OPINION: Export of services plays a strong and growing role in B.C. economy

June 16, 2020
Jock Finlayson

As longtime students of the B.C. economy, we have been struck by the increasingly important role of service industries in driving business activity and employment growth.

This trend is being reinforced by digitalization and the adoption of other information and communications technologies. B.C.’s unique position as a gateway to Asia-Pacific markets and an attractive tourism destination has also helped elevate the importance of the services sector. So too has the expansion of international education, which is now a significant “export” industry in the province.

In 2019, industries that produce services rather than goods accounted for almost three-quarters of British Columbia’s gross domestic product and for 80% of all jobs. It turns out that services are also looming larger when we examine the province’s trade with other international jurisdictions.

In recognition of the growing economic significance of services, Statistics Canada has improved the tracking and reporting of service exports since the mid-2000s. Data is now robust enough to allow us to quantify the place of services in provincial exports. Unfortunately, the most recent detailed provincial data on exports of services is for 2016. But it still sheds light on the province’s export engines and the shifting composition of our exports.

The story told by the B.C. export data is striking. Indeed, the prominence of services in the province’s export base may come as a surprise to many readers.

First, B.C.’s share of services in total international exports stands at 45%. This is a much higher proportion than the comparable 20%-to-30% figures reported by the other large provinces. Given this, it is not surprising that services feature very prominently in the list of B.C.’s leading export industries.

In 2016, five of the province’s top 10 international export categories, measured by the value of sales, were services. Topping the list is “transportation and related services,” reflecting the outsized contribution of our gateway status to the economy. That B.C. is home to Canada’s biggest port and hosts the Port of Prince Rupert heightens the importance of exports of transportation services.

As an appealing destination for international tourists, B.C.’s large accommodation and foodservices sector is also a major exporter. As we have long suspected, the selling of professional services into international markets – accounting, legal, engineering, technical services and so on – has also broadened the province’s export base. Exports of information and cultural services are also substantial and growing, due mostly to the rapid expansion of film and television production – which is captured in the category of cultural services. Further down on the list, “administrative and support” services and “educational services” have also become leading sources of export revenue, with each producing between $1 billion and $1.5 billion in export earnings in 2016.

Growth patterns suggest the economic contributions made by tradable services will continue to climb. Over the decade ending in 2016, B.C.’s service exports rose 60% while total merchandise exports advanced by 16%. Growth in some services segments has been especially impressive. With film and television production surging, the aggregate value of “information and cultural services” exports soared by 270% over the 2007-16 period. Exports of digital services are also on the rise. Export earnings from international education increased by more than 360% in the decade to 2016.

Accommodation and foodservices exports rose a substantial 77% from 2007 to 2016, in tandem with the general rise in international tourism. The oversized role of tourism in recent years is evidenced by the fact that B.C.’s international exports of accommodation and food services exceed the value of similar exports from Quebec, despite the latter province having a much bigger population. Unfortunately, this major source of B.C. export earnings will struggle in the post-COVID-19 context.

B.C.’s array of exports is more diversified than other provinces, due in large part to the expanding role played by tradable services. A review of the data confirms that the broad tradable services sector supports many high-paying B.C. jobs, particularly in the Metro Vancouver region.

For a small market like B.C., exports of both goods and services are critical to overall prosperity. The province benefits greatly from the economic activity and spinoff benefits that flow from the presence of globally competitive export-oriented industries. B.C. policy-makers should focus on sustaining and building strong export industries as part of the province’s post-pandemic economic recovery strategy.

Jock Finlayson is the Business Council of British Columbia’s executive vice-president and chief policy officer; Ken Peacock is the council’s chief economist.

As published by Business in Vancouver.

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