U.S. president Donald Trump has been targeting Canada in his criticism of foreign countries. First, he wrongfully accused Canada of burning down the White House in history, then labelled the prime minister as being "weak" and "dishonest".
Trump further escalated the war of words by blasting Canadians for smuggling U.S. merchandise across the border.
Having the American president, who lies every day, attack the integrity of his neighbour, closest ally, and largest trading partner is astonishing and unprecedented.
According to the Office of the United States Trade Representative, the U.S. had a US$12.5-billion trade surplus for goods and services in 2016, exporting $320.1 billion and importing $307.6 billion. In terms of just goods, the U.S. imports more goods from Canada than it exports, resulting in the U.S. having a trade deficit of $12.1 billion in this area.
Thus on the surface, overall trade favours Canada, but if we look closer, it’s the U.S. that receives more benefits.
A recent article on the Forbes website headlined “Blame Oil For Our Trade Deficit With Canada”, penned by Robert Rapier said that since the 1990s, Canada has been increasing its crude oil exports to the U.S.
From 12 percent of U.S. crude oil and products imports in 1990, the figure surged to 40 percent last year, according to the Energy Information Administration. In comparison, U.S. imports of crude oil from OPEC countries fell from 54 percent to 33 percent over the same period.
Rapier estimates that Canada’s exports to the U.S. are worth roughly US$63 billion.
Let’s do some simple math.
• The $12.1-billion U.S.-Canada goods trade deficit is 19.2 percent of the $63-billion crude oil exported to the U.S.
• A reduction of 20 percent in oil exports should balance the goods trade deficit with the U.S.
Readers may ask, would that hurt the Canadian economy? The answer is negative.
After Canadian crude oil is exported to the U.S., it is refined and then resold back to Canada at three times the value, according to one estimate.
If this crude is refined in Canada, not only could that create a great many jobs (whereas building a new pipeline only creates temporary jobs) and keep the profit, government could also collect more tax and consumers would likely benefit, too.
As you can see, first, a trade surplus does not necessarily benefit Canada more; second, increasing exports of crude oil to the U.S. worsens its trade deficit; third, refining crude in Canada would generate more economic benefits north of the border; fourth, spending $10 billion to $20 billion of taxpayers’ money to build a new pipeline to export more oil to the U.S. may not serve Canada’s interest; fifth, Trudeau is spending $4.5 billion to purchase a 65-year-old pipeline from a Texas-based company, which bought it for $0.5 billion in 2007. That is certainly not in Canada’s interest.
Moreover, the fact is that Alberta’s bitumen has no market in Asia. Last year’s export stats show that 99 percent of Alberta’s crude oil and related products exported through B.C. were shipped to the U.S.
If Asian countries are truly willing to pay a higher price, oil companies would not export all their products to the U.S.
Regarding Trudeau’s dishonesty, I have to say that Trump is right in regard to the trade and pipeline disputes.