Almost every one of my friends has expressed an opinion
against the newly elected President of the United States, and expressed
disbelief in the ability of the US population to elect somebody like him. While I didn’t vote for him, I do believe that
a freely elected person at least deserves a chance to prove themselves. I hope others will do the same.
It seems like an appropriate time to remind those living in
Canada of something a past Canadian Prime Minister (and father of the current
Prime Minister) said when speaking in Washington DC:
“Living next to you is in some ways like sleeping with an
elephant. No matter how friendly and
even-tempered is the beast, one is affected by every twitch and grunt”.
I don’t know that anybody could reasonably argue against the
truth of this observation. While Canada
currently is its own sovereign country, its well-being and future are very much
tied to and even dependent on the United States. Don’t believe me? Here are some fun facts:
- Canada’s GDP will be almost $1.6 trillion in 2016. This is a measure of all the goods and services produced by Canadian companies, individuals and institutions.
- Almost 1/3 of the Canadian GDP is sold to other countries (exports)
- 75% of Canada’s exports are to the United States (approximately $393 billion)
Based on the above, almost 25% of the Canadian economy
depends on having the US market buy their goods and services.
What if that disappeared overnight?
President-elect Trump has spoken about
changing / renegotiating the NAFTA agreement.
Would that hurt Canada? Almost
certainly! Think about it for a
moment. Every time a good or service is
brought into the US from Canada, it helps Canadian workers - one could argue
that it is at the expense of US workers.
A good question to ask is what is the US buying from Canada that couldn’t
be produced in the US? There must be
more than Ketchup potato chips and Blackberry phones. What are the leading Canadian exports to the
US?
- $70 billion of mineral fuels
- $55 billion of motor vehicles
- $30 billion of services (travel, transportation, telecommunications, computer, and information services sectors)
- $22 billion of food and agricultural products
- $20 billion of machinery
- $11 billion of plastics
Let’s look at a few of these.
The numbers for mineral fuels seems significant. The total cost of mineral fuels used in the
US every year is somewhere $700 billion to $1 trillion dollars, so the imports
from Canada represent between 7-10% of US consumption. However, the US also exports around $21
billion of mineral fuels to Canada, as it’s cheaper for Eastern Canada to get
fuel from the US than from western Canada.
That brings the net impact of Canadian fuel imports to about 5% of US
usage – a relatively small amount. This
gap could almost certainly be made up by a little more drilling (drill baby
drill), and expanding the development of clean coal, as well as continuing development
of alternative energy sources. My
conclusion is that the import of Canadian mineral fuels could easily be
replaced by increasing US production.
The next biggest import is vehicles. Really?
Why are American workers and factories not producing these? This could easily be stopped overnight.
By the same token, there’s really nothing unique about the services
imported from Canada. Yes, the cost may
be lower because call center workers in New Brunswick or Saskatchewan can be
paid less than equivalent workers in the US, but the costing difference is
marginal enough that US corporations could easily be incented to use American
workers to fill these needs. Again, and example
of something the US imports that the US could easily provide for themselves.
And so it goes, down the line, through food, machinery,
plastics, ketchup potato chips and Blackberry phones. Much of what the US imports from Canada could
easily be supplied by US workers and resources.
The question will undoubtedly be asked by a Trump presidency, “Why are
we paying Canadian workers and companies to produce what US workers and
companies could produce?”
The impact of making these changes would be “huge” for Canada. Many would lose jobs, many companies would be
bankrupt, governments would have less revenue, and be unable to afford to
supply the same level of programs to the population. Making America great again could well come at
the expense of the well-being of Canadians and Canada.
Of course, I would hate to see that, so what’s the
answer?
The US should simply buy Canada.
It happens all the time in business. One company buys another in order to get products or consumers it wants. Rather than cut off Canada, and cause irreparable damage to our northern neighbors, wouldn’t it be better to make them part of the same family? Buying Canada would solve all the problems, and would be a decision that could more than pay for itself in a few years.
Under President Obama, the US national debt has grown by
more than $9 trillion, and we have very little to show for it. Let’s say we add another trillion to the
debt, and use that to send a check (cheque) of $30,000 to every citizen in
Canada. Think of it like a signing
bonus. People living in the state of
Canada would still keep their jobs, and their companies would still produce
goods and services that the other 50 states would want. Travel to the other 50 states wouldn’t
require a passport, and people living in the state of Canada could naturally
move to any other state they wanted. Canadian taxes would be lower, and Canadians
could write of the cost of the obscenely high mortgages.
The trillion would be paid back, not only by eliminating the
cost of imports, but by creating a new taxation stream for the federal
government.
Presumably, the state of Canada would maintain several
regional governments, roughly aligning with today’s provinces. Those regions would be welcome to continue
programs like health care for their populations, without any impact on the
other regions in the state, or the other 50 states.
Talk about a win-win.
Canadians would no longer have to fear the elephant next door – they would
be part of the elephant!
Now, if only I could get an audience with the
President-elect to pitch this idea before he decides to just cut Canada off
completely…
