Diversify Our Trade? Go Right Ahead!

(Ottawa Citizen – William Watson)

Listening to CFRA on July 4th, I heard one of this country’s better-known financial analysts celebrate the 234th anniversary of the Americans’ declaration of their independence by arguing that, because the U.S. is now a falling economic star, it is imperative we Canadians reduce our economic dependence on them. To that end, we should set a goal of reducing our American trade from 80 per cent of our total trade to 60 per cent.

As an economist, it makes my head spin to hear such talk from supposedly reputable people.

First of all, though this is a technicality, we’re close to the goal already. Last year trade with the U.S. was just 64% of our total trade. That was down sharply from 82% in 2008 – a much more typical year. Though it might be aesthetically pleasing to have international trade statistics that are less lopsided, I suspect just about all Canadians would prefer to avoid years in which exports to the U.S. plummet by $100 billion, as they did from 2008 to 2009, the most disastrous year for international trade since the 1930s.

But last year probably was exceptional: For the last several years our trade with the U.S. has been running at just above or just below 80% of our total trade. Read more here.