The Importance of International Trade to the Canadian Economy: An Overview

Since the divisive 1988 election fought over free trade with the US almost 30 years ago, Canadians have developed a consensus that more trade provides net benefits. Free trade agreements signed in the 1980s and 1990s, and then China’s entry into the WTO, had a transformative impact on Canada’s economy. Productivity soared in manufacturing and natural resources which surged with guaranteed access to export markets, while prices fell for a wide range of consumer and business goods and services. Canadians take these benefits for granted, until protectionist threats remind us how much we have gained from trade and therefore how great is the threat of its loss.

After decades of steady progress towards freer trade, the recent rise in protectionist sentiment in many parts of the world seem especially threatening to Canada. However, these threats may be exaggerated. The UK vote to “Brexit” from the EU presents Canada with an opportunity to increase trade with its most important trading partner in Europe. Trade with Asian nations has grown rapidly in recent decades, even without the impulse of trade deals such as the TPP. Canada should resist any temptation to emulate a withdrawal to within its own borders that some of its trading partners rashly may be contemplating. Indeed, the threat of protectionism may even be a benefit; by drawing attention to how external trade has boosted our economy, it makes a powerful argument for the provinces to lower the many barriers to trade within Canada

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