to 61 per cent, down a record five points from the spring survey six months earlier, and the third consecutive low since the agency began reporting the figure in 2000.

"The world economy is collapsing around Canadian exporters," Mr. Hall said in a news release. "Growth has come to an abrupt halt in the world's largest economies, and financial market turbulence is not helping matters.

"Amidst this economic backdrop, the shock of last fall's seismic financial and economic shifts has turned into abject pessimism about the near-term future."

About 64 per cent of businesses that responded to the survey indicated they expect the global economy to get worse, up from 51 per cent and 30 per cent in the spring, 2008, and autumn, 2007, polls, respectively.

Similarly, concerns about the domestic economy hit a new high, with 57 per cent of respondents predicting conditions at home will worsen, up from 42 per cent only six months ago, EDC said.

However, the survey also found Canadian exporters are "more polarized than ever before" in terms of the trade opportunities they see: While 38 per cent now expect a worsening on this front, up from 23 per cent six months ago, the proportion predicting an improvement also rose, to 33 per cent from 28 per cent.

"These results may suggest that the growing number of Canadian exporters that have expanded into non-traditional markets in the past two years think that those opportunities will help to shore up near-term activity," the agency said.