Thank you.
To back up a little, the story really doesn't distinguish between goods or services, but what it envisions is that the process of taking an idea and ending up with a sale, whether that sale be of a service or a good, usually involves a sequence of activities, some of which could be thought of as services and others that involve merchandise in one form or another. We usually think of the ideal model as being a vertically integrated firm that has just the right combination of things in-house, and from basement to top floor everything happens and they earn a nice cheque from somebody abroad. That's the traditional export model.
What is happening in this world of better communications, lower trade barriers, and better logistics providers is the ability to take that model and disintegrate the firm, and take the pieces, whether they be service or production pieces, and locate them globally wherever they make the most sense to the company. With that disintegration of the company, what you need then is international trade to tie it all back together again so that you can actually do the export trade.
You need to do trade twice, as a supply process and then as a final sale process. What that means is the productivity improvement that the company enjoys depends on the distributed model. If you're unwilling to take this slice and move it to India, let's say, for some reason or another, you don't pick up those extra few percentage points of productivity improvement domestically.
If it's a low productivity task that we're talking about, if you move it to another country, it just disappears from Canada's statistics. Therefore, you get the so-called productivity miracle that the U.S. has enjoyed, and you can argue that although, of course, there are people who do that low-productivity task, their jobs are at risk from that reallocation globally.
The improved purchasing power and the extra income that is generated generates jobs in many other sectors. The biggest one in Canada has been in the construction sector, as the higher incomes have generated a much bigger demand for housing, bigger and better houses and additions and all that. So there's been a lot of construction work.
That's why we have record low unemployment even though this is going on, because people are transferring into other sectors of the economy that are expanding as a result of this underneath phenomenon. That's why it's important to keep in mind that it's a 50-year story and not one that just began a couple of years ago. We've been coping with it year after year for two generations.