Some say Canada’s links to the U.S. are done, finished, a thing of the past and should be abandoned: “There is no returning.” But that's short-sighted, writes Terence Corcoran. (Credit: Wikimedia Commons/Postmedia files)
From food shoppers in supermarkets to the upper echelons of economic and political power, the transformation of Canada into an anti-American nation appears to be underway. In Toronto today, the Canada-United States Economic Summit will explore turning the Canadian economy away from the U.S.
Some love the prospect. The idea of a national boycott of all things “Made in the USA” is turning into a “Made in Heaven” opportunity to launch a “Made in Canada” buying crusade. News stories, consumer interviews and buying guides have permeated the media in recent days, latching on to a growing anti-American sentiment among average Canadians. One news headline declared a “patriotic wave” among Canadian consumers against everything American, from produce to automobiles and vacation travel.
The patriotic wave is totally anti-Trump rather than anti-American, since it is more than likely that Canadians still want to travel to Florida and California and buy U.S. wines and oranges. For Canadians, the United States has long been a giant province to the south with shared culture and broadly individualistic political norms.
With a U.S. president who thrives on polarities and political confrontation, it is not surprising that Canadian individuals feel slighted and want to react, but the question is whether it makes any economic sense to adopt politically driven personal shopping motivations. Political shopping sacrifices the standard objectives of maximizing personal satisfaction — in taste, style, need, want and price — in favour of abstract and incoherent political concepts that have no value and may ultimately have detrimental economic consequences.
The same considerations apply to business and corporate decisions. The Trump tariff war is prompting a wave of calls for nationalist policy-making, even before we actually know how the tariff process will end. At the Canada-U.S. Economic Summit today, and across the commentary world, Canadians are being told to turn away from the U.S. and look elsewhere for markets.
Former Bank of Canada governor Stephen Poloz told BNN Bloomberg that the federal government needs to direct more resources at companies. “What I’m talking about is incentivizing investment,” said Poloz. According to BNN Bloomberg, Poloz said policy-makers should be placing a big emphasis on encouraging investment in Canada to create a stronger and more resilient economy that can better withstand external shocks like the Trump trade war.
Policy weaknesses are obvious regardless of Trump. Interprovincial trade barriers and the agriculture supply-management regime need reform, although these are policies that could and should have been reformed decades ago.
Most intervention proposals, however, call for a shift away from the U.S. economy. But as William Watson noted in FP Comment the other day, refocusing the Canadian economy — they call it “trade diversification” — is a long shot. Such diversification, Watson concluded, is “a poor substitute for tariff-free access to a market of 500 million people, including many of the world’s richest people.”
The most talked about diversification option is to expand alternative pipeline and shipping projects for Canada’s vast storehouse of fossil fuels. A leading candidate for the job is said to be the Energy East pipeline, a project first proposed by TransCanada Pipelines more than a decade ago. Within days of Trump’s tariff attack, calls for a revival of the Energy East pipeline emerged. Investment executive Eric Nuttall called for “a pipeline to the East Coast to supply Canadian refineries with domestic feedstock, while also more affordably accessing other markets.” Another op-ed this week said it is “imperative we recover our nation-building muscle memory and expedite east-west infrastructure and offshore export facilities.”
The original Energy East plan was promoted by TransCanada as a modern replay of the historic national railway projects, and by the federal Conservative government as part of a strategy to make Canada an “energy superpower.“ The pipeline would have crossed 4,600 kilometres of Canadian territory from Alberta to Quebec and the Maritimes. Then it all started to fall apart. Energy East was killed in 2017 by TransCanada for many reasons, including opposition from Indigenous communities, environmentalists, Quebec politicians and local towns and villages, and regulatory squabbles.
While all these obstacles were real, the most important one was the price of oil. When TransCanada announced Energy East in 2013, oil had risen to US$110 a barrel — a price many predicted would be the new normal. TransCanada dropped Energy East in 2017 after the price of oil had fallen to US$50 a barrel. Measured in today’s dollars, the U.S. price of oil in 2013 was equal to US$150 a barrel today. The market price of oil today is US$70, indicating a more than 50 per cent decline in potential revenue. Meanwhile, the cost of building Energy East today would be much higher than the $15-billion estimate set in 2013.
Some say Canada’s links to the U.S. are done, finished, and should be abandoned: “There is no returning.” But it makes no sense economically or politically to abandon more than a century of history after just two weeks with an unpredictable U.S. president.
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