Thank you, Madam Chair and honourable committee members.
Good afternoon and thank you for the invitation. If I may, in my remarks I will go a bit beyond the specific topics and offer a little more of a global perspective.
First of all, I believe that the most serious problem on trade for Canada in the wake of the COVID-19 pandemic is that the world is turning inwards and becoming a hotbed for protectionism. The U.S., unfortunately, is as reluctant to lead globally on trade as it has been on the pandemic. The major powers are competing for power, leaving middle powers like Canada dependent on multilateral institutions like the WTO, which have been weakened by a lack of clear leadership and any real will to work together. By refusing to name panellists to the WTO’s dispute settlement mechanism, the United States has severely restricted the institution’s ability to safeguard the rule of law on trade.
Due to the pandemic, self-reliance and self-interest are in the ascendency. Global trade has already seen employment, production, prices and supply chains sharply disrupted, and there is now a new public health rationale for constraints on trade, under the guise of national security. A “might is right” trend is taking hold as countries are compelled to fend more for themselves.
What should Canada do in this environment? First of all, now that the USMCA is operational, we need to defend vigorously and, where possible, advance access to the U.S., our most vital market, invoking the dispute settlement mechanism retained from NAFTA without hesitation and using selective retaliation when necessary. For Canada, the USMCA is a respectful salvage more than a platform for economic growth, but it should help check lunges into protectionism. Because bilateral trade is roughly in balance, there is no reason for Canada to become a passive punching bag for U.S. protectionists and mercantilists.
Arbitrary tariffs once again on Canadian aluminum exports will hurt American producers and American consumers more than anybody. This is a message that should be delivered fervently to Congress and at various state levels in the United States. We should not hesitate to retaliate.
Similarly, chronic complaints from Senator Schumer, the majority Democrat leader in the Senate, about Canadian dairy policy should be rebuffed. Canada made modest concessions on dairy in the NAFTA renegotiation and should abide by them, but nothing more. Nonetheless, these attacks are a harbinger of what to expect should the administration change in November. We should stand firm. The best antidote to American protectionism, in my view, would be a robust, V-shaped economic recovery—the sooner, the better.
Second, because 75% of our trade is with the United States, diversification has always been desirable. Now it's essential. For it to become real, however, we first need complete free trade within Canada, a quest over many decades that has delivered more solemn communiques than substantive results. Most popular in western Canada, this effort will only succeed with firm leadership from Ottawa and if economic common sense prevails over narrow provincialism, notably in Quebec and Ontario. According to the IMF, liberating Canadian internal markets would yield a 4% increase in GDP. That's much more than is expected from the USMCA.
Third, free trade across Canada would also give us greater leverage and better access from other preferential trade agreements, which are the best immediate prospects for diversification: CETA with the EU, the Canada–Korea Free Trade Agreement, and the mini-TPP, which affords significant new potential in Japan, Malaysia, Indonesia and Vietnam, among others.
Fourth, we should move deliberately to conclude a bilateral trade deal with a post-Brexit Britain, complementing, where possible, the terms negotiated in CETA, but mindful as well of the terms being negotiated by Britain with the United States. Canada enjoys more than a 2:1 trade balance with Britain. I suspect that their negotiators will seek to make up what they may lose from the European Union by gaining enhanced access specifically from the U.S., Canada and Australia. Our negotiators should be determined to get at least as much in terms of increased access as we are prepared to give. That is the goal for any trade negotiation.
Fifth, Canada should actively explore the prospects for broader trade with India, despite the difficulties posed by the high degree of regulations and protectionism in the Indian economy. This initiative can best be conducted on the basis of careful preparation and consultations, not by high-level junkets.
Sixth, even more daunting are the prospects with China, where relations are completely hamstrung today by the deadlock over Madame Meng and the two Michaels. There is much not to like about China's behaviour these days on trade and many other issues. The way supplies needed for the pandemic were hoarded before China released initial data on the virus and were then sold for huge profits should elicit worldwide scorn, if not harsh penalties.
Today, we are unwilling to counter discriminatory trade actions against Canadian agricultural exports, even though China has a 3:1 trade advantage over us, lest it harm those in detention. We should not be reluctant to retaliate. We must also be more deliberate in joining sanctions against China for its repressive moves against Hong Kong. Canada should, like Britain, extend a welcome hand to Hong Kong refugees. We should also nimbly expand relations with Taiwan.
Most importantly, we need to find a way out of the corner we have painted ourselves in, if not by an exchange of detainees, then by other means. We have become a hapless pawn caught in a dispute between two giants. Asserting self-righteous points of principle may make us feel better, but they will not break the current stalemate. We must deal with the world as it is and not as we would naively like it to be.
We cannot isolate or immunize ourselves from what will soon be the world's largest economy. Mutual self-interest obliges us to gauge prudently and cautiously the prospects for pragmatic, albeit limited, relationship, proceeding, as the adage about how porcupines mate stipulates, very carefully.