Canada losing its prime seat at the U.S. trade table
China overtakes top position among America’s trade partners with Mexico pushing for second
The second time prime minister Pierre Trudeau was feted at a White House dinner, very nearly four decades ago, president Jimmy Carter offered a toast that made amusing reference to Trudeau’s own words.
“I know that on the other side of the border, the Canadians feel what we are,” Carter said. “The last time prime minister Trudeau came to our country, he said that being a neighbour to the United States was like sleeping with an elephant — that you could very quickly detect every twitch or grunt. Well, the elephants are gone. The donkeys are here — and the donkeys are much more companionable beasts, I think.”
Companionable is a serviceable watchword for the relationship between Trudeau the Younger and President Barack Obama, as it will be on display Thursday evening at the much-hyped state dinner. We will be served a full-court press on black-tie wear, designers and foodie details of maple-infused whatnots, all part of a mise en scène for a U.S. administration in the twilight of its days.
A new collegial tone around climate change will be appropriately applauded during Trudeau’s visit to Washington, D.C. And maybe there will be some attempt to make it appear as though progress has been made on the complex softwood lumber file, an agreement that expired some five months ago.
But beneath the headlines lies a fundamental shift in Canada’s status as America’s largest trading partner.
Even in that sentence, we hit a speed bump. China surpassed Canada as the U.S.’s largest trading partner late last year. Collapsed oil prices were a significant part of that story, but it would be folly to assume that Canada can reclaim top status.
The more probing question would be: How long can we hope to be No. 2? We are hanging on by a hair’s breadth. U.S. Census Bureau data puts the numbers to the story. Our lead over U.S. trading partner Mexico is starting to look like little more than a rounding error.
It’s a useful exercise to chart trade data in five-year increments. Here’s data for the year 2000: Bilateral U.S.-Mexico trade, imports and exports, reached slightly more than $247 billion (U.S.) that year. Two-way Canada-U.S. trade was just shy of $410 billion.
In subsequent years, Mexico continued to exhibit far faster pace of trade growth. In 2015, while Canada’s merchandise trade with the U.S. was valued at $575.5 billion, Mexico’s reached $531.1 billion, a slight dip from the year previous. If the one month of data available so far for this year is any indication, that gap is almost closed.
Motor vehicles, motor vehicle parts, computer equipment, appliances, aerospace, telecommunications equipment. Mexico has exploded as an industrial hub, especially in auto manufacturing. We’ve seen it coming, of course. But few could have predicted that Canadian auto manufacturing would end up on such a luge run. The Detroit Free Press ran a dispiriting graph some months back. Citing a WardsAuto forecast looking out to 2020, light-vehicle production in Canada is expected to tally 1.6 million, compared with 2.7 million in 2004.
Mexico? How the tables have turned. Mexican production in 2004 totalled 1.5 million autos. In 2020, the number is projected to reach 4.7 million.
The U.S. is expected to see some softening in its own production, but the main point is that growth in Mexico has come and will continue to come largely at Canada’s expense.
Looking beyond autos, what’s striking is the way in which Mexico has steadily moved toward high-value products: as its production of clothing, for example, was halved across the decade to 2012, electronics exports increased by 73 per cent.
None of this was even imagined when Pierre escorted Margaret to the White House in 1977, when President Carter noted the “sense of relaxation” and compatibility he felt in their company. It would be years before NAFTA would come into effect.
It won’t be years before Mexico outpaces Canada in U.S. trade. When that happens it will be more than a knock to the ego. It will serve as stark reminder that as the new Trudeau presents a country on the world stage that is, as he likes to say, so much more than resources, there are legions of workers, especially in the diminished manufacturing base of southern Ontario, wondering what will arrive in its place.