Leveraging Canada’s International Trade Advantage

By: Rudolph Damas

International trade can sometimes be like a game of Monopoly. Similar to the board game, you can establish a strategy to come out on top, but where there are opportunities there are curveballs. For both trade and Monopoly, what often differentiates the winners from the losers are those who are most adept at maximizing opportunities and minimizing the effects of unexpected challenges.

From an international trade perspective, recent and ongoing challenges continue to strain diplomatic relations; Some examples include the growing need for climate mitigation along with emissions reductions, domestic labour disputes, slow CETA ratification (see Global’s latest insights on Canada-France relations) and U.S. tariffication of key Canadian exports such as steel and aluminium. While the federal government has advanced on some of these ongoing policy priorities through notable activities (e.g., the Green Shipping Corridors Program, the Indo-Pacific Strategy as well as the Critical Minerals Strategy), important opportunities to mitigate risks remain.

As such, this article won’t teach you how to win at Monopoly –unfortunately— but instead it will provide a high-level overview of potential pathways towards a more advantageous trade profile for Canada. In the short timeframe before Ottawa’s next quadrennial tug of war for Government(s), there remains a window of opportunity to strategically leverage trade in creative ways that could have a lasting impact on several fronts

The Importance of Maintaining Strong U.S. Ties

Canada can and should establish a long-term path towards trade diversification while maintaining a reliable reciprocal relationship with our permanent geographical neighbour, the United States. Regardless of who’s in the White House or at 24 Sussex/Rideau Hall, it is critical to the long-term prosperity of Canada and the U.S.’s interdependent economies that we maintain consistent and reliable trade relations.

As the U.S. electoral cycle brings about another highly contentious race for POTUS, again, many are rightfully concerned about the ramifications on Canada. For context, on March 8, 2018, President Trump announced Section 232 tariffs on imported steel and aluminum, following a review by the Commerce Department that concluded imports of both metals posed a national security risk. Section 232 falls under the U.S. Trade Expansion Act of 1962 and allows the U.S. Secretary for trade to determine if certain imports threaten the national security of the United States. If goods are found to be a threat, Section 232 allows for tariffs or other fees to be imposed, adjusting trade flows for the targeted goods.

Although, no S232 tariffs have been imposed on Canadian steel and aluminum since 2020, these tariffs are still in play for other allies such as the European Union who has yet to reach a more stable long term trade agreement. Moreover, in a bilateral meeting with Mexico on February 16, 2024, U.S. officials have highlighted to the USMCA partner country that Section 232 Duties on Steel and Aluminium allow for reimposition of tariffs. The Federal Government is on the right track with a renewed “Team Canada” approach to advocate for Canadian exports, however, officials must find ways to remind the U.S. that the success of both countries’ economic interests rely on mutually beneficial trade.

Diversifying Canada’s Trade Profile

Maintaining strong U.S. ties is not the federal government’s only trade move at the moment, Canada can also play to its strengths on the international stage. As a resource rich country with a growing population and a wealth of economic potential, we are well equipped to explore trade partnerships with countries that share similar priorities. Some examples include reciprocal trade, responsible natural resource exploitation, labour force skills development, climate change adaptation and access to quality education.

A good example is Canada’s Indo-Pacific Strategy (IPS), despite ongoing diplomatic challenges with the ASEAN region giants that are India and China. The IPS, which was announced in 2022 and recently marked its one-year anniversary, is an ongoing attempt through investments and diplomatic missions to build trade relationships with countries in the Indo-Pacific region. What makes the IPS so appealing to the federal government is the region’s 40 trade partners, its growing economies with over $47 trillion in combined economic activity along with Canada’s ability to meet increasing demand for energy and resources, amongst other opportunities.

To build on broader trade diversification objectives the federal government can take a similar approach as the IPS to similarly growing economic regions such as the Caribbean and Africa. The launch of consultations for a proposed Canada-Africa Economic Cooperation Strategy in the summer of 2023 is promising. Concrete opportunities to bolster trade relations can be explored through trade-focused collaboration with multinational economic development institutions such as CARICOM (Caribbean Community), the EAC (East African Community) and the ECOWAS (Economic Community of West African States).

At the World Trade Organization’s 2024 Ministerial Conference this year, member States focused on the implementation of reforms to the institution and a prominent theme was the appetite for the inclusion of emerging economies in global trade markets and trade for development. This is a key indicator that there are international partners on the global stage, who share Canada’s goal of unlocking the full potential of their trade profile. Moreover, the 2024 Global Risk Report indicates that countries with competitive advantages in upstream value chains such as critical minerals will likely leverage these as access to advanced technologies becomes the leading source of soft power and emerging economies become more influential through military, technological and economic means.

Investing in a Stronger Supply Chain Infrastructure

To realize some of these opportunities, it will depend on Canada’s ability to attract investments, while maintaining and creating partnerships. Much of that hinges on the reliability of our domestic supply chain and logistics infrastructure. In a post Covid-19 world where global inflation is on the rise, our domestic supply chain infrastructure across the country needs a whole of government approach to trade in consultation with the private sector to benefit entire value chains from producer to shipper to customer.

The Western Transportation Advisory Council’s (WESTAC) 2024 Compass Report comes to similar conclusions. It also highlights growing dissatisfaction with Canada’s regulatory and business investment environment, the adverse effects of environmental and labour disruptions are impacting businesses which demonstrates a need for increased resiliency and efficiency.

Key opportunities for a robust supply chain that supports trade are investments in smarter transportation logistics hubs to minimize the effects of environmental disruptions along shipping routes and increase transparency. Additionally, an investigative study that includes businesses, labour groups and a focus on strategies employed by other states with reputable supply chain infrastructures could provide the necessary insights for a more efficient national labour dispute resolution mechanism. The federal government should also continue its work to reduce regulatory impediments to business development and incentivize private sector partnerships that promote efficiency along with innovation.

The outcome of these opportunities and solutions remain to be seen but whether it’s Monopoly or international trade, the path towards success includes playing the long game strategically while remaining resilient to the unpredictable moves of all players.