Our dependence on trade with the U.S. is exactly why we need to trade more with others.
As I write about the need for Canada to strengthen ties with other like-minded nations – like the nations that make up the European Union – some respond by saying that this is a foolish move given that most of our trade is with the United States, and that we should instead focus our attention on deepening Canada-US trade ties.
This argument is based on the idea that Canada must appease the U.S. to avoid economic damage from U.S. tariffs, and that trying to shift more of our trade to other nations can’t come close to making up for the scale of Canada-U.S. trade.
Statistically, Canada’s trade with the U.S. does indeed dwarf our trade with the E.U.
Canada’s trade with the U.S. accounts for roughly 60% of our total world trade, while trade with the EU accounts for about 10%, slightly ahead of China.
Overall, Canada is about middle of the pack when it comes to trade as a percentage of our GDP. At around 66%, we are about in line with countries like France, Italy, and the UK. Given that interprovincial trade barriers are now being lifted, our dependence on exports is likely to decline, though the extent of that decline remains to be seen.
This is why trade diversification matters
The importance of trade to Canada’s economy, and our current dependence on U.S. trade, is an argument for – not against – deeper trade ties with the EU, and with Asian partners like Japan and South Korea.
Our problem right now is that the U.S. has leverage over us, because we are more dependent on trade with them (as a percentage of our economy) than they are on us.
Normally, this isn’t a problem, as trade is mutually beneficial and has been conducted according to agreed-upon rules. However, with a ruthlessly transactional U.S. President who throws away trade deals on a whim, Canada is now vulnerable to U.S. coercion.
Becoming more dependent on trade with the U.S. would only make things worse.
Instead, our goal must be to mitigate the damage from U.S. tariffs (try to sign a deal that at least preserves most of the current trading relationship), while reducing our reliance on U.S. trade over the medium to long term. Failing to do this would mean remaining trapped in our dependence on the U.S., which is, of course, what annexationists want.
For those of us who want to preserve Canada as an independent nation, even small trade shifts towards the EU and other jurisdictions and away from the U.S. are a good thing. If we can get our trade with the U.S. from 60% of the total to 45%, and increase trade with the EU from 10% to 20% and trade with Japan and South Korea by 5% points, that would reduce U.S. leverage.
Spencer Fernando
Image – YouTube
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