Protectionism, an Opportunity for Canada?

5 Jun

Protectionism, an Opportunity for Canada?

John Adams said once that every problem is an opportunity in disguise. Here is how this works…

For any business, it is never a good idea to become dependent on only a single supplier or customer. The reason for this is simple. If you are in that situation, then you are tied to whatever terms you get. When the terms are good, you are up, and unfortunately, the opposite is true also. For a  business to be sustainable, it needs to have multiple customers and more than one supplier for key resources. This way if the terms of the business relationship weaken with one relationship, there is hopefully another that is still strong.

For Canada, historically we have always had the United States as our single largest trading partner. While nearly every economist working today has stated that protectionism is not good, we should also see that this is an opportunity to fix a problem.

So where are those key secondary relationships we can look towards?

Canada now has a free trade agreement with Europe (CETA) and recently reached a deal with the Trans-Pacific Partnership.

Europe and the TPP countries all need Canada’s natural resources and we also need to have more than one major customer. For example, Japan is a member of the TPP and is a G7 country. They also have a historic need for raw materials, which Canada could supply in abundance and at a competitive price thanks to free trade. So a solution for rising costs due to tariffs could only be a phone call away for a Canadian materials supplier that is effected by tariffs in the US.

As we are pushed in one relationship towards protectionism, a good business strategy for Canada is therefore to look to the free trade relationships we now have and expand those.

The protectionism problem is also an opportunity because it compels a businesses look for multiple suppliers and customers in new ways. In the long run this is always a good thing.