Market diversity will save Canada from international bullying

Market diversity will save Canada from international bullying
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VANCOUVER – “It’s not fair!”

How often have parents heard this loud, angry declaration from young children at any real or perceived injustice?

Children have an innate sense of fairness that demands to be respected. Hence the practice of asking one child to divide a piece of cake and the other to choose first.

Fairness has become one of Canada’s defining values. All Canadians have access to medical care. All should be paying their fair share of taxes. No one should be jumping the queue to get the COVID-19 vaccine.

Alas, when Canada enters the international arena, there’s no wise, compassionate parent to ensure fairness. The governments of other nations can and do take actions that are not only unfair, but are often harmful to Canada and Canadians. Here are a few examples:

In the past, we’ve thought of the United States as our neighbour, friend and ally. Yet the administration of new President Joe Biden just killed the Keystone XL pipeline project, to the great detriment of Alberta. It’s also pushing a Buy America campaign that’s harmful to all of Canada’s regions and industries, since the United States  is the biggest customer for our exports and Canada is a trading economy.

It’s difficult to find fairness in China’s actions in relation to Canada – locking up the two Michaels (Kovrig and Spavor) for no apparent crime, reneging on a planned vaccine delivery, setting up trade-blocking ‘health and safety’ standards against Canadian products.

Such obvious mistreatment often generates a loud and angry desire for revenge. After all, it’s only fair that if they hurt us, we should hurt them back – maybe more.

Take, for example, Canada’s reaction to the Keystone XL cancellation. Calls for government and public retaliation are already appearing in the media. If the United States doesn’t consider our needs, we should be fighting back, critics say.

Two pathways to get back at the Americans and their economy are suggested.

The first is using tariffs or outright bans on exports of energy or other products to the United States. In the short run, this would make it more difficult and expensive for Americans to get what they need and cause them pain. In the longer run, it would be different.

Importers don’t sit idly by when they’re being targeted. Instead, they find alternate suppliers and/or substitutes for the now less accessible goods or services. So even if the trade constraints are removed in the future, Canada might find it has lost the U.S. market and not just in the short run, with negative impacts on jobs and the economy here.

We should also remember that export limitations almost always lead to tit-for-tat restrictions, curtailing the movement of goods and thus business activity, raising costs and lowering the standard of living for all Canadians. Such barriers against cross-border trade contributed a great deal to the length and severity of the Great Depression of the 1930s.

A second means of revenge against the U.S. is what’s called the Netflix tax, applying GST, PST and possibly other taxes to the electronic services that come into Canada. This would have very little effect on those involved in the Keystone XL decision, but it too might result in retaliatory measures against Canada, perhaps even a loss of access to those services. Canada is, after all, a very small share of the world market.

At the very least, it would immediately make all these well used services more expensive to Canadians when we are feeling financially pinched and more reliant on electronic services during the pandemic.

We shouldn’t be implementing tariffs and taxes that cut off our nose to spite our face. Rather, we should remember that revenge is a dish best eaten cold. Reducing our dependence on any one particular market or supplier makes us much less vulnerable to arbitrary and unfair treatment.

The secret is diversity. If we had more and diverse means of delivering energy to tidewater and thus non-U.S. markets, the loss of the Keystone XL pipeline wouldn’t be nearly as painful to our oil industry.

If we had developed wide and diverse markets across many countries for our agricultural products, we wouldn’t so easily fall victim to arbitrary Chinese measures against our pork and other foodstuffs.

Instead of getting mad and yelling “It’s not fair!” when we’re hurt by unjust measures, we should start now to develop our infrastructure and diversify our trading partners.

Rather than hurting ourselves by striking out against unfair treatment, we will have cushioned ourselves against it.

By Roslyn Kunin.

Roslyn Kunin is a consulting economist and speaker. 

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