Despite the recently concluded trade deal between Canada, the United States, and Mexico, Canadian Finance Minister Bill Morneau thinks his country’s exporters need to continue looking beyond the southern border for new opportunity.
Canada sends about 70% of its exports to the United States, accounting for one-fifth of its gross domestic product. That makes the country highly dependent on U.S. trade, a reliance that made the recent trade negotiations to update the landmark NAFTA deal all the more fraught for Canada. (It went as high as 85% in 2000, so Canada has made some progress on that front.)
Exporting to the U.S. comes naturally for Canadian companies given it has an enormous, wealthy neighbor that is also close economically, legally, and culturally. But now that the U.S Mexico Canada Agreement, as the updated version of NAFTA is called, is likely to pass, Canadian exporters should resist the temptation to just look South, Morneau said.
“We’re going to have to try and expand trade, diversify trade for Canadian exporters in the context of that,” Morneau said in an interview with the CBC at the Fortune Global Forum in Toronto. “We’re swimming against that tide.” So important is the matter to Canada that Prime Minister Justin Trudeau in June added a new Cabinet-level position called “Minister for International Trade Diversification.”
What’s more, there is anxiety over what kind of spillover from the current U.S.-China trade tensions could buffet Canada. “The trade tension around the world is real,” Morneau said. Canadian government officials at the Global Forum have repeatedly over the three days touted Canada’s new trade deals, including last year’s pact with the European Union.
The minister, in his role since 2015, noted that there was some discussion in corporate Canada about the potential impact on its competitiveness in light of tax reform that has lowered U.S. corporate taxes that have brought them down to about the level of Canada’s.
Morneau’s interview at the Global Forum fell on the day the purchase of marijuana for recreational purposes became legal in Canada. Canada’s federal government has set a few baseline rules and left others to the provinces, with the primary goal of squeezing out the black market. Morneau said the decision had nothing to do with raising revenue from taxes despite a roughly $5 billion market. “But that’s not the key driver,” he said.
When asked whether he himself would partake in the newly legal product, Morneau said pot would not become something he consumes.
“My wife asked me if we were going to change our habits in any way. We decided to stay on the same path of having a glass of wine every night,” Morneau joked.