Reliance on U.S. not ‘sustainable’

It’s well known that Canada relies on America for the majority of its exports.

Nevertheless, the actual figures are eye-watering.

In 2017, using Statistics Canada data, exports were:

  • $472.6 billion in goods and services to the United States
  • $18.7 billion to the United Kingdom
  • $12.2 billion to Japan
  • $4.4 billion to Germany
  • $3.5 billion to France
  • $2.8 billion to Italy
  • $20 billion to China (2016 figures)

The Japanese figure is particularly tiny, considering Japan is a country of 129 million people compared to 325 million for the U.S.

The data shows why the Canadian government pursued free trade deals with the European Union and 10 Pacific nations, including Japan.

It also illustrates how a fixation on the U.S. has become hazardous to Canada’s economic health, says a University of Toronto economist.

“It’s not sustainable. And the government is going to have to make these bold decisions, eventually … to change the status quo,” said Walid Hejazi, associate professor of economic analysis and policy at the Rotman School of Management.

Recently, Hejazi testified before the Senate committee on banking, trade and commerce, which was looking at the impact of the North American Free Trade Agreement and its re-negotiation on the Canadian economy.

Hejazi echoed the sentiment of many other economists and told the committee that Canada is overly dependent on America for trade and vulnerable to U.S. pressure.

The federal government has taken steps to diversify, such as negotiating trade deals with Europe and the Comprehensive and Progressive Trans-Pacific Partnership. Those agreements are helpful but not sufficient, because Canadian businesspeople need to shift their attention away from America, Hejazi said.

He’s doing a study for Global Affairs Canada on the competitiveness of Canadian firms and has data on every business in the country. What’s become clear is that companies aren’t taking advantage of global opportunities.

“There’s a really nice study that looks at the G7 countries and the G7 countries’ penetration into the BRIC (Brazil, Russia, India, China) market. We lag all other G7 countries,” he said.

“We are not nearly as engaged as we should be.”

Hejazi pointed to Canada’s supply management system for dairy, poultry and eggs as an example of an insular mindset and a status quo that needs to change.

In the long run, supply management isn’t sustainable but the federal government continues to defend the system, Hejazi said

“The agricultural industry is one of the ones that loses from that bargain,” he said. “The Canadian government needs to eliminate its protectionist mindset … and it needs to demand reciprocity from other countries. But that’s hard to do when you have a lot of protections … for industries in Canada.”

Hejazi also criticized the federal government for its go-slow approach on a free trade deal with China.

“Even in the midst of perhaps the most significant threat to Canadian prosperity in the post-war era, the Canadian government still doesn’t get it,” he wrote in a post on the U of T website. “It’s incumbent upon the Canadian government to focus its efforts on emerging markets, including China, India.”

A potential trade deal with China will likely be flawed, but nothing is perfect Hejazi said.

“I think the right question to ask is: if we trade with China … will that be beneficial for Canada? If the answer is ‘yes,’ we should have trade with them even though it’s not completely fair.”

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