Rules-based trade, yes, but Canada needs flexible policies too

The United States: Unreliable and undependable.

China: Undependable and sometimes hostile.

India: A mystery and a wild card.

The rule-based, pro free-trade world: Shrinking and weak.

How does Canada find a strategy to deal with that kind of a crazy, mixed-up world situation?

That’ll be the challenge for Canada for the next decade, probably, as the U.S.-centred, globalizing, free-trade friendly, rules-based order disappears. What’s going to replace it? How does Canada set itself up to deal with that?

I talked with geopolitics expert Jacob Shapiro about that recently, and you can read some of his views on page 14 of this issue.

What struck me as most interesting about what he said was that he doesn’t think Canada should back away at all from its commitment to and involvement with the “rules-based” gang.

That gang includes the nations of the Trans Pacific Partnership and the European Union. The TPP is a new grouping that hasn’t yet shown how significant it can be. The EU is an old organism that (in my view) doesn’t really believe in free trade but is too gentle to be frank about it and at least tries to appear to be a free trader.

With China proving itself to be a mercantilist and geopolitical adversary, the U.S. self-isolating in an America-first policy, and India committed to food self-sufficiency but possibly to become a massive food importer, commitment to a rules-first approach might seem quixotic.

But what I took from talking with Shapiro is that Canada should preserve whatever it can with the old free-trading order, while also finding ways to deal with the tempestuous giants.

There can’t be just one Canadian trade policy. There must be several.

The U.S. and China are big enough to try to impose their wills upon others. India, too, can chart its own course because it’s also a giant, even if it is mostly inward-focused. However, for the vast majority of the world’s countries, that me-first approach won’t work.

That’s why it makes sense to double-down in a commitment to rules-based trade with those who still believe in the old faith. We’ll never be able to make comprehensive and fair one-on-one deals with the three giants, but we can work with most of the world’s countries on at least some basis of rules-following and equality-of-status.

Plus, within trade agreements like TPP or the Comprehensive Economic and Trade Agreement with the EU, at least some things are likely to remain reasonably stable.

For that element of our agricultural and national trade, we can keep on keeping on with what’s been working for decades.

With the big boys, that won’t work, and we’ll have to find other ways of dealing with them. Each will require a unique approach, and that’s OK. We’ve just got to figure that out.

The U.S. is basically honest and decent, so our main challenge will likely be managing bouts of domestically focused selfishness. However, we probably can’t count on the U.S. using its size, power and credibility to back the rules-based order outside of the North American free trade agreement zone.

With China, we know what we’re dealing with, after our awful experience with the canola squeeze and the jailing and now prosecution of Michael Kovrig and Michael Spavor. It’s a mercantilist power, with major geopolitical ambitions, and it will never see Canada as an equal.

But it’s food-insecure and arguably needs Canada more than Canada needs it. That’s a basis for trade, if not friendship. It’s likely that with food, many times at least, we’ll have it and they’ll want it. We can horse trade with China.

How do we deal with India? That needs its own distinct policy. India does what it chooses, hardly noticing the outside world, but sometimes it needs things. Just as with China, there will be times it needs what we have. We can do business there too.

Canada might have left the simple world of the rules-based trading order, but that doesn’t mean that order is gone. It’s just smaller and its rules can’t be assumed to apply to all. It’s just part of the world now, and part of Canada’s trade strategy.

China, the U.S. and India: each will demand its own approach.

Canada doesn’t have to make a choice between the rules-based order and the geopolitical power order. It just has to deal with both.

About the author

Markets at a glance

explore

Stories from our other publications