New trade deals are fine, but unlikely to replace U.S trade soon
The North American Free Trade Agreement (NAFTA) is coming back into the national conversation, with renegotiation efforts taking place in Ottawa this past week. Couple this with the recent spat over jet prices, and you might find yourself asking some serious questions about Canada’s trading relationship with the United States.
Despite the challenges ahead, Canada really only has one option, and that’s to keep its relationship with America. It might not be easy, but with a little creativity, it can certainly be done.
But wait, if the nation’s trade with America is going downhill, can’t we just focus on building trade relationships with other countries? We can and we have, but it won’t be enough, at least not for the foreseeable future.
For one thing, America is by far our largest trading partner. Canada’s second biggest trading partner is the European Union, to which it exported $41 billion of goods in 2016. This pales in comparison to the $392 billion it exported to America, or 75 per cent of Canada’s total exports, while only 18 per cent of America’s exports go to Canada. It’s not as if both countries have the same amount to lose.
Also, starting new trade relationships is tough. Canada’s recent trade deal with the European Union, the Comprehensive Economic and Trade Agreement (CETA), went through seven years of negotiation and was almost destroyed by a small region in Belgium that threatened to veto it. The much-debated Trans Pacific Partnership trade deal was scuttled after much negotiation when the U.S. walked away from the table.
Even if trade deals do get signed, they don’t always work out as expected. A few years ago, when Canada entered into a free trade deal with South Korea, a big selling point was that it would increase Canada’s exports of natural resources and foods such as pork. But in the wake of the deal, exports on such items have been tepid at best. Even if you do a trade deal, it won’t help if there’s little demand for your products in the first place.
In America, at least, there has been historically a large demand for Canadian products. But what does Canada do if the U.S. president is playing hardball, or, at the very least, being extremely unclear on his position?
Luckily, Canada can deal with more people besides the president. In fact, Canada is already starting to end around Trump. Canadian diplomats have been meeting with American mayors, governors, lawmakers, and business people to talk trade, going far beyond the much-publicized negotiations between trade delegations.
Opening up deals with these other actors has already shown signs of paying off for Canada’s trade. In January, New York state considered introducing a Buy American element in its budget provision into its budget. However, after talks and lobbying from the Ontario government, it backed off and weakened the provision.
Given America’s stance at the federal level, anticipating and reacting to major, possibly negative shifts in NAFTA is a must, and relationships at other levels of U.S. government are the best way to do that.
Whether through NAFTA, trade deals with other levels of government, or some combination of the two, Canada shouldn’t try and ditch its largest trading partner.