July 18, 2006: Trade

Diversifying trade questionable policy Danielle Goldfarb, Financial Post, July 15, 2006
www.canada.com/nationalpost/news/story.html?id
=b6ae795e-9ddb-4877-8d69-1a2aaabf450c

Would Canada lower its risk further by diversifying trade away from the U.S.? The record suggests such a policy could make the country worse off economically. Canada's recent export mix has been relatively stable and resulted in moderate to high growth. Canadian exports outside of the U.S. were more volatile and grew less on average over the past decade. Being less focused on the U.S. in recent years might have lowered both export growth and stability.

But does Canada's trade concentration in the U.S. leave us particularly vulnerable to U.S. trade actions? Trade disputes are certainly important to specific sectors and receive a disproportionate share of media attention. But these disputes affect only a tiny share of overall Canadian exports and trade continues even in those sectors subject to dispute. It hardly makes sense to reduce Canada's share of total trade going to the U.S. to avoid disputes in a small subset of that trade.