Canada should trade with other countries to stop Trump’s exploitation due to reliance on trade with America

Canada is a laggard when it comes to trade diversity despite all the years of political pledges to do better, and all the free trade agreements signed.

 

At a quick glance, the facts are promising.

 

Canada is the only G7 nation with a free-trade agreement with every other member. And with 15 trade deals covering 49 countries and more on the way, we can boast to ourselves about our preferential access to a world eager for the True North’s rich resources.

 

But behind that rosy picture, our track record of reliance on the U.S. for nearly 80 per cent of our exports means that if U.S. President Donald Trump moves forward on his tariff threat, it will pummel our economy.

 

Canadian political and business leaders are now grappling with the fact that despite decades of signing deals in an attempt to diversify our trade, the Canadian economy remains deeply dependent on trade with America. That’s forced Canadians to make an existential pitch to their American counterparts: Our economies are so connected that our fates are intertwined — basically, hurt me and you’ll feel it too.

International Development Minister Ahmed Hussen, who has long advocated for Canada to do more business with emerging markets in Africa, said it’s “understandable” Canadian businesses turn to American customers.

 

“There’s two things at play. One is that we have access to the largest market in the world. The U.S. market is very attractive — it’s very easy to work in. We have the same language. We have similar ways of doing business. It’s easier to work and grow in the U.S.,” he said in an interview.

 

“The second part of the equation is Canadian businesses have been extremely risk averse when it comes to emerging markets,” he said.

 

“However, that reliance (on American markets) comes with risk,” he said.

 

He believes new trade agreements and government supports like trade commissioner and consular offices have helped. “We’re heading in the right direction, just not fast enough. I think the challenge for governments is that … you can build a bridge, but unless people walk over the bridge or drive across the bridge, it’s not very useful.”

 

Meredith Lilly, a professor at Carleton University and a former international trade adviser to prime minister Stephen Harper, underlined the significance of a diversified export market: “It sends an important signal to the United States, when we have other partners, that we have other options.”

 

But right now, she said, “the statistics just don’t support that.”

 

“We have actually become more dependent on the United States,” Lilly said in an interview with the Star.

 

It’s a tough geopolitical situation that is forcing Canadians to reckon with why we haven’t positioned ourselves to be less reliant on the U.S., and has reignited decades-old calls for a transformation in how we do business abroad.

 

Hussen points to the example of Turkey, a country of 85 million and a “gateway” for Canadian businesses not just to that market but into western Asia, as well as to Africa. He spoke last week to his counterpart in Turkey, where the government has aggressively moved to build embassies in 51 of 54 African countries, and has ramped up trade on that continent to the point where it has aided Canadian contractors who are partnering with Turkish businesses to do work in places like Senegal and Tanzania on high-speed rail. “Canada benefitted from that hustle by Turkey,” he said.

 

Hussen gave another example: Nigeria, where he said 70 per cent of the population doesn’t have adequate electricity. “That’s a huge inroad for Canadian power companies to go in there and build all forms of energy-producing projects. The opportunities are there, whether it’s food security, whether it’s health care, transport, logistics, education. Again, these middle powers are going all in,” he said. So are big powers like China and India.

 

In the last week, Ontario Premier Doug Ford, whose province does about $500 billion in two-way trade annually with the U.S., acknowledged “we need to move forward as quickly as possible” with diversifying our trade.

 

So, too, did Liberal leadership contender Mark Carney, who declared that “if we can no longer rely on American neighbours, we must diversify our trading relationships and build new sources of jobs and growth.”

 

But for now, the stats are grim. Over the last two decades at least, between 75 and 80 per cent of Canadian exports have gone to our neighbours south of the border. No other country has surpassed five per cent in that same time period.

 

Meanwhile, less than 20 per cent of U.S. exports go to Canada, even though we’re America’s biggest trading partner.

 

“We’ve been talking about it forever,” said Catherine Fortin LeFaivre, the vice president of International Policy and Global Partnerships at the Canadian Chamber of Commerce. “There’s nothing like an emergency, though, or urgency like the type of crisis that we’re facing now, to really force people to really innovate … perhaps this will be the catalyst for that.”

 

The task ahead is much easier said than done. Part of it is complacency. But despite booming efforts from successive governments to diversify our trade with new agreements, Canadian companies face regulatory burdens and the country lacks the infrastructure required to expand its overseas exports.

 

While trade experts who spoke to the Star say there is no magic number to aim for in a quest to reduce our reliance on the United States, moving the needle by just a few percentage points would come at a steep cost.

 

That leads to a situation where it may always be easiest and most natural to trade with the U.S. Lilly said that can also be attributed to a trade theory called the “gravity model,” which says that “the closer a country is to you, and the larger it is in GDP, the more likely you’ll trade with it.”

 

But there are other challenges, too. The Canadian economy has a high concentration of small- to medium-sized businesses that don’t have the capacity to trade at all. Of the fraction who are able to export their products, 65 per cent only export to the U.S.

 

“It’s not like you can just flip a switch and suddenly be exporting to a very different market on the other side of the world,” Lilly said.

 

Canada is set to have several pipelines opening in the coming years, including B.C.‘s Coastal Gaslink, and in the face of the Trump threats, there is renewed talk of breaking down interprovincial trade barriers.

Indeed, on Wednesday, Ford said it “it’s unacceptable that we don’t have (the) Energy East pipeline coming out to Ontario and out to New Brunswick, and again, the Northern Gateway going out through B.C. (so) we can ship our crude oil around the world.”

 

Duncan Munn, the CEO of Elevate Finance, a company that supports Canadian exporters, said his phone has been buzzing with businesses now ready to explore trading beyond the U.S..

 

“We’ve always taken the assumption that we’re going to have, you know, largely free and unfettered access to the American market. I do think that continues, but it may not be as free, and it may come with new costs,” Munn told the Star. “I think this is an inflection point for Canadian business, and the risk posed is very real.”

 

Fortin LeFaivre said that while businesses are starting to think more about the long-term risks due to the challenge with the U.S. right now, there is still uncertainty about what happens next.

 

She said the conversation a few months ago “was all about doubling down on working with the U.S., and decoupling from China and such states.”

 

“The context is shifting quickly, and it’s not to say that if we diversify the other markets, there aren’t other risks,” she said.

 

 

 

 

This article was first reported by The Star