is how most people think of it, and my story about globalization and value chains clearly envisioned a complex product, like a car or a smartphone. tangible goods also include products like oil, nickel, canola, pork or lumber. we sell over $ 500 billion in merchandise to the world each year. natural resources and agriculture will always be an important base for our economy, as the folks here today from the mining sector know full well. despite recent difficulties, energy products remain our number one export category, at over $ 80 billion per year. we can continue to find new customers for these products and grow those businesses over time. but, as we just saw, economies are constantly evolving. growth in canada ’ s economy, which was based on trade in natural resources in its early years, is now driven mainly by service industries. roughly 80 per cent of canadians are now employed in services, and trade in services has been growing at a much faster pace than goods. today, we sell about $ 120 billion per year in services to the world. for example, canada is a world leader in the mining services sector, with almost 4, 000 companies providing engineering, environmental and other professional services. these categories had exports worth about $ 12 billion last year. canada has long been an important exporter of financial services — last year these totalled about $ 13 billion and supported many wellpaying jobs in canada. tourism exports are worth around $ 25 billion per year. this category includes exports of education services to visiting students — valued at about $ 8 billion annually. and on the cutting edge, canada is becoming known as a global heavyweight in video games, employing more than 21, 000 canadians, with above - average salaries. many service sectors saw exports growing at near double - digit rates or faster, including financial services, the telecom, computer and information sector, intellectual property and tourism. as large as these numbers sound, services trade is difficult to track and probably underestimated. for example, many manufactured products include a large services component that is buried in the price. by some estimates, as much as 30 per cent of the value of goods exports is actually created through services. consider a smartphone. the parts and labour needed to assemble it might constitute less than half of what the consumer will eventually pay for it. most of the difference represents the cost of all the software that is loaded on the phone. here is another example. many companies today purchase back - office computing services on the cloud. previously, a company

and this weakness is extending into 2019. part of this is due to developments in our oil sector and in our housing sector, but the broader effects of trade uncertainty on investment are clearly there. fortunately, our economy also has areas of strength that are providing a cushion. some services exports have been growing strongly. more than 350, 000 jobs were created over the past year. indeed, labour income grew by almost 5 per cent in the fourth quarter. the data are currently giving us a mixed picture and need to be carefully monitored. but the deeper question we face is whether canada can continue to thrive as a trading nation. trade and globalization to address this question, we need to put recent trade developments into context. trade growth has generally fallen short of expectations since the global financial crisis a decade ago. to understand this, we must first understand why international trade grew so rapidly in the years before the crisis. 1 / 6 bis central bankers'speeches international trade began to accelerate during the 1990s as companies took advantage of opportunities provided by new technology and trade liberalization. many firms found efficiencies by breaking down their products into components. this allowed for unprecedented levels of manufacturing specialization, with components sourced from wherever in the world it made the most sense. instead of a domestic assembly line, you had a complex international value chain. a final product, like a car made in oshawa or a cellphone assembled in mexico, might have contained many components that were traded internationally several times. then the final product was exported, too. this is why international trade rose relative to gross domestic product during this period. as economists would put it, the trade intensity of goods increased. global trade really took off after china joined the world trade organization in 2001. with a massive supply of low - cost labour, china became key to many companies ’ value chains, and trade intensity grew even further. this gave rise to concerns that all manufacturing would move to developing economies. but there was always a natural limit to this offshoring process. a manufactured product can be fragmented only so far, and some pieces require more labour than others. this is what determines where best to produce each component. a manufacturing process that requires many workers and only a bit of machinery can often be made cheaper by moving it to a country where wages are low. but a process that has a lot of complex machinery and relatively fewer workers is much less likely to move to a lower - wage country. importantly, companies must also take into account the relative productivity of