Canada needs to see the U.S. and its trade motives clearly

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Canada needs to see the U.S. and its trade motives clearly


Existing crises that threaten the entire society have a way of forcing us to see the world as it truly is, the coronavirus pandemic is no exception. Canada, once mocked by South Park as “not even a real country anyway,” has come back together in remarkable fashion. Canadians and their leaders, from different regions and across the political range, are all pushing in the same direction. But while the epidemic has showcased the country’s inspiring solidarity, it has also revealed the costs measured in lives lost and economic opportunity wasted of Canada’s continued attachment to a one-dimensional ideology that long ago passed its best dates in the past.

Canadian economic development policy since the 1990s, has been tied up in two words “free trade”. The formerly widely accepted concept that countries should have an industrial policy. A strategy for encouraging strong and desirable economic growth was formed alongside in the single-minded pursuit of complete global trade agreements. Prosperity and economic security, so the standard wisdom held was best ensured by lowering trade barriers and encouraging specialization. Production would be global, which would not pose any problems in a free-trade world.

Two flaws

These two flaws have been long been there in this policy.

  • First, while Canada might be a “trading nation", trade is merely a means to an end, securing markets for Canadian producers and ensuring Canadians have access to foreign goods and services. At the end of the day what matters is its production and not trade for a country’s economic security and power.
  • Second, policy-makers failed to recognize the extent to which the entire free-trade world was dependent on, the actions and support of the U.S, given its global superpower status. After the Second World War, the United States. decided to underwrite a liberal multilateral order that encouraged free trade by which it was able to reinforce in the 1990s after the end of the Cold War.

While in 1990s, for a long while, Canada was able to get away with neglecting industrial policy and to imagine that free trade would be the economic salvation. This was mostly because the world of open borders, apparently supported by the United States power which hid the long-term costs of deindustrialization since it still had easy access to cheap production in other countries.

Unfortunately for Canada, that world hasn’t existed for almost 20 years. The multilateral free-trade world was only ever as strong as the American commitment to it.

The unilateral United States choice of security over success following the 9/11 terrorist attacks was the beginning to the end of this multilateral economic order. The un-sanctioned American invasion of Iraq accelerated the shrink of system’s, as did its open embrace of torture in violation of international agreements and basic human decency.

Under Democrats and Republicans alike, the United States economic policy, turned trade agreements from potentially win-win tariff-lowering treaties into agreements designed to lock in the American advantage on issues of the future:

  • Intellectual property
  • Data governance internet governance
  • Free trade agreements are no longer about free trade

Covid-19 exposes the crack

All of this happened before the pandemic began, the physical vulnerability of countries lacking the guaranteed access to producers of medical equipment. The current international struggle for medical equipment is not causing the world order to collapse, it’s a symptom of an order that has been falling apart for a long while in slow motion. Countries have been almost unconsciously adjusting to this reality. These include forms of what is called digital economic nationalism, in which countries, including Canada, are pursuing national industrial policies in high-tech areas like artificial intelligence (AI) and are seriously considering the regulation of global online platforms, mostly American.

Tentatively is still the operative word. Policy continues to be marked by a failure to think through the outcome of these long-term trends and by the hope that the former United States President departure from the Oval Office will restore the multilateral order.

It won’t, for the simple reason, there is no longer a political bilateral consensus on Capitol Hill that the order is worth saving. The liberal, multilateral world order that has been underwritten by the U.S. since the end of the 2nd World War cannot survive this degree of instability for very long. Canada’s free-trade obsession has put us in a tie-up, making us strongly reliant on global supply chains. Its a huge unforced error given that 19 years ago, 9/11 showed us just how quickly border policy can change.

The recently concluded NAFTA 2.0, officially known as the U.S.-Mexico-Canada trade agreement (USMCA), has multitude loopholes that leave Canada open to future harassment and concessions on data localization made without any analysis on their impact. It also states that Canada hasn’t fully understood on how the world has transformed since 1994.

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