Economic and Trade Outlook

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Economic and Trade Outlook

• Presentation to
• Transportation Situation and Outlook Conference
• Ottawa April 24, 2006

M.C. McCracken, CEO
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Trade in Goods
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Canada
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CanadaGrowth Indicators
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Growth of Super Sectors
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Growth of Transportation
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Freight Transportation Implications

• GDP of Rail, Water, and Trucking
• Distribution by Mode
• Ownership Structure

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Freight Growth
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The Modal Mix
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The Future is Not Forecastable

• Conditional Forecasts What IF?
• There are substantial uncertainties about the
  global economy, the US, Canadian policy, and the
  transportation sector.
• Need to consider scenarios

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Major Uncertainties

• OPEC is out of the box
• GHG remains on the global policy agenda
• International institutions are under attack

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Oil Price Uncertainty

• OPEC wants a higher return
• Environmental goals require a higher price for
  users
• Both the supply price and the demand price are
  likely to be significantly higher in the next 25
  years.
• But uncertainty is reflected by a 50 - 100
  variation in WOP.

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Oil Prices
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Commodity Prices
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Oil and Gas Prices, 921
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Globalization - What Direction?

• Less trade, more protection, and the breakdown of
  existing agreements.
• New items on the tables
• Greater protectionism or more cooperation?
• More or less trade?
• Divergence or convergence of incomes?
• More or less cyclical instability?

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Other Considerations

• What Other Driving Forces might change the
  transportation picture?
• Public infrastructure spending
• Northern rail system
• World food patterns
• What affects the modal mix?
• Processing patterns
• Relative fuel costs

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O.F.F.

• Climate change accelerated some ports
  unusable?
• Dirigibles?
• North American Rail System?
• Avian Flu
• Katrina events natural disasters with major
  shocks to large numbers of people

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Grouping the Driving Forces

• Society, etc.
• Labour market participation
• Immigration
• Learning Society
• Productivity growth
• International
• Real interest rates
• Growth
• Commodity Prices
• Market access penetration

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Policy Choices

• Monetary Policy
• Interest rate spread with US
• Exchange rate
• Fiscal Policy
• Degree of Federal-provincial restraint
• Competition policy

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US Issues

• () Can a recession be avoided before 2015?
• Medicare-Medicaid deficits
• Global peace-keeper
• () Middle East actions
• Creating a more open trading regime
• Environmental actions - how much?
• Immigration Promote or Close Down?

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Driving ForcesUS Structural

• Human capital formation
• Research and development
• Relative prices of medical services
• International trade liberalization
• Ageing population
• International trade agreements
• etc.

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Driving Forces US Policy

• Fiscal policy Attaining a Balanced Budget
• Monetary policy - carrying the weight of
  inflation control
• Curbing medicare entitlements and reducing price
  pressures in health care
• Environmental policy on clean air, GHG
• Etc.

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Driving Forces ROW

• Economic performance
• Stability of governments
• Exchange rate against US dollar
• () OPEC other Commodity Prices
• Environmental Policies