Canada cannot reduce its economic reliance on the United States simply by signing more trade agreements, according to a new report by Steve Verheul, Canada’s former chief negotiator for CUSMA and CETA, who outlines a two-track strategy.
Published today by the Public Policy Forum, From Reliance to Resilience: How to Diversify Canada’s Trade argues that Canada must pursue a careful two-track strategy: preserve as much access to the vital U.S. market as possible while urgently building the infrastructure, investment capacity and commercial machinery needed to compete in other markets.
The report comes as the Canada-U.S. trade conflict continues to escalate and Canadian business and government leaders prepare to gather for next week’s Canada Investment Summit.
“The United States will remain Canada’s largest and most deeply integrated trading partner, but that cannot prevent us from building stronger economic relationships elsewhere,” said Mr. Verheul, a Fellow of the Public Policy Forum. “Canada cannot diversify by signing agreements and hoping commercial activity follows. We need to build the infrastructure, investment capacity and commercial strategy required to turn market access into exports, investment and jobs.”
Canada has one of the world’s most extensive networks of trade agreements. But access on paper has not consistently translated into greater commercial activity for Canadian businesses. Previous efforts to diversify Canada’s trade have also produced limited results.
Mr. Verheul argues that the current disruption creates both a greater need and a stronger opportunity for Canada to succeed. Doing so will require governments to work closely with businesses, Indigenous partners and other levels of government to build domestic capacity and secure viable commercial opportunities abroad.
The report makes seven recommendations:
- Unlock investment in major projects that expand Canada’s resource, manufacturing and export capacity.
- Develop a national trade-enabling infrastructure strategy to identify and accelerate the gateways, corridors and other infrastructure needed to reach non-U.S. markets.
- Apply a competitiveness test to major tax, regulatory and policy decisions affecting export-oriented sectors.
- Pursue a two-track trade strategy that preserves as much U.S. market access as possible while expanding Canada’s global export relationships.
- More efficiently translate trade agreements into private-sector deal flow, investment and export growth.
- Pursue targeted sectoral agreements alongside comprehensive free-trade agreements, with a greater emphasis on speed and commercial value.
- Create an economic-security framework to protect Canada from unfair trade practices, coercive economic action and dependence on unreliable suppliers.
The report cautions that diversification will involve difficult choices. Reaching markets beyond the United States may initially favour energy and natural-resource exports, while highly integrated industries such as automotive manufacturing will face greater challenges in shifting production and supply chains.
It also warns that Canada must retain the ability to pursue trade agreements beyond North America. Any future “Fortress North America” arrangement, Verheul writes, must not become more effective at locking Canada in than keeping competitors out.
“Trade diversification is not a quick pivot away from the United States,” Mr. Verheul said. “It is a long-term effort to make Canada more competitive, more resilient and better able to protect its economic interests in a much less predictable world.”
The full report is available at: From reliance to resilience – Public Policy Forum
(Photos of report cover and of Steve Verheul from PPF)