Trade Challenges: United States, Canada, and China


Complaining about Canadian softwood-lumber and dairy products, President Trump seems unaware that Canada is currently the No. 1 market for 35 U.S. states. According to the U.S. Department of Commerce, American exports of goods and services to Canada in 2015 supported an estimated 1.6 million jobs at home.

In 2016, Canadians purchased nearly US$322 billion (C$426 billion) in goods and services from the United States.  Services exports from the United States were US$54 billion; the trade surplus on services was US$24.6 billion.  The combined U.S. goods and services trade surplus with Canada was U.S.$12.5 billion.

No two nations depend more on each other for their mutual prosperity and security than the United States and Canada.

Three-quarters of Canadian exports today go south to America. Vehicles, crude oil and auto parts comprised a third of our total exports to the United States last year. Cars, light trucks and auto parts exports sold for $79.8-billion, with bitumen and crude oil bringing $51.5-billion according to Canada customs data. Other top export products include lumber, natural gas, aluminum, and pharmaceutical/food products.

Some exports are essential to global supply chains. The current North American auto industry was built around NAFTA, with manufacturers, suppliers and retailers scattered across the continent.

The agreement allows auto parts to travel easily around North America, with some crossing the U.S., Canadian, and Mexican borders several times before being assembled into vehicles. Hasty changes to NAFTA could slow production, increase costs and ultimately make North American-made vehicles less competitive with ones made in Japan, Germany and South Korea.

The U.S. trade imbalance in goods and services with China last year, however, was US$3o9 billion, with Canada’s merchandise trade deficit with China being C$44 billion. Our two governments and others should thus initiate zero tolerance on unfair trading practices by Beijing, including currency manipulation of the yuan, the sale of consumer products made by forced labor, theft of intellectual property, and the continued refusal to honour its commitments made to the World Trade Organization on joining it in 2001.

In contrast, Japan, India, South Korea and the other rule-of-law democracies in Asia should be favored as trading partners in the region until China respects the rules of international commerce.

A major obstacle to a sustained world economic recovery is China’s continued swamping of export markets with its manipulated currency, which amounts to both an export subsidy and a tariff on imports. China’s central bank has used export revenues to buy trillions of dollars in U.S. treasury bills, partly as a means of keeping its own currency price down.

Peter Navarro, Director of the White House Office of Trade and Manufacturing Policy, has argued that consumer markets across the world have been “conquered” by China largely through cheating. These include export subsidies, widespread counterfeiting and piracy of products, and safety standards so weakly enforced that China is a hazardous place to work.

The consequences for Americans, he notes, included the eventual closing of about 54,000 factories and outsourcing of approximately 20 million related jobs mostly to China.

For all countries trading with China, Navarro has proposals to ensure that commerce with China becomes fairer. Specifically:

  • refrain from illegal export subsidies and abide by the rules of the World Trade Organization (WTO);
  • define currency manipulation as an illegal export subsidy and add it to other subsidies when calculating anti-dumping and countervail penalties;
  • respect intellectual property; adopt and enforce health, safety and environmental regulations consistent with international norms;
  • ban the use of forced labor and provide decent wages and working conditions for all;
  • adopt “zero-tolerance” for anyone selling or distributing pirated or counterfeit goods;
  • block defective and contaminated food and drugs by measures that make it easier to hold importers liable for selling foreign products that do harm; and
  • add strong provisions for protection of the natural environment in all bilateral and multilateral trade agreements.

Canada should take similar initiatives because our own manufacturing jobs have also been similarly declining over the past two decades. According to a survey some years ago of more than 1,000 Canadian businesses, a fifth of Canadian manufacturers responded to a rising Canadian dollar by shifting production to China.

Universal values must be asserted in dealings with Beijing.  The regime continues to rely on repression to maintain itself in office, but what are diplomats from democratic nations doing effectively to show themselves to be the friends of the poor, persecuted and voiceless across China? What are they doing to advance the rule of law and human dignity?

Let’s stop listening exclusively to self-interested China business lobbies. It is now clear that some economic liberalisation in China is not necessarily going to lead to the end of political Leninism and ‘crony capitalism’ in Beijing. There is no rule of law anywhere in China; “courts” are a sham.

Many “experts” on China abroad, including Canada, kowtow to the party-state because they think that their careers require support by the party. It’s time to draw conclusions about China on trade and other issues from facts on the ground.

By David Kilgour

David Kilgour, a lawyer by profession, served in Canada’s House of Commons for almost 27 years. In Jean Chretien’s Cabinet, he was secretary of state (Africa and Latin America) and secretary of state (Asia-Pacific). He is the author of several books and co-author with David Matas of “Bloody Harvest: The Killing of Falun Gong for Their Organs.”


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