Buy Canadian is Good-- ABUSA (Anything but USA) is Better

One cannot help but feel inspired and proud to witness the efforts of Canadians to buy Canadian-made goods and services. There may not be 41 million Canadians 'on the ice' in this arguably existential battle with the US, but the vast majority of Canadians from all regions and backgrounds have 'jumped the boards' to do what they can to support workers and businesses who have been hurt by the punitive, treaty-breaking tariffs and trade barriers the Americans have imposed on the Canadian economy. 

While all this is good, it is important to remember that what we are fighting against are the unjustified US attacks on our economy and even more concerning, threats to our independence and sovereignty. We aren't or at least shouldn't be fighting against international trade.  The classical British economists in the early 19th century clearly set out the mutual benefits of trade -- both parties are better off when they produce more of what they are relatively efficient at and buy what is inefficient for them to make. Tariffs and other trade barriers do benefit the protected industries, especially the owners of the firms who are able to charge monopolistic high prices, but they unquestionably hurt the general economy and population as a whole.

So better than 'Buy Canadian', the rallying cry for Canadians right now should be ABUSA--- Anything but USA. We shouldn't abandon international trade and the mutual benefits that provides-- we just want to ensure that the trading partners we develop and rely on will treat us fairly and reliably-- something the US clearly is not and may never be willing to do.

As we seek out new trading partners and relationships, the objective is not simply to find new markets for our goods. It is to develop new sources of supply for the goods and services we used to buy from the US. We can't make everything we need, nor would we want to -- not if we want efficient industry and affordable products.

The protectionist mindset is widespread, particularly among political leaders more focussed on narrow interests and favoured industries than the economy as a whole. Trump is undoubtedly an extreme example of protectionism at its worst, but he is not alone. Our own provincial leaders do the same. It is why it is so hard to break down the interprovincial barriers to internal trade that cost our economy billions each year. 

Canada is hurting right now not because we are a trading nation. We are hurting because we became too reliant on the US-- a country that has decided not to honour its treaty commitments or even follow a rational course of maintaining let alone strengthening mutually beneficial trade.

As we move forward we must not retreat into a protectionist Buy Canadian (or buy only from my region or province) philosophy. We must cultivate fair, dependable, mutually beneficial trading relationships where we produce what we are good at and buy what others produce better. That is how we can best grow and prosper, something the US will have to relearn if it wants to avoid economic upheaval and decline. 

Retaliation to U.S. Tariff Attack

 We will hear today how Canada intends to retaliate 'dollar for dollar' to the U.S. tariff attack on Canada. As University of Calgary economist Trevor Tombe has written, it will be impossible to structure retaliatory tariffs that simultaneously satisfy three key objectives: targeting U.S. swing states; significantly impacting U.S. producers; and minimizing impact on Canadian business and consumers. Perhaps a different approach is required.

What needs to be addressed is not the U.S. tariffs in themselves -- this is not a commercial issue. What needs to be addressed and challenged are the manifestly clear U.S. objectives. They want to shift auto, metal, wood product and other major manufacturing activity from Canada to the United States and at the same time retain Canada as a source of low cost primary energy, mineral, raw log and other resources.

Our retaliation could and should directly and transparently target the U.S. attempts to turn us into a classic resource colony with a three-pronged approach.

1) Canada should tariff all U.S. manufactured goods at the same rate they tariff us. We should eliminate the tariff rate imbalance that will encourage industry to move from Canada to the U.S. even for goods sold in Canada. 

2) Canada should require retailers to clearly indicate U.S.-sourced supply. Canadians want to help defend against the U.S. tariff attack; they should be given the ability to do so..

3) Canada should impose an export tax on all primary resources destined to the United States at a rate equal to the weighted-average tariff rate the US is imposing on our manufactured goods. We shouldn't allow the U.S. to access our primary resources tariff free for their manufacturing activity while they are  attacking our own manufacturing industry. 

This three pronged approach would make clear to the Americans how and why we will respond to their current attack and the additional ones they are threatening. It would make clear to U.S. citizens we are not the aggressors; we are responding to their aggression.  And if and when the U.S. reverses its trade agreement-breaking attacks,  our retaliation would automatically end. 

This three pronged approach would provide what is sorely needed -- clarity and resolve on where escalation will lead and a set of principles setting out how deescalation can quickly be achieved.

Our Strongest Counter to the American Demands

It has rightly been said many times: nobody can win a trade war. And it goes without saying that a trade-dependent country like Canada certainly can't win a trade war with the much larger and less trade-dependent U.S. Both countries stand to lose; Canada much more.

The U.S. is counting on this imbalance (as well as a misguided or cynical disregard for its own economic interests) to press for manifestly unfair trade arrangements with Canada. They want to restrict sales of Canadian goods into the U.S. market, limit any countervailing restrictions on the sale of U.S. goods into the Canadian market, and secure priority access to Canadian energy, critical minerals and other valuable resources that presumably goes beyond what paying competitive prices would provide.

The U.S. leverage is clear -- they can hurt us more than we can hurt them. The question is: how can Canada fight back.

The Carney government appears to be doing all the right things. The more we can diversify our trading relationships, the less dependent will we be on the U.S. -- the less can they hurt us. The more we can stimulate domestic demand with interprovincial trade and more infrastructure and other investments, the less devastating will the U.S. trade restrictions be. 

Nevertheless, significant loss of U.S. markets and disruption of well-established supply chains will significantly impact Canadian businesses, workers and communities.  Restructuring our trade relationships and internal economy will take time. In the interim, business will be lost, workers laid off and families dislocated in the search for new opportunities and employment.

Knowing this, the Carney government must do more than map out a less U.S. trade-dependent future. It needs to articulate and commit to the wide range of worker, family and community support policies that will enable a major restructuring of the Canadian economy in an equitable way. It is easy for Canadians whose jobs and livelihood are not at risk to demand that we stand up to the Americans and that we refuse to accept the unfair trade relationship the U.S. wants. What we need are policies that support those at risk so they too can demand we stand up to the Americans . We need to ensure that it isn't just steel or auto or forestry workers and communities that pay the price.

The U.S. thinks it can make unreasonable demands and secure an imbalanced, unfair deal because of the pain it can inflict. Our strongest counter is to make clear that the pain they can inflict will be short-lived-- Canada will restructure and move on. In the meantime we can take the pain and we can do that because it will be shared.

Elbows up, but hearts in place.