For Canada’s sake, let’s hope Justin Trudeau can make Joe Biden think bigger

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This article was published 15/11/2021 (1039 days ago), so information in it may no longer be current.

If efficiency was the watchword for pre-pandemic economics, the post-pandemic economy will be guided by the quest for resilience — resilient supply chains, resilient infrastructure, a resilient workforce.

We’ll see it play out this week — and there will be trade-offs.

When U.S. President Joe Biden met with China’s Xi Jinping by video on Monday night, the goal was to contain their rivalry so that lives weren’t lost or blood shed. They succeeded at that.

But on the economic front, the mistrust that led to a complicated, inefficient system of managed trade between the two countries stayed in place.

They weren’t looking to negotiate a removal of trade barriers that the U.S. has imposed, even though they have been responsible for some of the alarming inflation and supply-chain dysfunction that has gummed up the economic recovery.

Sticking to the Trump-induced trade truce designed to cater to domestic interests in the United States, Biden and Xi barely touched on the tariffs and countermeasures that so upset business groups and drives up costs and prices.

When Canada’s prime minister goes to Washington this week to meet with the Mexican and American presidents for the first time since the Obama administration, those instincts will echo loudly.

The United States, as we know, will cling to its “Buy America” stance on procurement and also insist that the U.S. build its fleet of zero-emissions vehicles at home, despite the ink still drying on the renewed NAFTA agreement that is supposed to prevent such protectionism.

That do-it-yourself sentiment doesn’t stop there though.

Burned by the difficulty of obtaining timely medical supplies and vaccines during the pandemic, even Canadian politicians are doing what they can to encourage made-in-Canada production and investment rather than rely on the rest of the world.

We saw the push for that kind of supply-chain resilience from all parts of the political spectrum during the last election campaign. We saw it again from Quebec Premier François Legault last week when he rolled out a “Buy Quebec” post-pandemic economic strategy — just the latest provincial example.

And there’s a vibrant conversation in both Canada and the United States about reviving industrial policy — not whether, but how to best align government policy and business development to improve how our economies work and grow.

It’s a surprising shift, given Canada’s long-standing and successful embrace of free trade and foreign investment as the best route to prosperity.

“The most efficient solutions may not be the best,” former Bank of Canada deputy governor Carolyn Wilkins stated bluntly in a recent speech about growth in post-pandemic Canada.

Relying on market forces can only take a society so far, she argues, and the pandemic — along with global warming and the digitalization of how business works — has shown us the hard way that resilience sometimes needs to come before efficiency.

There’s no doubt that resilience is in short supply when it comes to climate change. The destruction of the highways in British Columbia this week shows us just what kind of trouble we will be in if we don’t quickly figure out ways to be more resilient to the effects of extreme weather. We can hope we will never need the extra reinforcements, but if we’re going to be able to bounce back after the flooding, the fires and the drought, we need to make the investments now.

The same kind of reasoning can be applied to health. A few years from now, we may not need all the domestic vaccine-manufacturing capacity that we’re building right now, but better safe than sorry.

But that preference for resilience over efficiency is less true for the daily commerce that keeps our everyday lives going, and that’s where the conversations Prime Minister Justin Trudeau has in Washington this week will be informative.

Faced with a stubborn battle for economic and technology supremacy between China and the United States, and countries around the world indulging their protectionist sides, Canada may be tempted to turn inwards too.

But we are just too small and too integrated with the United States for that to be practical. All the talk in the world about investing in our own resilience won’t completely offset the low prices, the abundance and the growth that stem from efficient free trade.

That’s why the Three Amigos summit is so important. If we can deepen our ties and persuade our CUSMA partners to think about resilience on a continental scale, rather than a country-by-country scale, we could perhaps all benefit from the efficiency of a large, diverse market at the same time.

Trudeau can make a compelling case on electric cars: the United States may want to produce them all at home, but auto manufacturing is deeply integrated across the continent already, and Canada has the critical minerals we all need to make the batteries for those cars. Include us, and we will all prosper. Exclude us in the name of domestic resilience, and we will all be worse off.

The same logic holds true for all sorts of goods and services, as long as we can trust each other to deliver when times get tough. Played right, we could have our cake and eat it too.

Heather Scoffield is the Star’s Ottawa bureau chief and an economics columnist. Follow her on Twitter: @hscoffield