Part of the reason for the export malaise reflects a shrinking manufacturing sector and slowing demand for autos, auto parts, forest products, consumer goods, as well as electronic and electrical products, categories that had been in the top six sectors in importance back in 2005, Mr Shenfeld and Mr Mendes said, adding that energy has been a notable standout.

"We sometimes hear the rejoinder that Canada is making up for its weakening market share in some of these historic export sectors with gains in technology and other services.

"While it's true that we've seen hiring and growing exports in such areas, the share of employment devoted to computer systems design is the same on both sides of the border, and growth in overall service exports has also underperformed what's happened in the US since 2005."

As a result of the export sector's weakening profile and lower business capital spending, an imbalance has developed within Canada's economy, the economists said, because the country has "leaned much more heavily on using low interest rates to propel consumption".

"That's a contrast to the US, where housing has been a negative overall since 2005, and exports and capital spending have gained in influence.

"The imbalanced share of the economy tied to leverage in household spending and housing now leaves Canada vulnerable in terms of what comes next. If we're going to restrain mortgage and consumer debt for the good of financial stability, we'll need to do better on exports and related capital spending."

The economists said "we need a 'fix' for the fundamental reasons surrounding why companies have not been voting with their dollars to expand in Canada to serve markets abroad".


"One clue on what's gone wrong lies in unit labour costs. These are hard to measure in absolute terms, but the trend relative to the US is clear: even with what we think of as a 'cheap' Canadian dollar, measured in common currency terms, Canadian costs have escalated relative to the US since 2000, and the opening up of that gap, with a lag, seems to be tied to the loss of competitiveness in trade."

The economists said the development reflects weaker productivity and "unfortunately, productivity gaps are like the weather, in that we talk a lot about them, but can't really do much to drive change".

"If that remains the case, we'll either need a long period of underperforming wages and an even weaker Canadian dollar if trade is going to take the reins of growth."

The economists said the Canadian dollar traded in a $C1.40 to $C1.50 range for much of the decade prior to the current period of trade angst. "Don't be surprised to see [the currency] sport a 1.40 handle again in the next five years as the Bank of Canada is pressed to set interest differentials at a level that will give us the currency we might need to bring exports back to life."