William Watson: How should Canada respond to the Trump-quake? By not being stupid
So, is he crazy like a fox or is he crazy like a mad dog, a spoiled child or your senescent uncle? A sad reflection on our times is that I probably donвЂ™t have to spell out that вЂњheвЂќ is the current president of the United States and titular leader of the free world.
First, in his favour:
Yes, if you thought the world steel and aluminum markets were awash in subsidized supply, sharp tariffs might be a way to shake things up, although it would be better if your goal were free and unsubsidized markets rather than restrictive carve-outs. The problem is not that importing from Canada threatens U.S. national security because perfidious Canada might cut off supply. It is that low world prices in general threaten the U.S. steel and aluminum industries, which are key to national security. Just how threatened they are is an empirical question, however. In March, the index of real U.S. output of raw steel (with an index measure of 100.7) was almost exactly the same as in 2012 (100), though half its peak in 1974 (183.7) and twice its trough in 1982 (52.6). Cars and SUVs, which supposedly are next for protection, arenвЂ™t so handy in combat and donвЂ™t seem very threatened. The U.S. already has permanent 25-per-cent tariffs on light trucks.
Yes, as the president keeps tweeting, Canada does have 270-per-cent tariffs on dairy products. For instance, we have a 265-per-cent tariff on ice-cream mixes вЂ” because if you have sky-high milk prices itвЂ™s hard for your ice-cream makers to survive without sky-high protection themselves. Many of us have been arguing for years that supply management was undermining our trade policy but the Conservative leadership candidate who courageously took on the cartel, Maxime Bernier, got beaten by the cartelвЂ™s subversion of the partyвЂ™s leadership campaign, all within the hilariously elastic membership rules that now typify our parties. (Want to be a Liberal, Conservative, NDPer, or Green? Maybe all four at once? Just click here!) The current Conservative leader joked to the press gallery dinner that he owes his job to the milk lobby. ItвЂ™s actually no joke.
Yes, the G7 is a bit of a bore and in years when there isnвЂ™t a world economic crisis on, which is most years, its much-worried-over communiquГ©s are forgotten in less than a news cycle. (Can anyone not in the G7 business remember what last yearвЂ™s was about?) But if you are meeting with six founding members of an alliance that you head, youвЂ™d better show up on time, stay for all the proceedings, and not call the other members namesВ вЂ” even if youвЂ™re attending only because your advisers made you.
Yes, Prime Minister Justin Trudeau may have been вЂњmeek and mild,вЂќ as Trump put it, in chairing the G7 sessions and maybe in the one-on-ones as well. Politeness obliges the annual chair to behave a little more judiciously than his visitors. But taking umbrage at TrudeauвЂ™s closing press conference for calling U.S. tariffs вЂњkind of insultingвЂќ and for saying Canada wonвЂ™t be вЂњpushed aroundвЂќ is mainly evidence Trump hasnвЂ™t been paying attention to the prime ministerвЂ™s recent tariff talk. Since Trudeau hasnвЂ™t been on Fox News much that is completely believable. But really: The excuse from TrumpвЂ™s people is that if he didnвЂ™t immediately slap down an impertinent northern neighbour one-tenth AmericaвЂ™s size, Kim Jong Un could get wrong ideas? Maybe if, like Trump, Kim flips his strategic vision every 12 hours.
When Canada-U.S. free trade was being debated, opponents warned it was dangerous to put all our eggs in the U.S. basket. Whether it is or not actually depends on how big and far away all the other baskets are. In fact, theyвЂ™re all smaller and very far away. But even the opponents couldnвЂ™t have imagined a U.S. president would want to destroy the international structure his 13 predecessors, from Franklin Roosevelt to Barack Obama, worked so hard to build and then maintain.
Stuff happens, however. Imagine an earthquake created a five-mile chasm at the Canada-U.S. border. Suddenly it would make sense for us to trade more with the rest of the world. But weвЂ™d clearly be poorer. Trade with the rich folk who live just down the road will always be first-best for us. If thatвЂ™s less possible, weвЂ™re worse off.
So Trump-quake makes us poorer. What should we do? We should speak the truth as we see it and do whatвЂ™s best for us, which is: Keep our trade and investment policies liberal and get rid of policy stupidities such as supply management (i.e., legislated high prices for essential foodstuffs). Australia did it in 2000, almost 20 years ago now. We arenвЂ™t as smart as Australians?
If on the contrary we decide we now have to keep supply management because Donald J. Trump wants us to get rid of it, well, the craziness is on us.