Canada and the U.S. are looking for 'friendly' trading partners in a perilous world
Should both countries come up with a common approach to trade with autocratic nations?
U.S. Trade Representative Katherine Tai visited Canada this week — a two-day, two-city visit with International Trade Minister Mary Ng intended to showcase the closeness of the Canada-U.S. relationship.
Two countries that share the same democratic values in a tumultuous world. Two governments committed to expanding trade. Neighbours. Partners. Friends.
There are points of friction, of course. The Americans want Canada to live up to a ruling on the allocation of tariff-free dairy products coming from the U.S. Canada wants the Biden administration to avoid any protectionist measures as both countries ramp up production of zero-emission vehicles.
In an interview airing this weekend on CBC's The House, Ng said she's confident the two countries are united in recognizing the value of the auto industry's integrated supply chain. She noted that she and Tai visited a GM plant in the Toronto area where those next-generation vehicles are being developed.
"And here, what you're seeing is an American company that has some of their most important research and development, certainly in autonomous vehicles and electric vehicles, anchored here in Canada," she said.
"That's one example of the collaboration, the industrial collaboration in the auto sector that already is taking place. And, you know, we're really looking at continuing to explore these opportunities not only in the auto sector, but in, you know, in a range of clean energy sectors between Canada and the United States."
Canada relies heavily on that U.S. trading relationship. It's especially important in the context of a new world disorder emerging after Russia's invasion of Ukraine, and with a more aggressive China cracking down on democratic dissent in Hong Kong and maintaining heavy pressure on Taiwan.
That disorder has led to a push that trade experts called "friend-shoring" — efforts to find suppliers based in western countries.
"And that means instead of going offshore and doing business anywhere around the world ... you're either going to re-shore back to your home country [or] friend-shore with countries that share your values," said former Conservative Party aide Adam Taylor, who now heads the consulting firm Export Action Global in Ottawa.
"And we're going to see more of that."
No 'God-given right' to U.S. trade
That sounds like win-win for Canada. The U.S. is Canada's largest trading partner already. But Scotty Greenwood, CEO of the Canadian American Business Council, warns that access to the American market shouldn't be taken for granted.
"Canada doesn't have a God-given, constitutional right to access the U.S. market at any time it wants on its own terms. Canada has to establish its relevance in the global economy and with its partners in order to have the leverage it wants to negotiate," Greenwood told The House when asked if there's a growing protectionist sentiment under President Joe Biden.
"So the question isn't, 'Is the U.S. a reliable partner?' The question is, how do the U.S. and Canada sit down and do business together? And I think Canada has made a very credible case for why our economies are integrated. And I've been part of that too, [about] why it is in the U.S. interest to build things together and not build up these barriers against each other. But that's an ongoing, constant struggle."
The other question is whether the two countries should adopt the same approach to autocratic regimes such as China.
The 'risk' in trading with autocracies
To help ease inflationary pressures, the Biden administration is looking at lifting punitive tariffs imposed on Chinese goods during Donald Trump's term in office.
Tai was asked during a news conference with Ng in Ottawa whether the two countries should be trading with autocratic regimes at all.
"We are placing a real focus on risk, and how we address risk in global supply chains. That is a lot of the conversation between us," she said. "With respect to autocracies, there is a particular risk that we are realizing in terms of trade relationships that … present a higher profile in terms of risk."
Statistics Canada reported last May that exports from Canada to China rose 14 per cent from 2020 to 2021 — a period that covered the illegal detention of Canadians Michael Spavor and Michael Kovrig. Coal exports led the way, even though Canada has vowed to do more to reduce greenhouse gas emissions.
"Well, we are steadfast at promoting human rights around the world. We're steadfast at supporting businesses to grow, particularly in building out into the green economies," Ng told The House, pointing to Tai's visit as a signal that Canada is actively engaged in building dependable supply chains with like-minded countries.
"We are seeing record-high trading volumes with the Europeans. We are seeing $1 trillion — the highest trade that we've ever done with the United States in this last year."
Canada also is leading efforts to reform the World Trade Organization to support more rules-based trading relationships, Ng said.
Trade hasn't changed Russia, China: Taylor
"I think Canadians are looking to us, and this is certainly the work that I am doing, advocating and promoting and supporting rules based trade and working to solidify those supply chains that Canadians would expect us to, and particularly in an area where we have to be able to build out for the planet and for the people."
Taylor said that while Ng deserves credit for her leadership at the WTO, the long-held Liberal position that engaging with countries like China and Russia allows Canada to push for human rights and other reforms is now outdated.
"Russia has been part of the WTO for about 10 years. And there's been no demonstrable political and social freedoms in that country," he said. "The same with China."
Ng said that's a key reason why Canada continues to look for new trading partners in Asia and to promote "friend-shoring" to reinforce existing supply chains within North American and Europe.
It's all about getting more value out of those shared values.
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