We’re signing trade deals. Now, we have to use them

This week sees the launch of free trade between Canada and its 10 partners in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Trade barriers started coming down last Sunday between Canada and the five other CPTPP countries that have been the first to ratify the milestone trade pact, including Japan, the world’s third-largest economy, and the major economies of Australia and Mexico. Further tariff cuts among those countries are taking place this week.

With ratification by all 11 CPTPP partners, Canadian business will have unprecedented access to the large Vietnamese, Chilean and Malaysian markets, as well.

In just one mandate, the Trudeau government has concluded three landmark trade deals: the CPTPP; the Canada-EU Comprehensive Economic and Trade Agreement (CETA) with the European Union, world’s largest economy; and the U.S.-Mexico-Canada Agreement (USMCA).

And the Trudeau government is intent on forging a free-trade agreement with China, the world’s second-largest economy.

Canada depends on exports for about one-quarter of its economy. Among its fellow trade-reliant major economies, including Japan, Germany and Australia, Canada is unrivalled in its network of trade alliances, with the U.S. and the European Union, and in the Pacific Rim, Latin America and Australasia.

In a recent report, the Business Development Bank of Canada (BDC) cited expected strong Canadian GDP growth of 2.0 per cent in 2019 and continued robust business investment as “a great opportunity for Canadian businesses to sell more abroad (and) diversify their markets.”

And yet, a complacent Corporate Canada still does more business with the likes of Illinois and Ohio than it does with the rest of the world.

Heading into an election season, Prime Minister Justin Trudeau would do well to wage a campaign exhorting Corporate Canada to exploit the enormous job-creating trade opportunities that Ottawa has provided Canadian business.

The early going with CETA is proof of Canadian exporter lassitude.

Canadian exports of goods to the EU have increased just 2.1 per cent over the past year, roughly the time CETA has been in effect.

During that same period, EU exports to Canada have jumped almost 14 per cent.

Canadian exporters fixated on the U.S. market invoke the EU’s many languages (at least 47) and transportation issues as reasons for not vigorously tapping EU markets.

And yet those same language “barriers” have not dissuaded Italian biscuit and French cheese exporters from ramping up their sales to Canada. And transportation challenges in an EU with an integrated rail and trucking network are actually less formidable than bottlenecks at, for instance, the Windsor-Detroit crossing.

Admittedly, Canada still faces political obstacles on the trade front. The U.S. has not ratified the USMCA. The Democrats who take control of Congress this week are seeking changes to the deal. And U.S. President Donald Trump’s punitive tariffs on Canadian aluminum and steel, a violation of international trade law, remain in place.

Ottawa is bracing for Brexit, the scheduled March departure of Britain from the EU. The U.K. is the largest of Canada’s European trading part- ners. Canada hopes to strike a CETA-like agreement with a U.K. outside the EU.

And China is the biggest challenge, in the wake of the diplomatic furor after Canada’s Dec. 1 detention of a prominent Chinese business executive on a U.S. arrest warrant. The warrant is believed to allege that Meng Wanzhou and her employer, Chinese telecomequipment giant Huawei Technologies Co., violated U.S. trade sanctions against Iran.

China is Canada’s fastestgrowing export market.

And it is emerging as one of Canada’s biggest trading partners, accounting last year for 7 per cent of total Canadian exports, up from 1 per cent two decades ago.

To be sure, Canada is gradually reducing its export reliance on the U.S. America now accounts for about 70 per cent of Canadian exports, compared with a peak of about 80 per cent in the late 1990s.

But the diversification of export markets the BDC calls for has been very slow. Over that same two decades, for instance, Europe’s share of Canada’s total exports has grown by just 2 per cent, to a current 9 per cent.

Jim Carr, the federal trade minister, told Bloomberg last week that Corporate Canada will hasten its progress in diversifying its export markets now that practically the whole world is open to it. And also because a protectionist Trump has proved the dangers of tying our export fortunes largely to one customer.

“Trading with the United States for a very long time has been comfortable and has been easy,” Carr said. “Now they (Canadian businesses) see that it’s going to be in their interests to experience a little bit of discomfort.”

Carr has logic on his side, but not generations of Canadian business practice, which shows every sign of continuing to follow the line of least resistance. Which leads to Chicago, not Frankfurt, Santiago and Hanoi.