Canada Needs to Focus on More Sophisticated Exports as It Looks to Diversify, Report Finds

By Robb M. Stewart

OTTAWA--A shift by Canada from simply exporting its abundant resources to adding value could unlock a sizeable boost for the economy as the country seeks to pivot from a traditional reliance on the U.S., Canada's export credit agency argues.

A concerted effort to move toward producing and selling more sophisticated products could result in gross domestic product being roughly C$100 billion (US$71.5 billion) larger in 2035 than if economic complexity remains stagnant, analysis by Export Development Canada found.

The agency, in the first of a series of reports it plans to release that look at strengthening Canada's resilience, said companies leave significant profits on the table by exporting raw commodities instead of more complex, processed products. Scaling up the country's capabilities can make a tangible difference for the economy.

"It is well and good to talk about regional diversification, and we absolutely do need that as the events of the last 18 months or so have made it amply clear. However, just diversifying the things that we produce today, which is mostly commodities, which are mostly on the lower end of the complexity scale, is only going to get us so far," Meena Aier, EDC's head of research, said in an interview.

Continuing to only export vast amounts of oil, gas, lumber and other commodities won't help buffer the economy from future shocks or grow it in a way that results in benefits for a maximum number of people in Canada, Aier said. "If we have an abundant level of natural resources, for instance, we shouldn't just be taking them out of the ground and shipping them to wherever to have them be processed and purchasing them back at a premium," she said.

Canada's economy, after stalling for a year, rebounded in the second quarter with its strongest growth since early 2023 as exports surged and household spending remained resilient. The pace is projected by economists and the central bank to moderate in the coming quarters, with the potential for activity to be dampened by heightened uncertainty with the escalation of trade tensions between Ottawa and Washington.

Canada hosts a range of natural resources, including about 9% of the world's forests and 20% of its fresh water, along with the third-largest proven reserves of oil. It is the fourth-largest oil producer and fifth largest in natural gas, as well as a major source of uranium.

"Canada has what the world wants," Prime Minister Mark Carney told an audience this week at an inaugural investment forum in Toronto where his government pitched shovel-ready development projects in an effort to catalyze C$1 trilling in investment in the country over the next five years. It is part of a broader push to strengthen the economy and pivot trade away from a historical reliance on the massive U.S. market, including a goal of doubling Canada's non-U.S. exports by 2035.

In his comments, the prime minister said the government doesn't just want capital coming into Canada for capital's sake but that it is also looking to bring in technical and process know-how, for companies to build in Canada, and for investment to help position the country within global supply chains.

Cross-border trade between Canada and the U.S. remains strong as most goods continue to flow duty-free, but trade-compliance costs for businesses have risen and polls show more Canadian companies are looking at new export markets in Europe and Asia. Efforts to diversify have shown signs of success, with government data pointing to a 17% rise in non-U.S. exports in the last year and nearly one in three shipments heading to markets outside of the U.S.--the highest share in 40 years--compared with about 25% traditionally.

EDC in its report said Canada's long-term prosperity will depend less on how much it trades and more on how much value it captures from trade, but it acknowledges the challenge.

Since the mid-1990s, Canada's economic complexity has declined, while countries such as Japan, Germany, China and South Korea have built capabilities to move into higher-value activities. This fall in economic complexity since 1996 has contributed to lower productivity and roughly 3% loss in real GDP per capita over a decade, EDC estimated.

Improving complexity would significantly raise Canada's growth trajectory, translating into roughly the equivalent to an additional C$2,500 in income per person, the agency said.

Some industries in Canada are ripe for the shift toward adding value to exports, among them critical minerals and aerospace, which have a strong geopolitical tailwind and rising demand, Aier said.

Other sectors--such as forestry, which has been targeted by U.S. tariffs--can find willing buyers in areas such as Europe if done in a way that is climate efficient, given different requirements and tougher regulations. And there also are areas such as branding, trademarks and intellectual property where Canadian products can set themselves apart in markets such as agrifoods, where safety and quality can attract a premium, she said.

"We should build the capabilities in Canada to extract our resources, process them, build industries around them, and then export those products. And that nets us a much higher value," Aier said. She added that the C$100 billion boost that EDC envisages is conservative and could be greatly exceeded if value can be added to exports Canada currently produces and where value can more easily be added to existing capabilities.

Write to Robb M. Stewart at robb.stewart@wsj.com

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September 18, 2026 14:25 ET (18:25 GMT)