A Partnership That Has Run Its Course
For years, the United States and Canada have enjoyed one of the most integrated economies in the world. Trade across borders, shared supply chains, and interconnected labour markets created a strong partnership between the two countries. Now, Prime Minister Carney argues that this same closeness has put Canada at risk — when one country controls so much of another country's economy, any disruption to the primary economy will send shockwaves throughout both countries' economies. Canada is currently facing this exact scenario.
Carney's Warning to Canadians
Prime Minister Carney did not mince words during his address. He stated, "We live in a US with tariffs at the highest level since the Great Depression, and it is quite easy for people to look back to the Great Depression as a historical parallel for just how serious that has become today. "We used to be strong simply because we have a close relationship with the US, but many of the things that made us strong are weaknesses that we need to turn back into strengths". I see marks of a leader who is in search of exactly the opposite of confrontation; rather, it's someone who sees an urgency for structural economic changes.
While he held up a toy of Gen. Isaac Brock, the British General leading an army that successfully defended Canada against the United States from invading at the time of the War of 1812, his holding the toy soldier up had meaning to what he was saying for many reasons. It was a way for him to remind Canadians that we have overcome many challenges in the past from outside, and we are still around and have the strength to continue. "The times may seem to feel different at this time, but we have conquered from previous threats". He used the unification of historical success and the current difficulties Canada faces.
Trump's Tariffs and the "51st State" Comment. Under President Trump, the U.S. has put in place significant tariffs that are causing problems globally with both enemies and traditional friends. Canada has had its share of those problems. Trudeau, as well as many Canadians, are upset by the comments Trump has made about Canada becoming the "51st state." While tariffs have since been reduced and a thawing between Trump and Carney has taken place, the uncertainty caused by this has created an opportunity for a fundamental re-evaluation of the bilateral relationship.
A New Political Mandate to Act
Carney's ability to take bold economic actions has been strengthened due to the election results from last month, where his Liberal Party won a parliamentary majority. As a result of having a majority government in place, he now has a much stronger political base from which to act than in a minority government. This newly-acquired authority comes at an extremely important time since there will be a formal review of the free trade agreement between the U.S., Canada, and Mexico in July 2021 — a negotiation that will have dramatic implications for the Canadian economy and those employed in it.
Diversifying Trade: The Road Ahead
A key theme in Carney's message is that Canada needs to be more proactive in creating new economic relationships with other countries. To help in this effort, he has initiated establishing closer trade partnerships with countries such as China as part of his plan to reduce Canada's dependence on the US. The purpose of this is not to eliminate trade with the US, since their trade relationship is one of the largest and most beneficial trade relationships in the world, but rather, to protect against Canada being so reliant on one foreign trading partner that a change in that partner's trade policies could cause a collapse of the Canadian economy. "We must protect ourselves since we cannot rely upon just one foreign trading partner," said Carney.
Canada cannot wait for the Storm to Pass
A major message in Carney's comments was that Canada cannot simply sit back and wait for the disruptions coming from the US to eventually stop. "We cannot control the disruptions coming from the US. We cannot control our future by hoping that the disruptions end," stated Carney. His comment signifies a shift in thinking — that Canada needs to have a proactive economic plan, rather than simply a passive approach and hoping for good results. As Canada continues to navigate through the changes that are taking place in the worldwide trading environment, it appears that Carney's government has the desire to change the rules that currently exist and that bind Canada by being too reliant on any one foreign country, before it is too late.
