James Laxer's Blog

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James Laxer is regularly asked to comment on current national and global issues by the Canadian media and frequently writes columns in major newspapers and periodicals.

The Harper government's bogus case for a border deal with the U.S.

| September 26, 2011

The Harper government has been negotiating a comprehensive border deal with the United States. It is being presented to Canadians as an agreement that will yield greater access to the American market for Canadian exporters in return for the harmonization of Canadian security arrangements with those of the U.S. The idea is that we will benefit economically while satisfying the Americans that we are solid on the all-important issue, for them, of national security.

The Harper government makes case that the deal is necessary because Canadian exports have been and are being hampered by the thickening of the border since the terror attacks of September 11, 2001.

The case that Canadian exports to the U.S. have been harmed since 9/11 as a consequence of the implementation of new American security measures at the border is entirely bogus.

Let's examine the facts:

In 2000, Canada exported US$230.8 billion worth of goods to the United States. In 2001, the year of the terror attacks, Canadian exports to the U.S. declined to US$216.2 billion. In 2002, there was a further decline in the export total to US$209.1 billion. The following year, however, the decline in Canadian exports to the United States halted and from 2003 through 2008, exports to the U.S. increased dramatically. In 2003, exports were worth US$221 billion; in 2004, US$256.3 billion, well above the total in 2000. In 2005, Canadian exports to the U.S. soared to US$290.3 billion, sixty billion dollars higher than the total for 2000. From there, the upward progress of Canadian exports to the United States continued unabated -- to US$302.4 billion in 2006 and US$317.1 billion in 2007, reaching a record high of US$339.4 billion in 2008. At this point, Canadian exports to the United States had soared by more than one hundred billion dollars a year above the figure for 2000. Clearly American security arrangements at the border were not holding Canadian exports in check.

In 2009, however, the value of Canadian exports to the U.S. plunged by US$113 billion dollars, to a total of US$226.2 billion, a savage drop that had vast implications for the future of the Canadian economy.

The reason for the plunge, of course, had everything to do with the great economic crash of 2008. It had absolutely nothing to do with post 9/11 U.S. security arrangements at the border.

In 2010, Canadian exports to the U.S. climbed back to US$277.6 billion, up just over fifty billion dollars from the previous year, but still over sixty billion dollars less than in 2008. While the pace of Canada's exports to the U.S. was somewhat higher for the first half of 2011 than in the same months of 2010, the slowing pace of U.S. growth in the second half of 2011 threatens the level of demand for Canadian commodities. (The falling price of oil and the drop in the value of the Canadian dollar reflect the market's assessment of these trends.)

When we examine the exports of Canadian products, overwhelmingly to the U.S., sector by sector, the picture becomes even clearer. The value of energy exports peaked in 2008 at C$125.7 billion. In 2010, energy exports were worth C$90.8 billion. The falling price of oil threatens to prevent a recovery in this sector. The export of automotive products peaked in 2006 at C$81.9 billion. In 2009, the export of automotive products had plunged to C$43 billion, recovering somewhat to C$56.8 billion in 2010. Exports of industrial goods and materials, made up of metals, metal ores, chemicals, plastics, fertilizers etc. peaked at C$111.3 billion in 2008, dropping sharply to C$79.1 billion in 2009 and recovering to C$96.5 billion in 2010. Forest products exports were at C$33.4 billion in 2006, plunging to C$19.5 billion in 2009 and recovering somewhat to C$21.9 billion in 2010.

While Canada has continued to have a positive balance of trade with the U.S., the Canadian surplus has plunged from a peak of US$78.3 billion in 2008 to US$21.6 billion in 2009 and US$28.5 billion in 2010. That dramatic decline has led to Canada running an overall trade deficit in goods with the rest of the world as a whole, something which has been very rare in previous decades. The overall impact of this shift is reflected in what has happened to Canada's Current Account (balance of international payments). In 2006, Canada had a surplus in its Current Account (with the rest of the world) of C$20.5 billion. The following two years the Current Account remained in surplus, C$12.8 billion in 2007 and C$5.3 billion in 2008. Then came the plunge to a Current Account deficit of C$45.2 billion in 2009 and C$50.9 billion in 2010.

The weakness of the U.S. economy has led to the dramatic results spelled out above.

Canada is at a crossroads in its economic course, a critical historical moment. And there is precious little relevant attention to this among politicians in all political parties and the media to these developments.

The Harper government's strategy is to promote tar sands exports and the construction of a pipeline to carry tar sands oil to be refined south of the border. Along with this, the Harperites are pushing a comprehensive border deal with the United States. The deal to be unveiled in a few weeks includes plans to share security-related information about Canadian citizens and residents with American security agencies. For the deal to be implemented, according to a report released by the Rideau Institute, "Canadian privacy laws will need to be violated or weakened." At stake is Canadian sovereignty as Canada takes a giant step toward inclusion within an American continental security perimeter.

The Harper government will attempt to sell this agreement as necessary for Canada to enhance its exports to the U.S.

As has been shown here, the weakening of Canadian exports to the U.S. has everything to do with the economic crisis in which the United States now finds itself and nothing to do with the security measures being taken at the border by the U.S. since 9/11.

The border deal should be scrapped.

What we urgently need is a debate about Canada's economic future. The Harper government is leading us into a dead end, emphasizing tar sands exports and an intensified effort to bet our future on the markets for Canadian commodities south of the border. For this country to succeed in the 21st century, Canadians need to face the twin realities of climate change and peak oil. Canada will succeed or fail depending on how it faces the challenges of rebuilding our cities, transportation systems and energy delivery systems. We need to establish new industries in a host of fields and to rethink our trading strategy with the rest of the world, not betting everything on deals with the Americans.

Instead of fostering the needed debate, the Harper government is tying us every more tightly aboard the chariot of a declining superpower.

This article was first posted on James Laxer's blog.

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