rates rise to compensate savers and lenders for expected higher inflation and for the risks caused by uncertainty about future inflation. none of this encourages productive investment. in the high - inflation days of the 1970s and 1980s, a lot of economic resources were instead devoted to hedging and speculative purchases. and inflationary booms - here and elsewhere - inevitably turned into busts. we must not let this happen again. that is why the bank of canada and the government of canada have agreed to an explicit target for inflation control. this target aims to hold inflation inside a range of 1 to 3 %. inflation - control targets also ensure that monetary policy works to moderate fluctuations in output, employment, and incomes. in the nine years since the targets were first adopted, not only has underlying inflation been lower than in the previous two decades, but economic growth has strengthened and has shown less short - term variability. as we move ahead, we must ensure that this situation continues and that we avoid the boom - bust cycles of the past. granted, we will not be able to wipe out fluctuations completely. external shocks will still buffet canada ’ s very open economy every now and then. and we will get economic surprises on the domestic front too. but in the past, our economic ups and downs were often amplified by outbreaks of inflation. keeping the economy on an even keel so how is the canadian economy performing these days and what is the bank of canada doing to help keep it on an even keel? our economy has been expanding solidly for some time now - even through the asian financial crisis of 1997 - 98 - creating the conditions for the healthy gains in employment and incomes that we are now seeing. since mid - 1999, the economy has outperformed expectations - growing in excess of 5 % at annual rates and with an underlying rate of inflation that, excluding fluctuations in energy prices, has remained in the bottom half of our 1 to 3 % target range. the bank has raised its projection for growth in 2000 to a range of 4 to 4. 5 % because of stronger demand for canadian products from both domestic and foreign sources. when it comes to foreign demand, this stronger momentum reflects faster - than - expected growth in several parts of the world, including europe and the emerging - market economies that were in the eye of the asian storm. even in japan, where the outlook continues to be uncertain, economic conditions should improve this year. but by far the greatest source of this stronger external stimulus is the tremendous bu

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