Services can drive greater Canadian export diversification – RBC

Report on Canada’s Service Sector Exports and Alignment with Sustainable Development Goals

This report analyzes the increasing significance of Canada’s service sector exports as a core driver of economic diversification and sustainability. The sector’s growth trajectory and structural advantages demonstrate strong alignment with key United Nations Sustainable Development Goals (SDGs), particularly SDG 8 (Decent Work and Economic Growth), SDG 9 (Industry, Innovation, and Infrastructure), SDG 4 (Quality Education), and SDG 17 (Partnerships for the Goals).

Economic Growth and Resilience Through Service Sector Expansion (SDG 8)

The expansion of service exports is a primary contributor to Canada’s recent economic performance, fostering sustainable growth and economic resilience as targeted by SDG 8. This shift away from a dependency on goods trade enhances economic stability.

• Service exports more than doubled between 2014 and 2024, reaching a value of $232 billion.
• The sector’s contribution to the national economy has grown to represent over 7% of Canadian GDP.
• As a share of total exports, services increased from 17% in 2015 to 23% by the second quarter of 2025.
• Since 2014, service exports have been responsible for 62% of Canada’s real export growth, demonstrating a 61% increase while goods exports remained largely static.

Key Drivers of Service Export Growth: Innovation and Human Capital

Growth in the service sector is primarily led by commercial and travel services, which highlights Canada’s strengths in innovation and education, directly supporting SDGs 9 and 4.

1. Commercial Services (SDG 9): Representing approximately 60% of service exports ($138 billion in 2024), this category is driven by innovation. The rapid adoption of digital service delivery, particularly in computer, financial, and professional services, showcases progress in building resilient infrastructure and promoting inclusive and sustainable industrialization.
2. Travel and Education Services (SDG 4): Travel exports reached $70 billion in 2024, with a significant portion directly linked to quality education. International students contributed over half of this total ($36 billion) through spending on tuition and living expenses, positioning Canada’s education system as a critical export and a key contributor to global human capital development.

Structural Advantages for Sustainable and Diversified Trade (SDG 17)

Service exports possess inherent characteristics that support the development of a more diversified, resilient, and sustainable trade profile, strengthening global partnerships for sustainable development as outlined in SDG 17.

• Reduced Tariff Exposure: As intangible products, services are less exposed to direct tariffs and protectionist measures, providing a stable foundation for international trade relationships.
• Economic Cycle Resilience: The sector has demonstrated greater stability during economic volatility compared to goods. Commercial services, driven by essential business needs and digital delivery, continued to expand even during the pandemic, supporting the objective of sustained economic growth (SDG 8).
• Market Diversification: Services facilitate access to a broader range of global markets. The United States’ share of Canada’s service exports has decreased to 52% from 55% over the last decade, significantly lower than its 75% share of goods exports. This diversification strengthens Canada’s global economic partnerships.

Interlinkages and Considerations for Integrated Policy

While service exports offer a pathway to sustainable growth, their relationship with the goods sector necessitates an integrated policy approach. A significant portion of service activity is embedded within goods trade, creating indirect exposure to tariffs and trade disruptions.

• Sectors such as transportation, warehousing, finance, and professional services are closely tied to the movement and sale of physical goods.
• According to 2022 OECD data, services constituted 35% of the total value added in Canadian manufacturing exports.
• This interdependence highlights that maintaining stable goods trade relationships is crucial for maximizing gains in the service sector and achieving holistic, sustainable economic development.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 8: Decent Work and Economic Growth
   • The article focuses on the significant growth of Canada’s service exports, which have “more than doubled between 2014 and 2024 to $232 billion, representing over 7% of Canadian GDP.” This directly relates to promoting sustained, inclusive, and sustainable economic growth. The discussion on services as a “core driver of export growth” and a key opportunity for “economic diversification” aligns with the goal of achieving higher levels of economic productivity.
2. SDG 9: Industry, Innovation and Infrastructure
   • The article highlights the role of innovation and technology in driving service exports. It mentions the “rapid rise of digital service delivery” and “robust growth in computer, financial and other professional services.” This connects to building resilient infrastructure, promoting inclusive and sustainable industrialization, and fostering innovation. The resilience of commercial services during the pandemic, driven by digital delivery, underscores this link.
3. SDG 4: Quality Education
   • The article explicitly identifies “education-related travel services stemming from international students” as a major contributor to travel exports. It states that spending by international students on “tuition, food, and accommodation” accounted for “$36 billion” in 2024. This directly connects to the global dimension of education, where Canada serves as a destination for higher education, contributing to the goal of ensuring inclusive and equitable quality education.
4. SDG 17: Partnerships for the Goals
   • The article’s central theme is international trade. It discusses Canada’s trade profile, the impact of tariffs, and market diversification. This relates to strengthening the means of implementation and revitalizing the global partnership for sustainable development, particularly the targets related to promoting a universal, rules-based, and equitable multilateral trading system and increasing exports. The analysis of trade diversification, noting that the U.S. accounts for a “shrinking share of total services exports,” is also relevant here.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation.
   • The article directly addresses this target by stating that “services trade is a key opportunity for Canada to further economic diversification.” It also points to technological upgrading and innovation as drivers of growth, citing the “rapid rise of digital service delivery” and growth in “computer, financial and other professional services.”
2. Target 9.b: Support domestic technology development, research and innovation.
   • While this target is often framed for developing countries, its principle applies. The article’s emphasis on the growth of high-value services like “computer, financial, and other professional services” and the expansion of “digital delivery” implies a strong domestic technology and innovation ecosystem that is competitive on a global scale.
3. Target 4.b: Substantially expand globally the number of scholarships available… for enrolment in higher education.
   • Although the article does not mention scholarships, it directly discusses the outcome of international student mobility. The significant value of exports from “education-related travel services stemming from international students” ($36 billion) is a direct measure of Canada’s role in providing higher education to non-residents, which is the broader theme of this target.
4. Target 17.11: Significantly increase the exports of developing countries.
   • While Canada is a developed country, the article’s entire focus is on increasing exports, which is the core principle of this target. The data showing service exports have “more than doubled between 2014 and 2024” and now account for “23% of total exports” directly reflects the objective of enhancing participation in global trade.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. For SDG 8 (Economic Growth and Diversification):
   • Value of service exports: The article states this reached “$232 billion” in 2024.
   • Growth rate of service exports: Mentioned as having “more than doubled between 2014 and 2024.”
   • Share of services in total exports: The article specifies this increased from “17% a decade earlier” to “23% of total exports as of Q2 2025.”
   • Contribution of services to GDP: Services exports represent “over 7% of Canadian GDP.”
2. For SDG 9 (Innovation):
   • Value of commercial services exports: The article notes this sub-sector, which includes digital and computer services, hit “$138 billion in 2024.” This serves as a proxy for the growth of technology-intensive service industries.
3. For SDG 4 (Education):
   • Value of education-related travel exports: The article provides a specific figure of “$36 billion” in 2024 from spending by international students.
   • Share of education in travel exports: The article states this accounted for “over half” of total travel service exports.
4. For SDG 17 (Trade):
   • Geographic diversification of exports: Progress is shown by the fact that the U.S. share of services exports is “down from 55% a decade ago” to 52%, and “exports to non-U.S. markets have expanded more than to the U.S. since 2015.”

4. Summary Table of SDGs, Targets, and Indicators

Source: rbc.com