Rethinking our global ambitions
The most important line of Jim Carr’s speech in Parliament on Monday came at the very end.
“We are naturally global, but we haven’t always been actively global,” the new trade minister said as he introduced legislation to ratify the 11-country TransPacific Partnership. The TPP, he added, “is a call to action.”
The Trudeau government often talks like it’s trying to get its material atop a Google search: The TPP officially is now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, apparently at Canada’s behest; the new agency in charge of corralling international investors is called Invest in Canada; Carr is the country’s first minister of International Trade Diversification, and not merely the trade minister, as he himself informed the House during the early stages of debate over the TPP bill.
So taking Prime Minister Justin Trudeau and his cabinet members seriously can be hard. But when they stop reducing the English and French languages to phrases that algorithms can understand, they sometimes hit the right note, as Carr did with his first high-profile speech since joining the team of ministers supported by Global Affairs.
Carr’s conclusion stood out because it reflects a shift in thinking in Ottawa. For decades, the approach of governments has been to sign trade agreements and assume that everything else would take care of itself. That attitude flattered Canada’s executive class, a group of (mostly) men and women whose idea of adventure is a business trip to San Diego. Carr’s comments reflect a growing recognition among policy-makers that if they think diverse markets is in the national interest, then they will have to make it as easy as possible for Canadian companies to find them.
According to research by the Trade Department when it was still called the Trade Department, only Finland relies more on its 500 biggest exporters to generate international sales. Stephen Tapp, deputy chief economist at Export Development Canada, found recently that Mexico is the only big economy that is more reliant on a single trading partner than Canada. Both countries are extreme outliers in the degree to which the value of their exports derives from trade with one country, in each case the United States. Most advanced countries spread themselves wider, although it must be said that no other countries enjoy preferen- tial access and relatively open borders with the world’s largest economy.
Trade responds to economic gravity the same way suspended objects respond to the pull of Earth. That’s why Canada’s biggest export market always will be the one directly south of the border. But events in the U.S. over the past decade have provided hard lessons for why it’s important to give yourself options. The Great Recession crushed Canadian exports partly because the country had done too little to develop links to fast-growing markets in Asia. And then Americans elected Donald Trump, who has followed through on threats to rewind decades of globalization, including a rewrite of the North American Free Trade Agreement.
“This bill … speaks directly to Canada’s diversification imperative,” Carr told Parliament. “As a middle power, we cannot afford the status quo and we cannot afford to wait for the world to come to us.”
Canada has had an odd history with the TPP, first devised by Brunei, Chile, Singapore and New Zealand in 2005, and then essentially taken over by the U.S. as part of former president Barack Obama’s “pivot to Asia.” Twelve countries eventually joined, although former prime minister Stephen Harper waited until near the end.
The Republican-controlled Congress blocked Obama’s attempts to ratify the TPP, and Trudeau was initially hesitant to endorse the agreement. Most thought the TPP was dead after Trump quit the arrangement, but Japan resolved to keep the TPP-11 alive. Trudeau decided to get behind the Japanese initiative, although his commitment again was questioned when he missed a meeting of leaders that was meant to secure the initiative. The remaining countries worked out their differences, and now the TPP is the leading exhibit of Trudeau’s commitment to trying an Asian pivot of his own.
“Canada is now poised to be the only G7 country with free trade agreements with all of the other G7 countries,” Carr said. “To realize this remarkable value proposition, diversification into new markets must be a national project to which every farmer, rancher, fisher, manufacturer, entrepreneur, business owner and innovator commits their efforts.”
The trade minister might be applying the message a little thick, but the idea is right.
Conservatives talk about being the party of free trade; it was Harper who did most of the work on the trade agreement with the European Union, and he got Canada preferential access to South Korea. But he failed on the follow through. Canada’s trade with Europe and South Korea has changed little. Benoit Daignault, the chief executive of Export Development Canada, said earlier this year that companies were doing too little to take full advantage of the preferential access they have to big, rich markets like the EU.
Carr promised to staff up Canadian trade commissions to help smaller companies break into complicated places such as India and Brazil. That will help. So might embarrassing Canada’s executives into trying harder.
As a middle power, we cannot afford the status quo and we cannot afford to wait for the world to come to us.