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Canada’s Self-inflicted Trade Crisis With the US

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Another G7 meeting is upon us and the usual hand wringing over what President Trump will/will not do has the center of attention, just the way he likes it.  But this Canadian op-ed explains why it is less an acute Trump condition and more of a chronic circumstance purposely pursued by Canada in lieu of more diversified trade:

 

Quote

... Now imagine what would befall Canada’s economy—and, along with it, the country’s public services—if the torrent of trade revenue from the US slows to a trickle. Trump’s bellicose rhetoric after the G7 summit offers a stark reminder that Canada, despite its culture of prudence, has pursued a risky path when it comes to trade. We’ve tethered our quality of life to the whims of one large and apparently mercurial customer. And now we may have to face the consequences.

... For generations, a combination of geography and convenience has helped foster Canada’s deep reliance on trade with the US. In the 1950s, economic nationalists began bemoaning Canada’s resource-dependent branch-plant economy. In response, Lester B. Pearson’s Liberal government negotiated a trade arrangement designed to boost Canada’s struggling automotive industry; the deal turned out to be a huge boon for Ontario in particular. But an unfortunate side effect of the Canada-US Auto Pact was that it gave Canada all the more incentive to focus its trade south of the border. In the decades that have followed, our dependence on the US has become noticeably more pronounced, particularly since the Canada-US Free Trade Agreement in 1989 and its successor, the North American Free Trade Agreement, in 1994.

... The shame of it all is that while Harper’s determined, multi-front trade campaign (which has been taken up by the Liberals) was absolutely necessary for diversifying our export base, it simply hasn’t been sufficient. Apparently, you can lead a (Canadian) horse to international markets, but you can’t make it sell.

...The HHI measures international trade concentration using a complex economic formula: the higher the resulting percentage, the greater a country’s dependency on a single market (or product). The majority of developed economies—including the US and most European Union countries—scored below 10 percent in 2015, which is considered to be a healthy level.

Canada and Mexico, however, hover in the 50 to 60 percent range. According to World Bank data for 2015, the only other country with a higher HHI than that is Mongolia.

https://thewalrus.ca/canadas-self-inflicted-trade-crisis-with-the-us/

 

Methinks Canada will choose to just wait out Trump and hope for a return of "normalcy", which includes the lack of trade diversification away from and continued dependence on the United States.   

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25 minutes ago, bush_cheney2004 said:

Methinks Canada will choose to just wait out Trump and hope for a return of "normalcy", which includes the lack of trade diversification away from and continued dependence on the United States.   

I think this is the new normal, not only have both Red Team and Blue Team soured on "free trade", but Red Team doesn't like Canada anymore since Canada went completely Pinko,  and Blue Team is too into themselves to do anything for Canada.

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Well, I naively assumed that Canada had the equivalent of a RAND Corporation or CATO institute to at least analyze and communicate domestic and foreign policy risks to Canada in the short and long term.    What Canada has are think tanks (Conference Board of Canada, Fraser Institute, Canadian Centre for Policy Alternatives, etc.) that ultimately confirm and entrench the economic and military status/dependence on the U.S. rather than propose actions for more independence, because there is no viable alternative on the horizon.

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20 minutes ago, bush_cheney2004 said:

Well, I naively assumed that Canada had the equivalent of a RAND Corporation or CATO institute to at least analyze and communicate domestic and foreign policy risks to Canada in the short and long term.    What Canada has are think tanks (Conference Board of Canada, Fraser Institute, Canadian Centre for Policy Alternatives, etc.) that ultimately confirm and entrench the economic and military status/dependence on the U.S. rather than propose actions for more independence, because there is no viable alternative on the horizon.

More independence is a fools errand, Let The Americans In, that is the way to go.

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4 minutes ago, Yzermandius19 said:

More independence is a fools errand, Let The Americans In, that is the way to go.

Trade problems are easily solved by abandoning the narrowly vested entrenched interests and associated protection of them. 

No tariffs at all.

Milton Friedman's Hong Kong knows.

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9 minutes ago, Dougie93 said:

Trade problems are easily solved by abandoning the narrowly vested entrenched interests and associated protection of them. 

No tariffs at all.

Milton Friedman's Hong Kong knows.

If Canada lowers tariffs on other nations goods and services, it will be easier to trade with other nations, who knew?

If only there was a barren little rock with no real resources, aside from a natural harbor, who had this figured this out decades ago, starting from the bottom and rising to great wealth in a very short period of time, that proves the obvious effectiveness of that strategy.

Oh wait, there is, Milton Friedman's Hong Kong figured it out, and left the ChiComs in the economic dust while doing so, because they didn't embrace counter-productive protectionist trade policies that Commies love and embraced free market capitalism and free trade instead.

Edited by Yzermandius19

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2 minutes ago, Yzermandius19 said:

If Canada lowers tariffs on other nations good, it will be easier to trade with other nations, who knew?

If other nations want to tax themselves for their entrenched interests, more fools them, all protectionism is a scam, a self inflicted wound.

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Canada loved tariffs in the first half of the 20th century...that's why there are/were so many American owned branch plants in Canada...to beat the Commonwealth tariffs.  

That all changed post WW2....the UK was broke....Europe was in ruins....and the Americans had very deep pockets to go with the world's largest consumer market.

 

 

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Canadians have clearly recognized the economic Dutch disease that exists, but government and industry are paralyzed to do anything about it.   Worse still, world oil imports to growing economies are up while Ottawa and several provinces fight each other over pipelines and export terminals to satisfy partisan special interests.

No international G-7 meeting is going to solve Canada's domestic troubles or weak leadership, regardless of Trump.

 

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Dutch disease inevitably leads to the Canadian dollar riding a roller coaster based on commodity prices, as in the case of oil.   The crash in oil prices has put Alberta in a hurt locker and the CAD on its ass.

https://www.theglobeandmail.com/report-on-business/top-business-stories/the-canadian-dollar-oil-and-canadas-dutch-disease/article20509692/

I had two fence contractors give me bids using western red cedar, and they told me that softwood lumber prices have collapsed.    Canada is just giving it away now compared to the border wars of old.

 

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10 hours ago, bush_cheney2004 said:

Another G7 meeting is upon us and the usual hand wringing over what President Trump will/will not do has the center of attention, just the way he likes it.  But this Canadian op-ed explains why it is less an acute Trump condition and more of a chronic circumstance purposely pursued by Canada in lieu of more diversified trade:

Methinks Canada will choose to just wait out Trump and hope for a return of "normalcy", which includes the lack of trade diversification away from and continued dependence on the United States.   

Trump cancels NAFTA,  blames Trudeau ..

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2 hours ago, GostHacked said:

Trump cancels NAFTA,  blames Trudeau ..

NAFTA is not good for you.   NAFTA protects narrowly vested entrenched interests in Canada at the expense of the majority.

If Canadians simply dropped all tariffs, lowered taxes, and enacted property rights, there would be a Flight to Quality to Canada and everyone would get rich instead of just a few.

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The American Flight to Quality is the source of all their wealth and power.

They don't have to be perfect, they just have to be better than everybody else.

Canada could beat them at their own game.

But not while Canada is a confiscatory nanny police state with high tariffs, taxes and no property rights, to the advantage of the narrowly vested entrenched interests; wealthy dynasties, corporations and unions, which run it to their benefit like a Company Town.

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1 hour ago, Dougie93 said:

NAFTA is not good for you.   NAFTA protects narrowly vested entrenched interests in Canada at the expense of the majority.

If Canadians simply dropped all tariffs, lowered taxes, and enacted property rights, there would be a Flight to Quality to Canada and everyone would get rich instead of just a few.

Canada has no need to drop tariffs.  If the USA wants to be stupid and cancel NAFTA without having something else in place (and that is yet to be done) and then blame Canada for raising tariffs after the USA did , means this argument is useless.

We can only really be reactionary to Trumps idiocy as the rest of the world is doing.  Always waiting for the next stupid move from Trump.

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Just now, GostHacked said:

Canada has no need to drop tariffs.  If the USA wants to be stupid and cancel NAFTA without having something else in place (and that is yet to be done) and then blame Canada for raising tariffs after the USA did , means this argument is useless.

We can only really be reactionary to Trumps idiocy as the rest of the world is doing.  Always waiting for the next stupid move from Trump.

Tariffs are just a tax on you which get handed over to corporations, it doesn't protect you from the Americans, Canadians are still going to buy American, they just end poorer because you tax them as a punishment for that.

America is not the problem, you are the problem.

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16 minutes ago, Dougie93 said:

Tariffs are just a tax on you which get handed over to corporations, it doesn't protect you from the Americans, Canadians are still going to buy American, they just end poorer because you tax them as a punishment for that.

 

Yep....Canada's crazy high tariffs on dairy only served to protect special interests in Ontario and Quebec (protectionism) at the expense of Canadian consumers.   Trudeau had to give some of that up to the EU too just to get PM Harper's CETA across the finish line.

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3 minutes ago, bush_cheney2004 said:

 

Yep....Canada's crazy high tariffs on dairy only served to protect special interests in Ontario and Quebec (protectionism) at the expense of Canadian consumers.   Trudeau had to give some of that up to the EU too just to get PM Harper's CETA across the finish line.

And again, due to the Flight to Quality, the power of American freedom and property rights, America can get away with taxing people to enter America.

Canada not having a flight towards it, not so much.

Thus why Canada cannot win a trade war with America, if Canada tries that, Canada will get crushed, just like all others who have gone to war against American freedom.

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This is also why China can't win against America, because China has no flight to quality neither, China dines out on American freedom by arbitrage too, like a giant Canada.

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20 hours ago, Dougie93 said:

Tariffs are just a tax on you which get handed over to corporations, it doesn't protect you from the Americans, Canadians are still going to buy American, they just end poorer because you tax them as a punishment for that.

America is not the problem, you are the problem.

Trump cancels trade deals with several nations and I am the problem? I was not aware I had that much influence.

Tariffs punish the end user only. The corps pass that cost onto the consumer in higher priced goods.

 

20 hours ago, Dougie93 said:

This is also why China can't win against America, because China has no flight to quality neither, China dines out on American freedom by arbitrage too, like a giant Canada.

Well take a look around your home and find out where it's all made. You'll be surprised!  Designed in California, made in China!

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2 minutes ago, GostHacked said:

Trump cancels trade deals with several nations and I am the problem? I was not aware I had that much influence.

Tariffs punish the end user only. The corps pass that cost onto the consumer in higher priced goods.

 

Well take a look around your home and find out where it's all made. You'll be surprised!  Designed in California, made in China!

Tariffs are self harm, no tariffs at all is the way to go, hence why Hong Kong is much richer than dreary old socialist backwater Canada and always was.

Manufacturing is not where the money is, it's the Information Age,  AAPL in Cupertino is where the money is, I know, I paid my mortgage off with it, all at once, mortgage free, overnight.

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I mean, if you bother to check, you can find out that manufacturing and energy are in a long term depression.

Why?  It's the information age.   Information is now the most valuable commodity on earth,   The future is here, Marshall McLuhan. Welcome to the new age

Dreary old socialists and their thuggish unions trying to save themselves from it by trade war and tariffs?

Doomed.   Buggy Whips.  Buh-bye Industrial age.

Those who are desperately trying to crawl back into the womb of modernity and the 20th century, are simply going to find that it's not there anymore.

Market forces are Darwinian forces, adapt or perish, entropy is the nature of the universe itself.

Edited by Dougie93

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On 8/27/2019 at 11:11 AM, Dougie93 said:

Tariffs are self harm, no tariffs at all is the way to go, hence why Hong Kong is much richer than dreary old socialist backwater Canada and always was.

Manufacturing is not where the money is, it's the Information Age,  AAPL in Cupertino is where the money is, I know, I paid my mortgage off with it, all at once, mortgage free, overnight.

Interesting that Trump wants to bring manufacturing back to the USA. But it won't mean the jobs that people think. It will be heavily automated. And since you consider tariffs to be self harm, Trump has been doing that since he killed NAFTA.

Trump has tariffed the USA into a new recession.

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1 minute ago, GostHacked said:

Interesting that Trump wants to bring manufacturing back to the USA. But it won't mean the jobs that people think. It will be heavily automated. And since you consider tariffs to be self harm, Trump has been doing that since he killed NAFTA.

Trump has tariffed the USA into a new recession.

Trump is simply following the prescriptions that those who voted for him demand, if they vote themselves into a correction, that's democracy in action.

I wouldn't fear a correction though, corrections are a good thing, the market needs to find the real price of things, if the GOP incites that, it's all good.

Take your profits, go short, buy low, that is how the markets are supposed to work, that is the only way to make money in the markets in the end.

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2 minutes ago, Dougie93 said:

Trump is simply following the prescriptions that those who voted for him demand, if they vote themselves into a correction, that's democracy in action.

I wouldn't fear a correction though, corrections are a good thing, the market needs to find the real price of things, if the GOP incites that, it's all good.

Take your profits, go short, buy low, that is how the markets are supposed to work, that is the only way to make money in the markets in the end.

Democracy would mean that the person with the most votes would be POTUS.  The political process in the USA does not look or feel like a democracy at all.

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