Jack Mintz: Look Beyond the U.S.

(Financial Post – Jack M. Mintz)

America’s pre-eminence is in decline. If Canada is to prosper, we must seek new foreign trade partners

At the beginning of this decade, elite opinion held that our priority for trade should be to deepen our relationship with the United States, our most important trading partner. Having ended this decade, it far from clear that this is the best approach for Canada. The U.S. is a waning star. We need to branch out to other countries where growth will be more pronounced as well as to strengthen our bargaining position with an increasingly protectionist partner.

Our past trade strategy focused on the United States, especially after the terrorist attacks that resulted in 3,000 deaths in New York and Washington, D.C. Canadians debated whether we should pursue a “Big Idea,” a term coined by UofT’s Wendy Dobson, such as a common market, a custom union or just some new trade partnership to reduce regulatory, tax and other barriers with the United States. Sure, we looked at some new trade deals with Chile and Israel but most attention was paid to our relationship with the United States, and secondarily to Mexico, our other NAFTA partner.

We are now in a different world. The United States is on the precipice of decline as it struggles with a sick housing market, excessive public and private debt loads, an antiquated tax system, anti-growth regulatory policies, falling productivity with an aging population and increasing isolationism. It is hard to see the U.S. growing at its historical 3% over the coming decade. With high unemployment and distrust of the benefits from globalization, U.S. trade policy is becoming more inward with trade agreement initiatives being replaced by “Buy American” provisions.

The U.S. share of world GDP (about a fifth) will continue to fall this coming decade as emerging and developing countries almost double their size. By 2030, China will be the second largest economy in the world, rivaling the U.S. for economic domination. Other emerging economies, including Brazil, India and Indonesia with growth rates double that of the U.S., could be major markets for Canadians exporters. It would be a mistake for Canada to ignore markets beyond North America. Read more here.