stephen s poloz : release of the monetary policy report opening statement by mr stephen s poloz, governor of the bank of canada, at the press conference following the release of the monetary policy report, ottawa, ontario, 30 october 2019. * * * good morning. senior deputy governor wilkins and i are pleased to be here to answer your questions about today ’ s interest rate announcement and our monetary policy report ( mpr ). before turning to your questions, let me first offer some insight into governing council ’ s deliberations. not surprisingly, the worsening global situation was the primary issue. economic forecasts have been marked down further in most countries, largely as a consequence of the escalation of trade actions and uncertainty around what may be next. heightened uncertainty about future trade policies is directly reducing business investment, and there is a risk that this will spread to households as well. these consequences can be buffered through easier monetary policy, and many central banks have recently eased in response. however, we need to remember that tariffs and trade restrictions will work over time to permanently reduce potential output everywhere, while raising the prices of consumer goods — a stagflationary scenario. monetary policy can only do so much about these elements of the shock. canada is not immune to these global developments. in fact, canada was one of the first countries to feel the effects of trade policy uncertainty, since nafta was the first target of the trump administration. indeed, this uncertainty has been weighing on investment in canada for the past three years. these were important headwinds preventing canadian interest rates from rising by as much as us rates did during 2017 – 18. nevertheless, as other economies feel a growing impact from the trade war, there are second - round impacts on canada through weaker exports and lower commodity prices. in today ’ s updated projections, we are forecasting both exports and business investment to contract in the second half of this year and to recover only moderately in the next two years. we can see a wide range of indicators pointing to these effects — in manufacturing, mining and rail transportation — in our business outlook survey and in the quarterly reports of bellwether global companies. while we have had these secondary effects in our forecast for some time, and increased them in our latest projection, these are mostly judgment - based, and the situation could worsen. accordingly, we present a deeper analysis of this downside risk in today ’ s mpr, in box 3. let me just note

##growing advanced economies, particularly the united states, rather than fast - growing emerging markets. this concentration reduced the annual average rate of export growth by d. de munnik, j. jacob, and w. sze, “ the evolution of canada ’ s global export market share, ” bank of canada working paper, forthcoming. bis central bankers ’ speeches around 3. 3 percentage points between 2000 and 2007 ( chart 5, table 1 ). by comparison, the drag from competitiveness effects was about 2. 5 percentage points. in short, our underperformance prior to the crisis was more a reflection of who we traded with than how effectively we did it. this is even more the case since the onset of the great recession. canadian export growth has continued to lag the global average by about 5 percentage points annually. competitiveness effects have remained relatively stable. the combination of overexposure to the u. s. market and underexposure to faster - growing emerging markets is almost entirely responsible for canada ’ s further loss in world market share over the last several years. it does not have to be this way. many advanced countries have been more successful at capitalizing on the immense opportunity that emerging markets in general and china in particular represent. for example, germany has maintained its market share in manufactured goods by exporting capital goods and autos to china, and more broadly to emerging - market economies. australia has gained substantial market share in its exports of commodities to fill rising demand from china. expect these trends to continue the obvious question is whether we can expect these trends to continue. the answer is yes. bis central bankers ’ speeches a new normal for the united states our reliance on the united states is an issue only if we expect u. s. underperformance relative to both history and the rest of the world to continue. unfortunately, that is what we must expect as, to a degree, the u. s. economy is not what it used to be. allow me to explain. the trend in u. s. potential growth – the “ speed limit ” if you will of the u. s. economy – was already falling in the year leading up to the crisis, reflecting both an aging population and slower productivity growth. in the meantime, emerging markets were increasingly living up to their name, with large productivity increases raising their speed limits. the result was the increasing underperformance of the u. s. economy relative to the rest of the world