The Island Way

The Island Way

When you’re surrounded by water, looking beyond your border is a fact of life

What do potatoes, lobsters, airplane parts and Confederation Bridge have in common?

For Premier Wade MacLauchlan, they are key elements in making Prince Edward Island the export leader in Atlantic Canada. While he concedes his colleagues in New Brunswick, Nova Scotia and Newfoundland and Labrador may beg to differ, the former university professor is confident he can make the case for the Cradle of Confederation.

Exports have always been vital to the economic well-being of an island that is just 5,660 square kilometres from tip to tip. The Golden Age of shipbuilding in the 1800s and the rise of the silver fox industry in the 1920s both depended for their success on serving markets in the rest of Canada and the world.

While he agrees exports have always played a key role in the economic life of the province, MacLauchlan argues the trend has picked up steam since the opening of Confederation Bridge in 1997 improved transportation links to the rest of the country. The Island’s exports grew from $341 million in 1996 to $424 million the next year.

While there have been some ebbs and flows during the intervening 22 years, exports topped the billion-dollar-figure for the first time in 2014.

In 2015, when national exports declined by 1.5 per cent, P.E.I.’s business with the rest of the world was actually up 15.2 per cent to set what was then a new record of $1.243 billion. There was a more modest 1.1 per cent gain in 2017 and another five per cent jump in 2017 to $1.318 billion.

The final number is yet to be calculated for last year, but the premier is predicting it will be even higher.

“We are an export success story,” the premier maintains, adding that success has played a big role in putting the province at or near the top when it comes to several key economic indicators. While the final figures have yet to be tallied, the Conference Board of Canada is predicting GDP growth of 2.8 per cent for P.E.I. in 2018 and a further 1.4 per cent this year. In fact, all of the country’s six major banks are predicting strong growth for the Cradle of Confederation in 2019. The TD Bank is the most optimistic predicting two per cent growth, followed by the National Bank (1.9%); CIBC (1.7 %); Scotiabank (1.6 %); RBC (1.5 %) and BMO (1.1%).

The province’s top politician maintains strong export growth is a major factor in a rise in population (reaching 154,000 for the first time last October) and a 2.3 per cent rise in the average weekly wage ($836.85 in October of 2018 compared to $817.78 a year earlier).

For much of 2018, P.E.I. was one of the top two most optimistic provinces in a business barometer compiled by the Canadian Federation of Independent Business. The survey measures 13 industry groups, as well as providing a rating for each province. Erin McGrath-Gaudet has been the P.E.I. manager for the business organization for over 12 years and jokes “I just used to be happy when we weren’t last.”

There is no question the province’s small size is a major factor in why Island business leaders have long cast their eyes towards the rest of the world looking for markets. According to the P.E.I. Potato Board, for instance, there are approximately 165 potato producers in the province (that number does fluctuate as people enter and leave the industry) who collectively planted 84,000 acres of spuds in 2018.

“P.E.I. is not only the country’s leading potato producer but Island growers and shippers are more reliant on exports than their counterparts in the rest of the country,” said Kevin MacIsaac, a former chair of the P.E.I. Potato Board, who is now executive director of United Potato Growers of Canada.

Not surprisingly, potatoes are the Island’s top export commodity. In 2017, shipments of frozen potatoes were valued at $313 million while sales to the fresh market generated another $71.9 million.

What would happen if there was no export market? The short answer is an industry with direct and indirect economic benefits of close to $1 billion to the Island economy would be wiped out. MacIsaac said it would take less than a dozen growers to produce all of the french fries and table stock potatoes Islanders eat in a year.

Those french fries that roll off the line at the two plants in New Annan (about 15 minutes east of Summerside) that are owned by Cavendish Farms are the major component in the “frozen food manufacturing” sector that accounted for $327.7 million in 2017.

The potato industry, P.E.I.’s top export commodity, is worth almost a billion dollars a year in direct and indirect beneftis. Without those shipments to international markets, the island would need less than a dozen growers to feed their domestic needs—there are currently 165.

Seafood products take second spot on the sales roster at $212.2 million in 2017, over half of which can be attributed to frozen lobster sales (worth $125.4 million). The premier said one of the positive benefits of having 36 per cent of exports derive from the land and sea is the opportunity to spread the benefits across the province. While much of the province’s growing manufacturing sector is in the major urban centres of Charlottetown and Summerside, the vast majority of the agricultural and seafood processing plants are in rural areas.

MacLauchlan said that 5,000 full-time jobs have been created since 2015 and the provincial unemployment rate was below 10 per cent for the last eight months of 2018, something that has not occurred since the 1970s.

“None of that is possible without exports,” the premier said.

Fishermen checking oyster cages near North Rustico. Seafood products are P.E.I.’s second most valuable export commodity, posting sales of $212.2 million in 2017.

While both primary industries have been part of P.E.I.’s export equation for much of the province’s history, there are some new players who have made substantial gains over the last several years. Leading the charge is aerospace, an industry that rose from the ashes following the closure of an air force base in Summerside in 1991.

In 2017, the industry produced $145.9 million in engine and turbine equipment and $129 million in aerospace products and parts. A background document to the 2018-2019 provincial budget indicates aerospace now accounts for close to 20 per cent of the province’s exports.

Bioscience, another sector that has carved out a niche in the world market, was worth over $200 million in 2017. From a handful of companies when Confederation Bridge opened, the P.E.I. BioAlliance now has 58 members.

“I would say over 90 per cent of our sales are outside of Canada,” said Rory Francis, who is the organization’s executive director. “The United States is a major customer but Europe, particularly the United Kingdom is also a major market.”

Francis explained most of the organization’s membership are manufacturing products related to human, animal or fish health—a sector that is heavily regulated. He credits much of the sector’s export success to the BioAlliance’s development of an incubator process that helps guide companies from scientific idea to commercial production.

“I think we have proven that you don’t have to be headquartered in a large city to be a major player in this industry,” he said.

The premier said the growth in industries like aerospace, bioscience and information technology coupled with the reliance on primary products, is perhaps the Island’s greatest strength when it comes to dealing with factors that are out of the province’s control—like a sudden increase in the value of the Loonie or a change in the world trade environment.

Looking ahead, McGrath-Gaudet said she is expecting P.E.I.’s export engine to keep on chugging in 2019 and beyond. While the new Canada United States Mexico Agreement will create some challenges, especially for supply managed agricultural commodities, she said the announcement of a new North American deal should bring more certainty to the marketplace. She said the trade agreements with the European Union and the Trans-Pacific Partnership could also mean additional export opportunities.

“We have a lot of momentum going right now and hopefully it will continue not only this year but into the next decade,” she said.

That enthusiasm is shared by Rory Francis. For an industry that relies predominately on exports, he said the importance of having clear trading rules established can’t be overstated.

“Obviously having a new trading deal within North America is a major key to our economic success but I also see opportunities on the European side,” said MacLauchlan. “Since the U.S. is no longer part of the Trans-Pacific Partnership Agreement we may be able to gain an advantage in some Asian markets.”

The premier noted he has led trade delegations to China on a number of occasions and “that market is just huge with so much potential. While relations with the world’s most populated country were at a low ebb to start 2019 thanks to a diplomatic tit-for-tat that began with Canada’s arrest of Huawei executive Meng Wanzhou at the request of the United States, MacLauchlan is confident there will be a thaw. When that happens, P.E.I. will be ready to seize on those market opportunities.

Workers at Vector Aerospace in Slemon Park, Summerside. Aerospace now accounts for close to 20 per cent of Prince Edward Island’s exports.

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