Getting the Canada-European Union free trade deal (sort of) approved is a big step in the right direction for hedging Canada’s trade exposure.
But a lot more is needed, whether or not the Comprehensive Economic and Trade Agreement is eventually ratified.
Not only does Canada want access to more overseas markets, but it badly needs to reduce its exposure to U.S. or Mexican trade actions.
Our North American Free Trade Agreement partners take about three quarters of Canada’s total exports. They buy about 86 percent of our livestock, meat and aquaculture exports, 73 percent of manufactured food and 30 percent of crop exports.
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China purchased just over 20 million tonnes of wheat, corn, barley and sorghum last year, that is well below the 60 million tonnes purchased in 2021-22.
That not only leaves Canadian farmers and others extremely vulnerable to U.S. actions, which have caused severe problems over the years with pigs, cattle and grains, but also gives Canada little room to develop independent agriculture policy if it could provoke the U.S. in some way.
The U.S. doesn’t have to worry about Canada much because while Canada might be its most important trading partner, it has a number of partners of almost equal importance.
For Canada, it’s a matter of having access to the U.S. market or suffering dire economic chaos.
Brexit offers an interesting contrast to Canada’s situation.
The United Kingdom is able to consider leaving the EU only because it doesn’t rely completely on the European market. U.K. exports to the EU make up less than half of its overall exports, and the proportion of exports going to the EU has been declining.
Brexit might or might not be a good idea for the U.K. Losing tariff-free access and regulatory equality within the giant trading bloc is no small thing.
However, if leaving the EU allows Britain to sign more deals with trade-friendly countries such as Canada and the U.S., then it might be a strategic gain.
Regardless, I can’t image the U.K. even considering Brexit if it had anything near Canada’s 78 percent reliance on NAFTA. It just wouldn’t be conceivable to risk such a dominant market.
Having less than half its exports going to the EU is what gives the U.K. freedom of action.
CETA might get through, but it’s got a ways to go before that becomes final.
It’s a great first step, but we need to work hard to keep market-opening deals coming.
The Trans-Pacific Partnership might still survive, but if it doesn’t, bilateral deals with countries such as Japan should be a priority.
However, if Brexit really happens, that opens another possibility: a true free trade deal with the U.K.
Canada lost much of the British market when the U.K. entered the EU in 1973 and tariff walls were erected against us. If the EU hits Britain with tariffs post-Brexit, Britain is likely to reply with its own.
That’s a big market for pork, wine and grain that is now dominated by the EU. Getting access to those now-protected markets would help Canadian farmers and other exporters find new buyers but would also reduce the stranglehold that the United States now has over Canada’s exports.
That’s something to work on.
