“We don’t need their lumber. We have massive fields of lumber. We don’t need their lumber; we have to unrestrict them because stupid people put, you know, restrictions on, but I can do that with an executive order, we don’t need anything they have. We don’t need their dairy products. We have more than they have. We don’t need anything.”
So says Donald Trump.
Trump seems to not understand that trade isn’t a favour nor is it “subsidizing” Canada, nor does trading with Canadians make us a state. For a businessperson, he seems to have a poor understanding of basic economics.
The reason the United States buys anything from Canada is because they need it. Trade is not in luxury goods but in necessities.
Take lumber. Massively important to the Prince George and northern economy. And our lumber is massively important to the American economy.
I am told by people in the industry that Canada accounts for around 30 per cent of the American lumber market. BC accounts for a majority of the lumber so many items – houses, stores, furniture, etc. – built south of the border have significant Canadian content.
Right now, softwood lumber still has a 15 per cent tariff on it, charged at the border. Our lumber companies – for the right to sell into the American market – are paying a heavy price and the only way they can possibly recoup the costs is by charging more. However, the market is depressed and so our companies are losing money.
How then is this the United States subsidizing Canada? If anything, it’s the other way around. We keep selling into their market at below the costs of production simply to keep our market share.
Perhaps we really do need to find other markets. After all, if Trump doesn’t want our lumber, others will. Ditto car parts and dairy and many other things that the new president has mused about.
What he hasn’t talked about is our oil or minerals. These are both critical to the U.S. economy. As much as he would like to pretend the U.S. is self-sufficient in oil, it isn’t. About 27 per cent of their daily consumption comes from us.
Right now, we are tied in by the Free Trade Agreement signed in the 1980s, and its successors, to sell oil to the U.S. at below market value. Indeed, the whole point of the original FTA was to get permanent and unfettered access to our oil. The United States’ domestic production was on the decline back then and they needed a way to ensure that they had a stable supply from a friendly country.
We sold it to them at a discount in exchange for removing tariffs and restrictions on the import and export of chickens, among other things.
If The Donald goes ahead with his tariffs, perhaps it is time to rip up the free trade agreements and start charging world prices for our oil. Let’s see their economy survive that blow. After all, they do need our oil. They need us.
