Canadian exporters face stiff trade headwinds

China is using trade as part of its geopolitical policy, while the United States’ ‘America First’ position causes problems

Canadian farmers might feel battered and bruised by trading partners these days, but they’re actually lucky — in the long run, at least.

“Canada won the geographic lottery,” said Jacob Shapiro, a geopolitics expert with Perch Perspectives, in a June 12 interview.

“The challenges (today) compared to what other nations are facing? Canada’s doing fine and should do fine in the future.”

Shapiro bases his view on Canada’s bountiful natural resources, its physical isolation from most geopolitical hot spots, and its likelihood of being less severely impacted (at least in agriculture) by climate change than some food-dependent and food-exporting countries.

However, capitalizing on that will require Canada to negotiate some troublesome situations in a world that is swinging away from American-centred, rules-based trading that has prevailed for three decades.

Those challenges include:

  • An assertive China that uses trade as an integral part of its geopolitical policy, rewarding and punishing nations like Canada for compliance with its wishes.
  • A rising India that aims at food self-sufficiency, but might become one of the world’s biggest food importers.
  • An erratic and aggressive American government following an “America first” policy rather than championing global free trade.

It’s the third of these challenges that Shapiro thinks is most serious for Canada.

“I don’t think that it’s viable for Canada, just by virtue of where it is… to break with the United States, so you’re going to have to go along with where the United States is going, and I hope that future administrations are less heavy-handed,” said Shapiro.

“How the United States behaves towards China is going to affect how far Canada is able to deal with China.”

Dealing with China isn’t likely to be easy because it has proven that it will use trade access and trade policy quickly in disputes with foreign governments. Canada and Australia are both experiencing that today, but China’s government has long incorporated its carrot and stick approach and isn’t likely to change that.

Shapiro thinks Canada should continue to look to China for opportunities, but never count on it as a dependable market.

“Canada’s going to have to deal with the fact that it’s not likely to have easy access to the Chinese market for a long time, and it’s going to have the hard work of diversifying its client base and consumer base and broadening its supply chain.”

With the U.S. going rogue and China sticking to its marrying of trade and politics, it might be easy to write off the old rules-based trading order, but that would be a mistake, Shapiro said.

Defending what remains should be a key focus for Canada’s government.

“It’s not that the rules-based order is going to disappear overnight. It’s just that the rules-based order is probably going to get smaller and you’re going to have to work harder to make sure that the rules-based order stays coherent within itself,” said Shapiro.

“Have relationships with like-minded countries.”

That involves the nations of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Dealing with India is the wild card for the decade. Its government is trying to transform India into a modern, centralized state to unleash its vast potential, but has just started the process. Part of that is hopes to be not just food self-sufficient, but also a significant exporter.

That’s possible, but will be an enormous challenge, Shapiro said.

India lacks the authoritarianism and culture to conduct lightning fast developments like China does. And its government’s attempts to bring about quick modernization while keeping the Hindu masses of its base supporters happy will be a tricky problem.

India will most likely become a significant food importer in the coming decade, but it is too soon to say.

For all the challenges out there, which have multiplied in only a few years, Canada remains in a fortunate position, Shapiro said.

It’s one of the world’s few nations that will likely always be food secure and produce enough to remain a major exporter.

It can develop markets, broaden its sources of inputs and adapt to climate change better than most other countries.

In the end, the evolving world order is a challenge to everyone, so it’s all a relative situation.

“Canada can carve out a really good niche for itself,” said Shapiro.

“It’s easier to be resilient if you’re in Canada.”

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