Good Point: trade is risky too

Canada’s been getting some good press lately, thanks mostly to the non-implosion of Canadian banks. Of course, this is really the minimum one should expect from a bank.

However, Tyler Cowen points out that its not very wise to invest most of the country’s GDP in trade with a nation of risky banks. No matter how safe our domestic banks, the economy will still tank if the Americans don’t have money to trade.

I’m of two minds when it comes to trading with the US. They present us with a large, convenient, and usually stable basket in which to place all our eggs. If we were one nation, nobody would expect Ontario to decouple with Michigan in favour of India. But we are not Americans and it is probably not a good idea to encourage the elephant-mouse qualities of our relationship.

Broadly speaking, trade with the US is good for Canada and should not be discouraged in any way. Yes, there are some potential rough spots with NAFTA (water and culture come to mind) but they are not treaty-killers. Ideally, we would grow our trade with the rest of the world even faster. Canada should be pursuing membership in DR-CAFTA and free trade with the EU, for example. Granted, I’m no economist, but there must be government tools or incentives that encourage international trade.

There’s probably nothing we can or could have done to shield ourselves entirely from this mess, but being coupled so tightly to one trading partner is risky business.


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