Trade and imports that is instrumental to
Trade agreements establish the terms of trade between two or more countries. They determine the tariffs and duties that countries impose on exports and imports. Canada is known as a trade nation which means its economy is largely dependent on trade. Canada’s exports contribute to job creation (over 3 million jobs) and boost Canada’s economy, while its imports contribute to lower prices and the increase in choices available to the consumers.i Overall it is the combination of both exports and imports that is instrumental to rising living standards and a strong economy as total trades represent two-thirds of Canada’s GDP.ii Canada has trade agreements with many countries but the USA is Canada’s biggest trading partner accounting for three-quarters of Canada’s exports and two-thirds of its imports.
iii Canada and USA’s trading is regulated by the North American Free Trade Agreement NAFTA (Mexico is also part of that agreement). As a trade nation Canada’s economy is largely influenced by global trading and moreover by the US economy and its trading policy. Unfortunately, global trading has been slowing down over the past few years, due to various factors like the 2008 financial crisis, and notably due to the rise of protectionist measures.iv In effect many countries have started to question the benefits of an open economy, including the USA which has already left some free trade agreements and is currently reconsidering its position on NAFTA. In this new economic climate, Canada faces tough decisions on international trading, decisions that will impact Canada’s economy leading up to the year 2067. Canada’s trading policy could side with the growing protectionist trend and choose to impose protectionist rules to its current and future trade agreements.
This would in turn make Canada an unattractive trading partner in the international community and would most likely result in a sharp decrease in imports/exports which would ultimately lead to an economic disaster. Canada could also manage to simply keep its current trading agreements, as even if NAFTA dissolves, the 1989 Canada-US free trade agreement would still remain in place, thus allowing Canada to salvage its trading relation with the USA.v However, with the rise of East Asia as a manufacturing superpower, if Canada could not secure free trade agreements with countries such as China and India, the Canadian economy would be left sluggish and highly dependent on the USA.vi Finally, Canada could boost its economy by establishing new free trade agreements with partners like China and India, while still maintaining its current trade agreements with the EU, USA and the UK. This would be the most desirable outcome for Canada as it is the outcome which has the most potential for economic development. How Canada could stimulate its economy through its international trade deals? 1- Secure free trade deals with growing superpowers like China and India so Canada’s economy will no longer be mainly dependent on the USA.
It would also increase the size of its exports market, which in turn will boost exports, thus increasing jobs.vii 2- Promote development of niche industries in order to generate comparative advantages in other sectors than resources, for example Canada has recently become a strong exporter of medical marijuana products globally. 3- Offer incentives to foreign companies to establish their business in Canada and maybe attractive corporate tax for sectors like tech. 4- Trades inevitably creates winners and losers both in revenues and employment, to increase our sustainability the government would need to create programs to help those negatively affected. How likely are we to succeed? One of the biggest challenges for Canada to establish a successful trading agreement with rising powers like China and India, is the fact that Canada requires commitment on human rights and environment issues prior to drawing trading deals.viii While this is unarguably morally the right thing to do, these requests are not always welcomed by other countries, especially from a country that might not have the leverage required to make such demands.ix Another challenge would be if our trading with the USA encountered a sharp decline.
In this case, we would face a grave economic crisis that would prevent us from making advantageous deals with any other nations.
