What will the new normal be for international trade? The challenges facing Canada are enormous. The emergence of an even more protectionist America First United States fundamentally undermines the stability of Canada’s largest export market. Asia is now the world’s most dynamic economic region, but strategic neglect has left our country playing catch-up. And with little to no economic or political leverage, Canada is scrambling to cope with an ascendant and aggressive China.
We are free-trade advocates who have seen and believe in the benefits of open markets. It is fair to say Canada has done very well competing internationally, probably because it had to. With a population of just 38 million, Canada needs to look beyond its borders.
The natural target for expansion has been the U.S. It is right next door, has no geographic barrier, speaks the same language and, until now, has demonstrated a willingness to consider the Great White North a kind of 51st state. But, boy, have things changed.
The collapse of the U.S. manufacturing sector has revitalized and now institutionalized the America First protectionist mantra. Many U.S. politicians have seized upon this and weaponized an anti-free-trade movement. Canada’s best trading partner has shifted sharply to a transactional, what’s-best-for-me attitude.
The cancellation of the Keystone pipeline extension and the protectionist measures in President Joe Biden’s Build Back Better program are just a few of the latest signals alerting Canada it should not rely too heavily on its southern friend.
Canada’s approach to Asia has historically been one-dimensional. In the eighties and nineties, the focus was Japan, a consumer of our natural resources and a large investor, particularly in our automotive sector.
Since the beginning of the new millennium, Canada’s focus has been on China. Air Canada’s planes were full of government officials and executives seeking to invest in the next promised land and betting heavily on the creation of a free-market relationship with China.
And how has that worked out? Yes, China has become our second-largest export market – but it is still minuscule relative to our export dependence on the U.S. Today’s geopolitical realities will also limit interest and support for economic engagement with the soon-to-be largest global economy.
But Asia is a big place with many countries with large populations, young demographics and higher economic growth rates than ours. What is Canada doing to capitalize on its strengths and diversify its interests?
If there is a time for a well-articulated and coherent international trade strategy, it is now. COVID-19 has and will make it more difficult, but recognizing the need for a new global trade strategy that factors in current and changing realities is crucial. Countries around the world are all recalibrating their trade strategies, and Canada needs to do the same!
It will be imperative to engage a new generation of entrepreneurial business executives – many looking to build small and medium-sized enterprises to scale – in the development of a global trade strategy. They can best identify superior opportunities and key markets for Canadian products and technologies, and advise governments on the policies needed at the federal and provincial level to support and catalyze a global strategy.
Take India, for example, a market we both know well. China’s economic fortunes have changed dramatically in the last 30 years, but so have India’s. Since 1991, India’s GDP has increased tenfold. Billions of dollars of investments have been made in infrastructure that has transformed the look and feel of the country. Five hundred million people, through hard work and ingenuity, have pulled themselves up from poverty.
A nation that once restricted the number of computers allowed into the country is now the home of Tata Consultancy Services, the world’s largest software developer. TCS and other world-class companies are revolutionizing the technology people use every day. Each and every week, a new unicorn is born in India.
Large Canadian corporations such as the Brookfield companies, Fairfax Financial Holdings Ltd., Bombardier Inc., Sun Life Financial Inc., McCain Foods Ltd., Teck Resources Ltd. and CPP Investments are making significant investments in India. They do this only because they see superior opportunities. Canada’s politicians talk about expanding commercial relations with India and, in speech after speech, all the right things are said.
But when you look at the actual numbers, Canada has clearly not benefited in any significant way from the enormous economic expansion that is taking place in the country. Trade with India is still a rounding error. Other countries have aggressively pursued business opportunities with India and reaped significant benefits. Why has Canada not capitalized more on this opportunity?
In developing a global trade strategy, it is important to identify the core strengths we have to offer and then adapt the strategy to those strengths, depending on the market. Again, consider India. What does Canada have to offer, and what does India need? As a rapidly developing country with a large population and a young demographic, India needs energy security, food security, investment dollars for infrastructure development and education.
Canada’s domestic policies constrain our ability to supply carbon-based energy commodities to India. But that does not restrict us from promoting and supporting globally leading, renewable and sustainable technologies in areas such as hydrogen and hydrogen fuel cells, energy efficiency, solar and biofuels.
The same is true for food. Yes, we are the major supplier of pulse crops to India, but they are commodities, bought and sold through the global trading system. How we support our pulse exporters is and should be different from how we support companies that provide solutions in critical areas such as water – a scarce resource in India – or precision agriculture, which will increase the efficiency and output for the 750 million people in India who depend on farming for a living.
India cannot grow without investment. Canada is a global leader in pension fund investment and management. Our pension funds and our other large investors, such as Brookfield and Fairfax, have recognized the opportunity and have contributed to policy discussions that facilitate and encourage more investment in India. India sees Canada as a key partner in the pension space. So, what can we do to expand into other opportunities in the financial services sector?
When 50 per cent of your population is under age 25, education is a fundamental concern for India’s government and parents. Canada has benefited enormously over the past 10 years from the talented pool of Indian students who have chosen Canada as their education destination. Many of those students have remained in Canada and are contributing to our economic growth and social fabric.
But many have also returned to India. Are we thinking strategically about how we can use these young, dynamic professionals as a resource to promote our economic engagement with India?
Canada needs to develop and publish a new bold international trade strategy built on our strengths, aligned with our domestic innovation policies, and adaptable to the needs and requirements of our trading partners. It will be important to engage the Canadian business community in the process and, once the strategy is developed, provide the resources necessary to execute on it.
We have used India as an example, and anyone who has attempted to do business in India knows it is not easy. But if you look at India today and into the future, the economic opportunity for Canada is immense. Now is the time to aggressively and strategically diversify our trading relationships, not just with India, but with other high potential international markets.
Stewart Beck was responsible for Canada’s international business development, investment and innovation programs and is a former Canadian high commissioner to India. He recently retired as president and CEO of the Asia Pacific Foundation of Canada.
Gary Comerford is president and CEO of CMC Global, a director on the board of Novelis Inc. and former general manager of the joint venture between Sun Life and Aditya Birla Group, one of the most successful business collaborations between Canada and India.
To read the full commentary by the Globe and Mail, please click here.