The deterioration of Canada-US relations has provoked renewed calls for Ottawa to reduce
our trade dependence on the US.
The appointment of a Minister for International Trade Diversification is just the latest manifestation
of this political trend.
China is often touted as a, or even "the" trade partner who can rescue us from reliance
on the U.S. market, including most recently by China's ambassador to Canada.
Proponents of this strategy call for Canada to abandon "its stubborn fixation on the
U.S. market" and focus on China, seen as global trade's "adult in the room."
This thinking overlooks many inconvenient facts about the continental structure of the
Canadian economy, the sheer size of Canada-U.S. trade, and the basic problems of trade with
China.
The reality is a sizeable diversification of Canadian trade is highly improbable and
free trade with China is fraught with serious economic and security problems.
For Canada there is no credible substitute for secure and stable access to the U.S. market.
Concerns about NAFTA uncertainty are fully justified.
Twenty percent of our economy and roughly 2 million jobs come from exports to the U.S.
Estimates of the magnitude of diminished investment and job losses vary but the cost of NAFTA's
disappearance would be heavy — particularly for trade-sensitive sectors.
And these assessments likely underestimate the further harm that post-NAFTA uncertainty
would do to business investment.
But that does not make China the answer to our US problem.
The underlying assumptions of the "China solution" are two: first, the Chinese market
can take Canadian exports previously destined for the U.S.; and second, free trade with
China can be rules-based, reliable, and ultimately in Canada's interests.
Both are false.
The idea that we can replace the Canada-U.S. trade relationship with others neglects the
integration of our industries and supply chains within North America.
Canadian auto-part suppliers, agricultural exporters, financial and legal service firms,
energy infrastructure and so on, are deeply tied into our shared continental economy.
Politicians can speculate about trade diversification, but their strategies cannot counteract centuries-old
insights about specialization and the division of labour, nor the business decisions of countless
Canadian enterprises.
Claims about Canada's "over-reliance" on the U.S. ignore that most global trade
is regional, especially in intermediate goods (as opposed to finished products) like those
Canada does well in.
Think auto parts vs finished automobiles, for example.
This is intuitive: proximity has various advantages including transportation costs and common
standards, interests and practices.
Yet Canada's trade is less concentrated than Australia's and more diversified than
many EU member states.
America, the world's largest economy, is right next door and other markets are literally
oceans away.
Nor can China substitute for the U.S.
It takes less than 5 percent of total Canadian exports (the U.S. takes over 70 percent) and
that number will be exceedingly hard to increase substantially.
One of the biggest obstacles is China's own behaviour.
As Macdonald-Laurier Institute senior fellow Duanjie Chen has written, China is a "true
outlier" in global trade.
Its large trade surpluses – including a $40 billion one with Canada – are driven
at least in part by its refusal to grant its trading partners reciprocal access to its
own market.
Indeed far from becoming more open to trade, China's Made in China 2025 plan will make
China more closed to foreign companies in many key industries.
Similarly, China's track record of using cyber and other forms of espionage, as well
as licensing and joint ventures to gain control of foreign intellectual property, is deeply
worrisome.
But this pales in comparison to the serious national security challenges associated with
unfettered access for Chinese enterprises to our domestic market.
Those persist regardless of whether such enterprises are "private" or state-owned, a largely
meaningless distinction when all companies must kowtow to their internal cell of the
Communist Party.
Recent international attention to the security risks posed by China's major wireless firm,
Huawei, is only the latest example.
China has long refused to distinguish between commercial and national interests, making
Chinese companies effectively agents of the Chinese state.
As long as this is so, Ottawa must preserve its ability to act energetically to protect
our national security.
Finally we cannot ignore that governments have in recent years made Canada a high-cost
place to do business.
We can compete with the US, barely, often by letting the loonie fall and lowering our
standard of living.
But the idea that we would be cost-competitive with China is a pipe dream.
There are reasons we have a $40-billion trade deficit with China and a free trade agreement
won't make them go away.
Yes, NAFTA uncertainty is a huge headache.
But throwing in our lot with China isn't the solution even if it were possible.
Our so-called "stubborn fixation on the United States" isn't some misguided centrally-planned
boondoggle, but is rather the sum of millions of informed choices made by firms, markets
and individuals every day.
Ottawa cannot turn it on and off like a light bulb.
Only China's government can do that which, incidentally, is reason in itself not to see
it as the solution to our momentary woes.
I'm Brian Lee Crowley for the Macdonald-Laurier Institute.
For more infomation >> [Sub español] [FULL] 방탄소년단 : Behind The Answer - Duration: 1:03:03. 
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