The effects of a significant re-orientation of Canadian foreign economic policy will begin to be felt in North America through 2012 and intensify further as the decade unfolds. Prime Minister Stephen Harper’s foreign trade policy has produced a landmark free-trade agreement with Brazil, a fact as of August of this year, and is within months from concluding a Comprehensive Economic and Trade Agreement with the European Union by early 2012. Through these recently competed agreements, Canada faces a major shift in diversifying its economic relations away from America and towards a more multilateral basis, resulting in the better management of risk, the enhancement of Canadian competitive positions and better access to global markets.
Both agreements seek a significant expansion and liberalization of trade flows, investment and exchange of students, professionals and private sector interactions to creating a lasting change in the relationship. The deal with Brazil builds on a 1990 treaty that centered on air traffic; now, it includes annual summits at the ministerial level, private-sector meetings and an enhanced air traffic agreement that has serious potential to boost tourism activity between the two countries. As of 2010, Canada exported $2.6 billion worth of goods and services to the Latin American country and imports totaled $3.3 billion. While these amounts are small in contrast to global trade flows, the relationship has the potential to expand exponentially over the long term; if the current policy persists over the long term, additional agreements will certainly build and expand on this arrangement.
The more consequential agreement is between Canada and the EU. With one of the last rounds of meetings not two weeks ago in Ottawa, Canada, the agreement will be a fact by 2012. It represents greatly enhanced access to a market twice the size of the United States that will give much better opportunities for Canadian companies in the high-value added sectors of the national economy to go in the fast lane in respect to global market share in their fields. These include sophisticated hard and software technologies, transportation, and machinery. Numbers-wise, Canadian exports to the EU in goods and services totaled 38.9 billion euros while imports came to 29.2 billion euros; alongside, investment flows are several times larger.
These two developments have the potential to bring about structural shifts in the orientation of not only the Canadian economy, but also Canadian foreign policy away from the United States towards a more diversified basis which makes the country less vulnerable to systemic shocks that rock the giant to the south of us; in a comparative perspective, Canada did fare better, as its banks did not need mind-boggling bailouts to survive the financial crisis, so it is prudential policy to spread risk on a diversified basis to more players in the system and lower the overall exposition of Canada to systemic shocks.
The debt crisis in Europe will certainly put a damper on Canada’s ambitions, but Ottawa profits either way: more competition will enhance the country’s competitive advantages, lower risk and reflect the multilateralism of a global economic system by forming budding relationships with long-term prospects.
Photo Credit: oldmaison