Carney is not our Trade Saviour
Post 81 | Canada already has trade agreements - just not a government that cares
[Note to Readers: I REALLY wanted to post something non-political this week, but…]
Mark Carney’s hurry up hustle to Europe last week was held aloft as proof he is the one to deliver us from our US trading shackles, by leveraging his man-of-the-world credentials to bolster trade, economic relationships and alliances.
Arghhh!
Storylines of Carney as the man for our moment are mutating in the media and being gobbled by the gullible, as he gripped and grinned through photo ops in London and Paris (no, not those pedestrian little towns in Ontario, but rather in the flashy environs of Europe). Yes, Mark’s first instinct after being appointed our PM behind the curtain of prorogue was to jump on Trudeau’s plane and get right to work pressing flesh across the ocean.
And why were these meetings so critical that our national election should be forestalled yet another week? Well, to hear it told, new EU trading relationships will save Canada and we need Mark to build them for us urgently. This, after Canadians awoke to the lunacy of having 76% of our exports flow to a single country now led by a bloviating nitwit.
The re-converted and fickle electorate are now confident Carney will save us. And from what, you ask? Why from the carnage bestowed upon us by the very party he advised and now leads. Seems Canadians have already self-lobotomized to the point they don’t even have to pretend the last ten years of Liberal misgovernance never happened. And their escape route, if challenged, is to blame everything on Trump despite him lumbering onto the scene only a couple months ago. Presto - you’re absolved!
As for the EU relationship, indeed it should be part of a Canadian diversification strategy and only a fool believes isolationism is the answer. But let’s explore realities of the agreements we already have in place, and why we need a workmanlike government to leverage them - not the same Keystone Cops crew led by a new globetrotter intent on “social justice and international leadership”, purporting to open doors only he can access.
Canada boasts a major economy with per capita GDP ranking ahead of the U.K, France and Italy and not far off Germany. Our diversity of raw materials, manufactured goods, agricultural products, sector diversity, services delivered and the criticality of these to the world are far greater than most understand even as we lazily lob three quarters of our $750 billion in exports to the United States, while gifting them our fossil fuels at a discount.
But here’s the great news!
We already have four other relationships that can expand Canada’s trade prospects beyond the current US hostage scenario. And we don’t need Carney to make them happen because at least three are already in hand.
The first two are CETA with the EU and CPTPP with the Asia-Pacific countries, both reviewed in detail below. These each took years to build and were effectively handed to Trudeau’s government, then poorly managed and neglected during his tenure.
The third is Canada’s trade with itself, with several hundred billion of inter-provincial trade up for grabs, something that’s finally caught our interest given US aggressions. The potential to create and sell more within our own country rather than import from abroad has always been low hanging fruit begging to be picked.
Lastly we have CEPA with India, an agreement rich with promise that should be flourishing wildly, but willfully blown up by Trudeau.
Canada European Trade Agreement (CETA)
CETA eliminates about 98% of tariffs between Canada and 27 EU nations (combined GDP of $20 trillion, representing 16% of global trade).
But in 2022 we exported merely $36 billion of goods, primarily ore, oil and machinery while importing $80 billion, led by pharmaceuticals and vehicles. As a percentage of our ~$750 billion in Canadian exports, the EU represents less than 5%.
After being gifted this trade deal in 2015, Trudeau’s Liberals let it mostly languish while absorbing a $44 billion trade deficit (for comparison Trump is kvetching over a $65B trade deficit with Canada, a country 1/12th their GDP, while we suffer a $44B deficit with a trading bloc 8X larger than us!).
It wasn’t until last month that erstwhile and outgoing Trade Minister Mary Ng hustled to Brussels to apparently hold talks about increasing trade, saying afterward “Do I think we could do better? Certainly.” And that both parties should work to “enable our businesses to get into each other’s markets.”
Gosh thanks for that, Mary – after eight years I’m stoked to know you feel we can do better. Your government napped while this expansive opportunity passed us by, doing little to help Canadian commerce make its way across the ocean, particularly the small-medium enterprises (SMEs) that are the lifeblood of our country.
Here’s a brief history of how CETA came to be, as it traversed two decades and four Prime Ministers.
Early 2000s - Initial Talks
2004 – Canada-EU Summit
2009 – Official Mandate The European Commission gave formal mandate to commence negotiations focused on trade in goods & services, investment, public procurement, and regulatory cooperation.
2013 – Agreement in Principle The Canada-EU summit in October 2013 announced an agreement in principle.
2014 – Legal Review CETA begins legal due diligence by all parties and translation into multiple languages.
2016 – Adjustments Concerns such as the investor-state dispute settlement mechanism (ISDS) were addressed by creating the Investment Court System (ICS).
October 30, 2016 – Signing the Agreement CETA was formally signed
2017 - Provisional Application While awaiting full ratification by EU member states, parts of CETA were provisionally applied. This allowed trading to begin while the agreement went through national parliaments for approval.
2021 – Final Ratification CETA was fully ratified by all members.
So if we already have a solid trading platform that took nearly two decades to unfold, what the heck was Carney’s hurry-up flight to the EU as a first order of business over tea, croissants and scones? It certainly wasn’t about Mark opening magical trade doors for Canada because they’re already gaping wide – just horribly neglected while social, gender equity and climate issues occupied his Liberal party rather than boring matters of international trade.
Well, Carney’s trip was twofold. It was free election campaigning to look prime ministerial in a foreign land on our dime.
But he also wanted to lay foundation for his unending net zero dreams.
Mark has made it clear he sees EU trade as the linchpin to his ongoing climate priorities, claiming the EU and Asia prefer trading with like minded net zero adherents and not boorish climate deniers. Except this is quite untrue.
With 70% of the world having no carbon tax (including the US) and nowhere near the EU’s green regulations, they are happily conducting trade with everyone, even the unwashed. At the same time the all-in EU are backing away from certain climate regulations, realizing they’ve throttled growth and trade. And most major banks have fled Carney’s signature GFANZ (Glasgow Financial Alliance for Net Zero) largely responsible for the ESG scourge of reporting and red tape that’s dragged on the sector, while stoking paralyzing social activism.
Carney’s net zero hopes are fading as the world tunes out, but fear not...
If he can no longer bully businesses as Bank of England Governor, pronounce from on high as the UN Special Envoy on Climate Action and Finance, or opine as an executive of the World Economic Forum on how to reset the world – Mark can do one better if he becomes our permanent PM. He can turn Canada into his personal carbon sandbox by creating a nifty new industrial carbon tax scheme, juicing the struggling carbon trading market on Canada’s back and testing out his Carbon Border Adjustment Mechanism brainchild that will further enrage Trump.
This trip was not an example of Canada in desperate need of Mark Carney to build new trade deals with a broad smile and swipe of his Mont Blanc.
It was about Mark Carney needing Canada to further his dreams.
And you (well, maybe not you, dear reader) fell for it.
For a full outline of the dangers of Carney’s carbon plans, come back and have a read below when done this article.
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
CPTPP (previously TPP) is another quality agreement bequeathed to the Liberals, then left to suffocate in its crib.
In 2008 Stephen Harper began negotiating Canada’s inclusion along with the United States, and Harper formally signed in October 2015. The then twelve-country pact was seen as a bulwark against Chinese trading dominance until Trump pulled the US out in 2017 (citing concerns it would hurt American workers – sound familiar?), but the remaining parties agreed to continue.
It connects us to eleven countries representing ~12% of global GDP including Australia, Japan, Chile and Mexico. The aim is to reduce or eliminate tariffs on goods and services, streamline customs processes and promote investment.
Reliable annualized trade figures are challenging to find, but the Government of Canada website indicates $130 billion of trade conducted under CPTPP, though import/export distinctions are unclear. Most data suggests that Canada is importing considerably more than exporting, while Provinces and small-medium businesses (SMEs) are not readily being helped into these ripe international markets.
Courtesy of Asia-Pacific Foundation of Canada, International Trade and Investment Report, this graphic highlights Canada’s primary goods exports to seven of the CPTPP countries, mostly raw materials and large industrial products with little from SMEs.
CPTPP represents another powerful yet under-exploited trading pathway already in place for Canada. Most notably, our SME community (1.2 million businesses representing one-third of total GDP) still have very limited access to this lucrative market - with them being the business sector Canada relies on heavily for our growth and innovation. We must also significantly increase our total trade volume, but more importantly increase our exports to redress the balance of trade as Canada continues buying far more than we sell to this bloc of countries 6X our size.
This relationship, already built, needs the attention of a new government to pick up on the legacy of work gone before, because the Liberals have badly fumbled this file as well.
This graphic from Asia-Pacific Foundation shows the trade volume difference between CUSMA (Canada-US-Mexico), CETA and CPTPP trading agreements, highlighting not only our gross US dependency, but the opportunity yet to be leveraged against CETA and CPTPP.
In regard to the third trading opportunity referenced earlier, the topic of inter-provincial trade has received good press lately so I won’t cover it again here. But our Johnnie-come-lately realization that we should be our own trading partner bestie is now being talked up by everyone, though it was of little interest until the wolves began circling.
As for our trade with India, the world’s sixth largest economy and featuring a relationship destroyed by Trudeau’s poor judgement and drama – well, that requires a separate article.
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What I hope to have made evident is that we have most pieces already in place to expand Canada’s global trading footprint. We are long overdue for a government interested to just do the hard and unglamorous work of operationalizing and maximizing it all. In addition, we can no longer afford constraints applied to the free flow of commerce by imposing progressive and climate policies as the Liberals have been consistently doing.
Here’s something else that irks me, noted after a 30 year career in business. We have been forever told that personal relationships are what make deals happen. But it’s mostly untrue as mutual value ultimately moves the needle, while operationalized after-the-fact by a strong and detailed team. Indeed, we prefer to do business with those we like and personal bonhomie can open an initial door or make engagement more pleasant, but agreements take years that often cross administrations and don’t happen because of a nice lunch before winging off to the next exciting announcement. We watched Trudeau do this for ten years as each new pronouncement collapsed under the weight of neglect, by the very same people now vying to get back in office. They didn’t want to do the hard work then, yet we believe they now do?
Pretending that because a guy knows a guy, we’ll somehow create wonderful new economic and trading ties between countries is immature thinking at best.
Yet that’s the storyline being pushed, with Mark Carney starring in the role of saviour. After all, Mark has stridden the global halls of power, pontificated before the well-heeled and well-connected, met Queens and Kings and is a card carrying member of the prestige club. The electorate is falling all over themselves that he is our man for the moment, able to fix our woes with a few pumps of his golden hand. His recent European junket was met with – You see, I bet Pierre couldn’t do that, as though it meant anything more than the start of Carney’s frequent flyer career on our dime.
Honest assessments are that it was a pointless dud - “You wasted your last 24 hours” was how a British journalist cuttingly captured the point.
In comparison, Pierre Poilievre now seems small and parochial to some – just a guy busting our chops about BOOORRRING things like cost of living, over-regulation stifling our economy, need for small business growth, importance of a balanced budget, infrastructure development, the sanctity of Canadian history and criticality of energy independence – you know, the stuff ignored for a decade.
Oh, and he was also that guy talking about the importance of freedom and democracy a few years back while the effete crowd castigated him as a nasty populist for socializing with (gasp) truckers. Yet they continue ignoring internal threats to our freedom and democracy from within, including the despicably undemocratic way Carney was catapulted into the PM role, while fixated only on worries from the US.
How on earth could such a pedestrian fellow like Pierre Poilievre lead us to success when his opponent is meeting the likes of Emmanuel, Sir Keir and King Chas in his first couple days in dubious office, while Pierre met with mere factory workers in Sudbury, talking of a focus on Canada rather than trying to reshape the world?
“Let your motto be Canada first, Canada last, and Canada always”
~Prime Minister, Sir Wilfrid Laurier, 1904~
Who knows what will happen in the coming election as narrative and appearance maketh the man in today’s world. Seems Canadians are anxious to line up behind Mark Carney for him to fix that which his party destroyed in our lost decade. The irony is thick.
Perhaps the Liberals will slither their way back into office - my powers of prediction are no keener than yours. But there is something of which I am sure.
We do not need a saviour. Nor does he come in the form of Mark Carney.
We need a fresh look at things, a pragmatic vision, a focus on Canadians, basic competence of execution and a bit of grit. I’m betting on the Conservatives.
As for our relationships with the wider world…
If Poilievre becomes our Prime Minister he will be greeted warmly by world leaders. He will have a solid foundation of agreements on which to stand, bolstered by a country whose reputation was stellar until Trudeau entered our sphere, and backed by Canadian businesses eager to do commerce. The advancement of our trade and economic ties will not hinge on how delicately Pierre holds his knife and fork over dinner or rely on past personal bonds. Nor how he feels about net zero (after all Germany and Japan weren’t talking the green game when they came calling for our natural gas a few years ago.)
In recent years, we have not demonstrated an interest to do business with the world. We ignored their entreaties.
We neglected the agreements already in place by which to advance Canada’s interests well beyond the US and improve our economy.
The Liberal government wasn’t paying attention as they fixated on what mattered to them, not Canada.
We must change that - and it doesn’t require a saviour.
Stay tuned and stay pragmatic.
Excellent article with useful data.
Trudeau never related to the business community so he couldn’t possibly be helpful in expanding international trade. In fact he messed it up by insisting on gender and climate requirements in any trade deal he discussed.
One doesn’t need a personal relationship to make country head contacts - being a country head yourself is sufficient.
As usual you make many good, well informed points.
The past ten years have been instructive in what not to do. The Trudeau government was in an enviable position when it started. Instead of taking an approach, like Norway has, to leverage the oil and gas assets in place to fund the transition to their ideology, they squandered it and have been essentially killing off the golden goose while going into enormous debt, that will have to be paid off at some point, to fund their programs.
Some how straightforward business cases for LNG, for customers that came begging to our doors, were rejected for expensive EV battery plants, which are already collapsing, and hydrogen fantasies.
I agree wholeheartedly that we are long overdue for a government that can prioritize what needs to be done (you have identified those in past articles) and, along with incentivizing the private sector, can do the more difficult work of implementing it, while not being constrained by progressive and climate policies.
I, like you, have no trust in Carney and his Liberals. Carney’s CV may be impressive, his accomplishments much less so. They are great on glad-handing and announcements but have failed spectacularly on implementation. Four years of him and Trump are unfathomable.