NAFTA trade war .. the massive US share of Canadian exports actually is declining .. a little

Aug 30th, 2005 | By | Category: Key Current Issues



OTTAWA. Tuesday, August 30, 2005. 6 PM. Prime Minister Paul Martin is apparently thinking about calling federal Members of Parliament back early from their summer recess – to deal with the latest whatever-it-is (not exactly “a crisis,” surely?) over the never-ending Canada-US softwood lumber trade dispute. Meanwhile, Jean Chretien biographer Lawrence Martin has been arguing that the dysfunctional George W. Bush foreign policy at large has actually been a great boon for Canada: “The trend line for trade with the U.S. is downward, senior Ottawa officials confirm. The Bush era will force this country to diversify its commerce – and that’s a healthy development.”

A quick stroll through the Statistics Canada website does confirm that the massive US share of Canada’s exports beyond its borders has in fact been declining, a little, in the most recent past. Just what this means is no doubt open to much interpretation. And it is at best the earliest of beginnings for a statistical trend that may or may not last.

But in the later days of a hot summer, full of many other disasters, various raised voices are fueling an unusual combative mood about Canada-US trade among some Canadians. (And they include an editorial in the authentically free-trading Wall Street Journal in New York.) As the new US ambassador has urged, some Canadians have gone “emotional” on this issue. But in a North America where the Rev. Pat Robertson almost gets away with counseling the assassination of the president of Venezuela, and Cindy Sheehan has plaintive commercials on TV, why not?

The recent statistics on Canadian exports to the United States …

One piece of more or less solid ground in the latest rolling firmament of Canada-US trade debate is the recent numbers on Canadian exports from Statistics Canada. And as Lawrence Martin has reported, the very latest “trend line for trade with the US is downward.”

More exactly, from 1999 to 2002 just under 84% of all Canadian exports went to the United States. Then this number dropped to just under 83% in 2003, and just under 82% in 2004. (And at the latest edge of this still not very long-lived trend, just 79.5% of Canadian exports went to the US in June 2005, compared with 81.5% in June 2004.)

Exports of goods from Canada to country or country grouping (%)





























Other EEC







Other OECD







Other countries














SOURCE: Statistics Canada.

A NAFTA trade war in Canada .. surely not …

The at least off-and-on vigour of the official, quasi-official, and even un-official Canadian reaction to Washington’s latest refusal to abide by NAFTA rulings on exports of Canadian softwood lumber to the United States has been somewhat surprising.

And it remains that way, even allowing for all the transient domestic political calculations, with a federal election said to be imminent at some point over the next six months. (And even or especially with the latest “word of an interim ruling by the World Trade Organization that gives solace to the Americans on softwood lumber.”)

For a recent sampling from the central Canadian national newspaper see: “BC Chamber of Commerce urges NAFTA action on softwood lumber”; “Jim Stanford [of the Canadian Auto Workers] says let’s just give notice to abrogate NAFTA in six months“; “Ottawa assails cynical’ US trade tactics“; and even “Stephen Harper critical of US ambassador’s comments.”

As the statistics do show, the still quite globally vital US market’s share of Canadian exports has declined lately, from as much as just under 84% in 2002 to just under 80% in June 2005. (To round out the numbers in the calculations above, and give them their most dramatic small twist.)

Even at 80% Canada’s trade dependence on the US market is still of course very high. But it is not much higher than it was in 1985 (78%), before either NAFTA or its Canada-US FTA predecessor. Which could in some minds raise the question of just how useful these trade agreements have really been in securing Canadian access to the US market?

At the same time, all these recent numbers also remain considerably higher than the 57% of all Canadian exports that went to the US in 1965, to say nothing of the 45% in 1930.

If you have lived through the past several decades, it is hard not to believe that North American economic integration has now proceeded to such a point that the much more diverse Canadian international trading regimes of 1930 and 1965 will never be seen again – no matter how many fresh opportunities arise in such potentially gigantic emerging markets as China or India.

(Or as they still say at Statistics Canada, “Other countries” – i.e. growing places that are not part of the more traditional industrially developed nations in Japan and especially Western Europe. China and India are of course the leading and most gigantic Other countries. But don’t forget such smaller places as South Korea, Thailand, and Malaysia. Taken all together, this is the Canadian export market category that has increased its share the most since 2002.)

Even so … America Junior ought to be speaking up … somehow …

Beyond the narrow political calculations of Paul Martin’s Liberal Party of Canada, what the latest Canadian marginal tempest over the softwood lumber trade with the US finally seems to have loosened up a little is the congenital assumption that Homer Simpson’s America-Junior Canada just has to put up with what even conservative pundit John Ibbitson has lately called the “bullying” of the America-Senior trade policy, because it will otherwise just go broke.

Or integration cuts both ways. As demographically small as Canada certainly is (smaller than the most populous US State of California, e.g.), there are significant chunks of the US economy that now depend on trade with Canada too.

Regardless of what international trade agreements are in effect, Canada remains a competitive enough North American location for Jim Stanford’s auto workers, partly as a result of publicly funded health care in Canada. Dick Cheney will also be visiting the potential energy goldmine of the tar sands in Alberta soon. And so forth, on and on.

(And Vice President Cheney will be attending a Calgary dinner sponsored by the Fraser Institute on September 8 – the same day that President Hu Jintao of China “will be feted by Prime Minister Paul Martin at a state dinner in Ottawa,” to kick off an extended Canadian visit by the Chinese president, that will also include trips to Toronto, Niagara Falls, and Vancouver. [ED. NOTE: On  September 4 it was reported that Mr. Cheney has cancelled his trip, as a result of the Hurricane Katrina disaster. Hu Jintao has also cancelled a companion visit to the US as a result of the disaster. But : “ Mr Hu will continue with a scheduled week-long trip to Canada and Mexico, starting on Thursday, and meet Mr Bush in transit between the two countries in New York on the sidelines of the United Nations 60th anniversary summit.”])

Canada, that is to say, is probably not in quite as weak a position as some in Washington would have Canadians believe. And as Machiavelli probably said somewhere, in the spooky dark corridors of 16th century Florence, when the 21st century global economy was just starting to germinate, there is no point in trying to be reasonable with unreasonable people?

Even the Wall Street Journal has counseled that if there ever was a time for Canada to stand up and scream uncontrollably about the current dysfunctional US policy on free trade under NAFTA, that time is now. (Which also raises the question of whether a Canada that doesn’t do something emotional on this issue soon will even deserve to be called America Junior?)

Still crazy after all these years … ?

Of course no conceivable Canadian federal government that will be elected in any predictable near future is at all likely to take up Jim Stanford’s recent proposal to just abrogate (or cancel) NAFTA on six months notice, as provided for in the agreement itself.

This is the kind of thing Canadian New Democrats (much to the left of “New Democrats” in the USA) like to ponder, when they are quite certain that they will not bear the burden of actually forming a government, in Ottawa at any rate, in any predictable near future either.

The current British Columbia Chamber of Commerce version of a more combative Canadian trade policy is much more realistic and businesslike.

The BC Chamber has just politely asked its “counterparts in all 50 U.S. states … to write to President George W. Bush today … Please urge his administration to respect its obligations under NAFTA and expedite a negotiated solution to the softwood dispute with Canada.” (Which, if you leave out the part about writing to President Bush, does sound quite a lot like the “negotiated solution” that the new US ambassador, David Wilkins, has been urging too.)

But in the current continental North American atmosphere, the mere concept of a unilateral Canadian abrogation of NAFTA does not sound quite as crazy as it did even a year or two ago. Now it does not seem quite so foolish to at least ponder the proposition that most of the present strategic structures and benefits of North American economic integration probably would survive any abrogation of NAFTA (or any other mere international trade agreement).

Who knows just what is going to be happening in Washington over the next few years? George W. Bush’s second administration has been in office for only eight months. But already assorted domestic and international storm clouds do seem to be gathering.

The road ahead could get quite bumpy. At some point a little further along, something like what Jim Stanford is suggesting might even make some practical sense, for the great majority of people who live (and vote) in Canada today.

(And who knows? Maybe the Canadian federal government in Ottawa will eventually even do something really crazy – and start talking with its other NAFTA partner, Mexico, about just what must finally be done, to at last achieve real and secure free trade in North America?)

Randall White is the author of a number of books, including Fur Trade to Free Trade: Putting the Canada-US Trade Agreement in Historical Perspective, and Global Spin: Probing the Globalization Debate.

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