United States and Canada are like peanut butter and jelly, sandwiched together by the oceans around us. Certainly, Mexico is a part of the equation based on geographic proximity to the United States, but from the Canadian perspective — they’re our only real neighbour.
Canadian Prime Minister Justin Trudeau lays on the love for our southern allies pretty thick, especially in the wake of the election of President Donald J. Trump. Trump and Trudeau are at profoundly different ends of the political spectrum, and so many Canadians and Americans alike worried what would come of our longstanding partnership, given their vast differences.
The economy of Canada and the United States are aided immensely by the flow of goods between our two nations, this much is known. Jobs in both countries are created from and for this flow of goods, so therefore logical trading practises between us are extremely valuable.
It is for this reason that President Trump’s recent signing of an executive order to probe trading practises the United States has with Canada for anything “unfair,” has many economists biting their nails. Donald Trump has not proven himself a particularly competent president thus far, so to assume that he could genuinely improve trade practises between our two nations seems far-fetched, to say the least.
In fact, it seems more likely — thus the cause for concern — that Donald Trump would de-escalate into paranoid delusion and assume Canada is in some way ripping the United States off.
Trudeau, for his part, is not doing much to ease the worries in the minds and hearts of Canadians. While he has stressed that the “special relationship” between our two countries relies on the smooth flow of commerce, goods, and services across the border, he is not of the belief that the probe will highlight anything substantial.
At the heart of the probe is the intention to see if Canada or others are using abusive tactics to run export surpluses. The study is set to be completed within 90 days of the signing, which occurred on Friday. In terms of trade, the United States has had a global export deficit in recent years — a phenomenon which someone in the U.S. government clearly believes is as a result of non-tariff barriers, lax legal enforcement or currency manipulation to keep American products out of the marketplaces of other countries.
Trudeau released the following statement in response to the executive order:
“The United States regularly assesses what its partners are doing and what’s going on in the trade relationship. And that’s something that we’re certainly happy with. The relationship between Canada and the United States is unlike the relationship between any two countries in the world.”
The statement continues:
“It is of fundamental importance to good jobs in both countries that we continue to strengthen and ease the flow of goods, services and people back and forth across our border in secure ways.”
In terms of jobs, this is certainly not an understatement: a reported 9 million American jobs across 35 states relies on Canadian trade, according to Government of Canada statistics. Directly contradicting the statement issued by Trudeau, Commerce Secretary Wilbur Ross of the United States identified that a probe of this scale is unprecedented.
‘There has never been this kind of systematic analysis. It will be very heavily based on an empirical framework.”
Ross does however want to impress upon Canadians that it is not the intention of the administration to single out Canada. That said, he claims he doesn’t believe that Canada, or any other country slotted to be probed, can object. The list of countries to probe was allegedly compiled based solely on which countries had the largest trade surplus with the U.S. Canada, of all 16 countries, has the smallest surplus, and actually ran an 11.9 billion USD deficit in 2015. This discrepancy is primarily as a result of the rising and dropping prices of oil from the Alberta Tar Sands. Oil costs were low in 2015, and high in 2016; it really is that simple.
Ross also acknowledged this:
“A lot of what Canada’s deficit comes from is oil… Undoubtedly we’ll conclude that with some of the countries no action should be taken.”
That said, the latest American report on trade barriers highlights some problem areas within the realm of Canadian dairy and poultry controls, limits on American-made wine in grocery stores, aerospace support, telecommunications, limits on American companies to be contracted for serves to Crown corporations (Hydro-Quebec, cloud-computing) and a perceived too-small duty-free limit on online goods purchased.
President Trump is undertaking all of this such that his administration will be prepared for NAFTA negotiations later this year, which could mean big changes are on the horizon.
Feature Image via Twitter.