The Reality of Trade: Canada's Complacency and its Damaging Consequences

Strategic Insights -

Canadian leaders have often viewed trade relationships as akin to family ties or friendships, but the truth is that countries we trade with are simply jurisdictions that do business with us. This wide-eyed view has led to complacency and deepened the economic consequences when trade relationships evolve or break apart.

Key Takeaways:

  • Robert Peel, the British prime minister between 1841 and 1846, slashed tariffs on British timber imports, resulting in a significant drop in Canadian timber exports.
  • Peel's subsequent removal of protectionist tariffs on grain in 1846 ended Canada's preferential grain market access, leading to a 50% decline in property values in Montreal and widespread bankruptcies among commercial men.
  • The United States cancelled the 1854 reciprocity deal in 1866, citing growing protectionist sentiment and the perception that the deal benefited Canadians more than Americans.
  • Past examples, including the U.S. Fordney-McCumber Act (1922) and the Smoot-Hawley Tariff Act (1930), demonstrate the volatility of trade relationships and the need for Canadian leaders to adapt.
  • China's 75.8% duties on Canadian canola seed are a transparent attempt to pressure the federal government to backtrack on its 100% tariff on Chinese-made electric vehicles.
  • Canada's trade agreements, such as the Canada-EU Comprehensive Economic and Trade Agreement, often promise more than they deliver, with low utilization rates and persistent barriers to trade.
  • Trade negotiations with Britain collapsed in 2024 due to disagreements over dairy and supply management systems, as well as rules of origin.
  • It is time for Canadian leaders to acknowledge that countries trade with Canada based on their economic needs and political agendas, not out of familial or friendly ties.

Statistics:

  • 40%: average tariff on imports imposed by the U.S. with the Fordney-McCumber Act in 1922
  • 50%: decline in property values in Montreal after Peel's removal of protectionist tariffs on grain in 1846
  • 12 years: duration of the reciprocity deal with the U.S. before it was cancelled in 1866
  • 75.8%: duties imposed by China on Canadian canola seed
  • 100%: tariff on Chinese-made electric vehicles imposed by the Canadian government

Sources:

  • Canada's trade history, as described by Mark Carney in his appearance on The Daily Show
  • Robert Peel's policy decisions as British prime minister between 1841 and 1846
  • The Fordney-McCumber Act (1922)
  • The Smoot-Hawley Tariff Act (1930)
  • The 1854 reciprocity deal between Canada and the U.S.
  • The Canada-EU Comprehensive Economic and Trade Agreement (2017)
  • Human Rights Watch report on forced labor in China's EV sector
  • Policy Magazine article on Canada's trade agreements (2023)