The Third Option

DXntV0vXkAEsKBdConservative leader Andrew Scheer is in the UK, talking trade; when the trip was announced a Liberal MP, Stephen Fuhr, asked (about 9:45 AM on 6 March) “Why? His comments was only a bit tongue in cheek because others asked the same question. Of course it is the government’s job to negotiate trade deals, and of course Prime Minister Trudeau met with Prime Minister May in September to discuss just that … but that was last September, before:

Many Canadians have, quite simply, lost faith in the prime minister’s ability to negotiate anything with anyone.

But there’s also this:

Whoa, you say, that’s about NAFTA, not trade with the UK.

Not quite … look at little closer at the graphics; we already send 3% of our exports to Britain, it is our third largest customer after the USA and China. But, of course, it pales in comparison to our US export market. But the question, one that Mitchell Sharp and Pierre Trudeau  …

 … asked back in 1972 was: “is the Canada-US trade relationship too unbalanced?”  They concluded that it was and proposed expanding our trade with Europe and Asia, especially, to get something in which we could export more to the rest of the world (buying more, too, in return) so that when, inevitably they felt, the US would turn inwards, again, we would not be too dependent upon its market.

The so called Third Option* failed because the US market was and remains, simply “too easy” for Canadian business … why go to the bother and expense of meeting e.g Japanese or EU standards when we already share standards and a common border with the USA?

marine-corps-expels-recruit-for-racist-incident-with-a-black-woman-at-trump-rally-1457208364But things may have changed in the very way that worried Mitchell Sharp when he was a very senior civil servant in the 1960s. The “friendly giant” with whom we share the world’s longest undefended border might turn inwards or, even against us. We might want and need to be less reliant on one trading partner. Governments do not trade … companies, corporations, large and small do the trading but governments set the rule under which international trade is done.

trade-at-a-glance-2011-aus_map01Canada should want to look a bit more like Australia in how its trade us diversified. This graphic is six years old but ratios do not change very quickly … look above and you will see that 76% of Canada’s exports go to one market, the USA, while Australia’s largest market, China, accounts for only 22.6% of its exports with Japan (16%) and South Korea (almost 8%) are second and third and the “big three” still account for less than less than half of Australia’s exports. The size, relative openness (even under President Trump) and proximity of the USA mean that we should never dream of reducing our dependence to less than about 50%, but our trading ambition should look a little like this:

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That involves “finding” or diverting from US markets something like $100 Billion in trade deals with Africa, Asia, Europe, Oceans and South America … the scale of that is evident when you remember that Prime Minister Trudeau crowed about $1 Billion in trade deals with India … before he corrected himself. We need to make or divert 4,000 India sized export deals to get to where people like Mitchell Sharp thought would  be acceptable.

But it has to start somewhere, doesn’t it? And given that Justin Trudeau is leading Canada’s government it is probably a very good idea that Andrew Scheer is in Britain talking trade and, perhaps, reviving the idea of a Third Option.

_____

* Mitchell Sharp, in a policy paper, explicitly rejected two options, the status quo and closer integration with the USA, his preferred, Third Option, was to diversify our trade.

 

 

 

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