CANADA WILL SIMPLY NEVER BE AN INTEGRAL PART OF THE EUROPEAN AND ASIAN SUPPLY CHAINS.

(notably managers overseeing production), which is still high relative to the cost of moving goods.

Canada’s role in the North American supply chain has changed markedly over time, a reflection that cost competitiveness is as important as the rules governing trade. In the years after the original 1988 Free Trade Agreement with the U.S., before Mexico joined, Canada became the de facto low-cost producer for the U.S. Our steadily declining exchange rate led to the rapid expansion of export industries producing cheap consumer goods in Canada. The lower dollar helped lower the cost of producing in Canada enough that not regulations. Producers in low-wage consumergoods industries such as clothing and furniture soon began disappearing or moving abroad. What remained in Canada’s manufacturing sector were resourcebased industries and capital goods, both of which pay high wages, along with some surviving assets in the auto industry.

Canada’s changing role in the North American supply chain helps clarify what is at stake in the current blizzard of negotiations and deals involving Europe, Asia and the NAFTA partners. While trade deals with Europe and Asia have some importance to our producers of natural resources and our consumers of imports, we will simply never be an integral part of the European and Asian supply chains. Canada is simply too remote and has too high a cost structure.

That means Canada’s future lies in finding its proper niche in the North American supply chain. Even with the loonie’s devaluation after 2014, exports have stagnated because our high cost structure and low productivity increasingly limits our role to producing raw materials, buying finished goods and supplying high-cost capital goods such as aerospace and high-tech equipment. This underscores the fundamental importance of both a successful renegotiation of NAFTA and lowering our costs. We cannot be fooled into thinking that trade deals with Europe and Asia will ever replace our need to successfully integrate into the North American production process.

Concluding trade deals between Canada and other nations is complicated by the Trudeau government’s fixation on “progressive” trade issues such as higher labour and environmental standards and social goals related to gender and Aboriginals. All of these inevitably raise our cost structure, so it is easy to see why Canada wants other countries to commit to the progressive trade agenda or we risk losing even more cost competitiveness. By the same token, it is obviously in the interest of other countries to encourage Canada’s fanciful pursuit of these policies while paying only lip service themselves. This is why progressive trade was only a non-binding side deal to the TPP and a non-starter in Canada’s talks with both China and the U.S. The Trudeau government says it will not sign a bad trade deal. Agreeing to trade deals while unilaterally saddling our businesses with higher costs would be worse. zling that many are willing to be deluded into thinking free trade is largely in place. Americans in the tens of millions, who saw their wages remain stagnant over decades, weren’t so deluded. Neither was Donald Trump who, like them, saw through the con that was taking place.

The mantra of the deluded — that “trade deficits don’t matter” — would be valid in their imagined world. In the world in which Americans actually live, deficits do matter, and Trump will soon make them matter to the Europeans, the Chinese, the Japanese and Koreans and to Canadians — to all who have been benefiting at the expense of so many millions of Americans.

Through bilateral agreements that demand reciprocal trade, Trump will be imposing his real-world view on America’s trading partners. America’s trade deficits will then narrow or disappear, and the welfare of the millions of Americans who have been left behind by today’s multilateral trading regimes will rise. But they won’t be the only winners from a reciprocity that will render useless many protectionist measures by America’s trading partners. The ideal of free trade will also be winning, whenever countries accede to Trump and lower their trade barriers.

A great experiment in bilateral trade is about to take place, a great ratcheting down of barriers in an eyeswide-open pursuit of trade that is not only fair, but free.