As an impending recession in the United States looms, the discourse in Canada surrounds the possible implications for our own economic fortunes. Might the current economic climate serve as impetus for closer trans-Atlantic ties?
In terms of economics, deeming a period as boom or bust usually requires the knowledge afforded by hindsight, and predictions amongst experts and the general populace vary widely. One need only look at the results of polls, and read columns by pundits to get a sense of the disagreement, and inherent ambiguity associated with assessing the current economic situation. At the very least it can be said that Americans are concerned; the economy now taking precedence over the war and immigration in the presidential race.
We've lived through a slump before, but some fear that this sag is starting to bear the hallmarks of a full recession; one that Colin Campbell and Jason Kirby writing for Maclean's say has not been seen since the late 1970's, "a time of high oil prices, crisis in the Middle East, rising inflation, and a weak U.S. dollar." Sound familiar? Both Europeans and Canadians need to be concerned as well - especially the latter. One way or another, hopefully this talk of economic downturn will spawn some soul searching on both sides of the pond.
That's not to say we need to distance ourselves from the United States. Diversifying is not synonymous with diverting; there is no reason to shy away from trade relations with the U.S., though putting all of our economic nest eggs in one basket doesn't make much sense either. Quebec Premier Jean Charest has already called for increased trade with the European Union as a means of counterbalancing reliance on the U.S.
Trade with the United States represents over half of Canada's GDP. In 2006, bilateral trade with the U.S. totalled $577 billion, and with the prospect of an economic slump, Bloomberg echoed Merill Lynch's prediction that Canada's economic growth will slip to just 1.7 percent, the lowest rate in over a decade. At this point in time, there is no question; if the U.S. sneezes, Canada will catch a cold. And although Canada is by far the largest trading partner of the U.S., the three largest economies of Europe occupy the top ten as well - parties on both sides of the Atlantic stand to gain, or lose.
Trade between Canada and the E.U. is somewhat outmoded by trade missions to South America and Asia, respectively. As such, establishing closer ties with the E.U. would likely require a multi-faceted approach, that is one consisting of more than just the reduction of tariff and non-tariff trade barriers (though it's a start). Getting Canadian businesses to start thinking East-West rather than North-South will require some stroking, through increased political dialogue, cultural exchanges, and government assistance, and encouragement, for firms looking to do business in Europe.
Doing business in Europe makes sense. The long standing historical and cultural ties notwithstanding, positives include; that English and French tend to be de facto languages of business, the E.U. represents the world's largest market. Highly developed and conducive to trade and foreign investment, it is the world's second largest economy. There is little anxiety as to corruption or unfair business dealings; the court system upholds patents and other forms of intellectual property rights. Competition would serve as the only major disincentive.
A new economic ally might also improve our position relative to the benign neighbour south of the border, and increase Canada's bargaining power. Both the E.U. and Canada began discussing deeper ties back in 2004 with the inception of the Canada-E.U. Trade and Investment Enhancement Agreement, or TIEA. The E.U. and Canada last had talks about a trade pact, in June of last year before the G8 meeting in Berlin, where it was agreed that they would await the result of the Doha round before going any further. The Doha round is conducted by the World Trade Organization in hopes of breaking down barriers to international trade. The talks, which began in Qatar in 2001, recently broke down in Potsdam in 2007.
A call to deeper ties with Europe has been sounded numerous times; The Conference Board of Canada published a report in May of 2006 warning of the relationship falling to the wayside. The report cites the poor integration of Canadian companies into the global supply chain and a general lack of awareness as the reason for suboptimal trade performance.
There is much both the public and private sector can do to attract trade and capital from Europe. For instance, infrastructure improvements in Halifax along with low taxes and shorter administrative delays might make Canada a viable point of entry for trans-Atlantic shipping. Or increase travel and tourism to Whistler, Prince Edward Island, and other little sung spots with advertising abroad. Regular performance evaluations for trade missions and quotas for officials are also imperative to the assessment of a program's efficacy.
Further incentive to make such alternatives and industries attractive to European business, would be to offer them a stake in the enterprise. In addition, cultural exchanges for the future managers (those replacing the baby-boomers) of business and government might help change the national mindset. There is no easy answer; however efforts up until this point have lacked vision and strategic thinking.
Though numerous appeals have been made, Legislators on both sides seem to pay no heed, continuing instead on the path of mutual ambivalence. One wonders, and perhaps hopes, that the current economic climate might expediate the negotiation process; maybe a protracted recession in the United States might lend the proposed frameworks what they have always been lacking; political initiative.
Adam J. Vradenburg