Stacked shipping containers at the Fairview Cove Container Terminal in Halifax, in 2019. Amid the U.S. trade dispute, the non-Western economic bloc BRICS could be a viable alternative for Canada.Andrew Vaughan/The Canadian Press
Jeff Rubin is the author of A Map of the New Normal, a finalist for the National Business Book Award.
While his adversary complemented his negotiating skills this month, Prime Minister Mark Carney left his much-hyped meeting with U.S. President Donald Trump empty-handed, failing to achieve any reduction in American tariffs.
All the while, Mr. Carney made bold proclamations of new trade deals to come, climaxing with a prime-time speech Wednesday night saying he’d double non-U.S. exports over the next decade.
More and more, Mr. Carney is looking like the emperor who is wearing no clothes.
If the outlook for the tariff-beleaguered Canadian economy is already calling for urgent action now, consider how much more urgent that call will soon become. The United States-Mexico-Canada Agreement, which went into effect on July 1, 2020, comes up for its mandatory six-year review in eight months. And USMCA is a dead man walking. Mr. Trump has repeatedly warned that he will seek to replace USMCA with separate bilateral trade deals with Mexico and Canada. The White House intends to offer a new bilateral agreement on a take-it-or-leave-it basis, and it will be very much on America’s terms.
The U.S.-Mexico-Canada free trade agreement is up for renewal. Here's a guide to what comes next
How much higher Canada’s already-rising unemployment rate will be, and how much lower already-falling Canadian housing prices will sink, is anyone’s guess.
Mr. Carney is aggressively pursuing trade deals with the European Union as an alternative to the American market, as demonstrated by the Prime Minister’s recent visits to meet European leaders. But while the EU countries share many of the same values with Canada, they have little economic inclination to open their own highly protected markets to Canadian exports.
Canada has had a free-trade deal with the European Union, and a grandfathered version of it with post-Brexit Britain, since 2017. But since then, exports to Europe as a percentage of the total has barely changed at about 10 per cent. Many products still face non-tariff trade barriers.
If you doubt that, how would you rate the chances of General Motors Co., Ford Motor Co. or Stellantis NV selling any of the few remaining vehicles they still produce in Ontario in the German market? And other than maple syrup, how would your rate the chances of Canada selling any agricultural products, like Quebec cheese, for example, into the French or Italian market?
Moreover, major economies in Europe are seeing near-zero growth. How much more can they buy from Canada, beyond what they’re already buying? While photos with European leaders may generate a feel-good vibe for Mr. Carney, in reality trade diversification toward the European Union is nothing more than a pipe dream.
The non-Western economic bloc BRICS (Brazil, Russia, India, China, South Africa and recently joined Saudi Arabia, Egypt, Ethiopia, Indonesia, Iran, and the United Arab Emirates) is on the other hand a real alternative to the American market. While it may be a stretch for Canada to boost trade with the likes or Russia and Iran, they are not big players in terms of trade anyway. The real clout comes from China and India, the world’s No. 2 and No. 5 economies.
Unfortunately Canada has poor diplomatic relations with China and India. The alleged state-sponsored assassination of a Sikh militant, a Canadian citizen, on our soil, and the incarceration of two Canadians in China for more than two years, are sticking points. Both countries have also been accused of electoral interference. But we shouldn’t lose sight of context.
Canada is a hot bed for Sikh extremists who haven’t shied away from terrorism. The bombing of Air India flight 182 on June 23, 1985, should have been considered Canada’s 9/11 moment. And the incarceration of two Canadians in China for over two years was in response to the arrest of Meng Wanzhou, chief financial officer of Chinese telecommunications giant Huawei, on an American extradition request.
While Canada must stand firm on foreign incursions and arbitrary detentions, it must also tackle the source of them. The problem that India sees in Canada, the problem that had caused it to allegedly order the assassination, is a problem Canada should want to tackle, too. And the problem with China stems from Canada’s carrying out the orders of the United States, a country somewhat of an ally then but now thoroughly hostile.
The Carney government has done the right thing by seeking rapprochement with China and India. But it’s questionable how much Mr. Carney – who once had two European passports and who called Canada the most “most European of the non-European countries” – has his heart in it.
It’s also questionable much much political support Mr. Carney can muster for such rapprochement. A new Angus Reid poll shows 57 per cent of Canadians favouring more trade with the EU, versus 14 per cent for China and 5 per cent for India.
Compared with India, Mr. Carney faces an even more challenging task when it comes to boosting trade with China. China has aggressively responded to a 100-per-cent Canadian tariff on Chinese electric vehicles (dovetailing the same tariff imposed by former U.S. president Joe Biden, yet another case of Canada going along with the United States to its own detriment). With its own tariffs, Beijing has effectively banned Canadian canola, pork and seafood from its market.
Aside from Canada’s relationship with the United States, what exactly its 100-per-cent EV tariff is protecting is far from clear. GM has suspended production in the country’s only electric vehicle assembly plant in Ingersoll, Ont. The Carney government would do well to heed the urging of Manitoba Premier Wab Kinew to scrap the tariff in exchange for China dropping its own tariffs. But can Mr. Carney overcome the voices on the other side, from the auto lobby and Ontario Premier Doug Ford?
Faced with an ever-escalating trade war with the Trump administration, the Canadian economy desperately needs to find new markets. That much Ottawa understands. What it doesn’t yet understand is that those new markets aren’t in the EU. Instead they are in BRICS. The sooner the Carney government recognizes that reality, the better off the Canadian economy will be.