Op-ed: Fair trade, not free trade, is what this country needs

Donald Trump’s vow to rewrite NAFTA could provide both pitfalls and opportunities for Canada
Trucks
Trucks crossing the Thousand Islands suspension bridge, for illustrative purposes only.

America’s new president, Donald Trump, was elected partly – if not primarily – because he is a protectionist. And what, I ask, is wrong with that?

I’m a protectionist. I believe many others are too, in that they want to protect their homes, their families, their jobs, their country. And, yes, maybe even their culture and their way of life, although it is not politically correct to say so.

Protectionism is a dirty word to many people, especially when applied to international trade. Free trade brings prosperity and lifts countless millions of people out of poverty all over the world, its supporters claim.

I believe that fair trade, not free trade, is the way to go. And I just hope that Donald Trump thinks so too. If not, the outlook is bleak for Canada.

Canada and the United States are the perfect trading partners. Each country makes or grows products or has natural resources that the other country needs. They exchange goods and services freely. And, when all the bills are paid, the cash flow across the border is about the same in each direction.

Isn’t that wonderful? Hundreds of billions of dollars flow back and forth each year, and the economies of both countries are strengthened.

Contrast that with Canada’s trade with China, one of the world’s two superpowers along with the U.S. A couple of years ago, Canada’s trade deficit with China was running at almost $1 billion a week. Lately, the trade gap has narrowed to about $1 billion a month in China’s favour.

 

China has some 40 times as many citizens as we do, yet we buy more from them than they buy from us. There’s something wrong there

So much of what we buy is made in China, it’s surprising that the trade gap is not wider than it is. But remember this: China has some 40 times as many citizens as we do. Yet we buy more from them than they buy from us. On a per capita basis, we buy 40 times as much from them as they do from us. There’s something wrong there.

Trade deals are not rocket science. Any such deal must meet one essential condition: It must be beneficial to both countries.

Take, as an example, two small island nations, located not far apart. They agree to a free-trade deal. One island honours the deal, but the other island finds it can buy what it needs more cheaply elsewhere. The result: One island gains and one island loses on the deal.

And don’t think it’s not important if we buy more than we sell abroad. A trade deficit means Canada’s wealth is gradually being exported to China or to whomever we are trading with at a loss.

It’s a safe bet that bilateral or multilateral trade deals are good for the traders and merchants in all countries concerned. It’s also a safe bet that these groups urge their governments to make such deals.

But, just as in life, there are winners and losers in most deals. What is needed in any trade agreement is a mechanism that ensures all sides benefit equally. That’s the difference between free trade and fair trade: If I buy $100 billion of goods from you, you must buy $100 billion of goods from me.

Donald Trump has vowed to renegotiate, if not scrap, the North American Free Trade Agreement that lowers the price of goods the United States imports from Canada or Mexico.

For his presidency to succeed, Mr. Trump surely needs international friends. And he has none better than Canada – and, probably, Britain, which no doubt will also be seeking a fair-trade deal with the United States and Canada, now that British voters have chosen to leave the European Union.

Let’s hope the president recognizes this. We may see Donald Trump, Justin Trudeau and British Prime Minister Theresa May shaking hands on a three-way deal that is good for all of us.

Michael Prentice is OBJ’s columnist on retail and consumer issues.