2017 is shaping up to be a year of consequences for global trade, but amid the gloom, there are reasons for optimism.
In this blog post:
When I was looking for one word to describe 2017, I chose “big” because 2017’s story is one of risks, opportunities and what-ifs.
Why? Because everything happening on the global trade front is focused on the debate about the architecture of international trade and it’s a very serious debate indeed. We use the word “big” because we think this is extremely big — it affects every region, every country and, we believe, every enterprise in the world. We’re even going as far as to say it affects every individual in the world.
Potentially dismantling the entire economic apparatus that we know today will throw into question many of the benefits we’ve seen in the post-war era.
Many are perplexed about why we’re even debating this. Economists at the head of large enterprises — those who’ve seen the benefits of globalization — are asking themselves why a slim majority in some key trading nations is voting against trade.
It turns out there are significant groups angered by the fact that sluggish growth in the post-recession period hasn’t bolstered their personal story. Some lost their jobs just before they retired, others lost their jobs mid-career and still others, the millennials, have been waiting since the minor economic upswing of 2010 to get decent jobs and pay off their student loans.
That’s what’s led to the anti-trade wave of populism and protectionism we’re seeing today. But when we analyse the impact of tearing up NAFTA, for example, that would be the equivalent of raising the average tariffs on goods and services we send to the U.S. by 3.5 or four per cent — enough to throw Canada into recession. But we’re not just talking about tearing up trade deals here. We’re actually talking about, for example, 20 per cent levies. A move like that might take six or eight per cent off our bottom line, and that’s panic mode. The impact is even greater in Mexico.
We can analyse the negative impacts on our own countries and on our enterprises and then we can get angry and say we have to mobilize, but do those on the other side of the argument really care? What they need to be asking themselves is what the effect is on them. If this isn’t a zero-sum game, then they could get hurt – badly. Globalization is like a densely built neighbourhood of high rises. If you want to throw a wrecking ball into that, you’re not just going to take one building down – it’s going to affect the whole neighbourhood.
When you look at how dismantling globalization would impact the U.S. economy, for example, the logic of the story starts to come home. American exports to Mexico support 1.2 million American jobs while American exports to Canada support 1.7 million U.S. jobs. A further 600,000 U.S. jobs have been created by Canadian investments inside the U.S.
In addition to the American jobs that would be lost, we have to remember that globalization keeps costs down. Raising tariffs on Chinese goods coming into America will significantly increase the costs of those items. Meanwhile, if the U.S. makes the first strike in a trade war, that’s just round 1 folks; there will be reprisals from its trading partners around the world.
For the remaining reasons not to despair — and I have five more — as well as why we’re predicting six per cent growth in Canadian exports this year, watch this recording of our Let’s Talk Exports 2017 webinar!
We also provide answers to all the questions Canadian companies have submitted to us on this subject.
