Industry News

Courtney Agencies Ltd. provides a weekly industry news update to its clients.

Please click here to receive this update by email.

June 28, 2010

Productive factories more likely to export

Statistics Canada published last week an interesting study which demonstrates that the more productive a plant is, the more likely it is to make a transition to export markets, and the less likely it is to leave them. The reverse also occurs; plants that enter export markets improve their productivity performance compared with similar firms that do not.

In addition, plants that stayed in export markets did better than comparable plants that exited export markets. This lends support to the thesis that plants that successfully transition to export markets boost their productivity.

The study analyzed plant-level data from the Canadian manufacturing sector between 1984 and 2006. The ease of access to foreign markets varied over this 22-year period because of different rates of Canada/US bilateral tariff reductions and differing movements in bilateral real exchange rates.

While entering into export markets was associated with increases in productivity, the magnitude depended on the trading environment facing new exporters.

Export market participants gained more in productivity growth during periods of currency depreciation than non-participants did. The superior performance of Canadian export starters or continuing exporters was greater in the period between 1990 and 1996 when the Canadian dollar depreciated.

However, this advantage was reduced in two other periods, between 1984 and 1990 and between 2000 and 2006, when the Canadian dollar appreciated. In particular, the dramatic increase in the value of the Canadian dollar during the post-2000 period was associated with a much lower advantage enjoyed by export market participants.

The study "Export market dynamics and plant-level productivity: Impact of tariff reductions and exchange rate cycles" is available on Statistics Canada's website.