As everyone knows, it’s not a good idea to pick a fight with your neighbors, especially if they have no intention of moving. Unfortunately, this lesson seems to have escaped certain quarters of the Trump administration that have ratcheted up trade tensions with Mexico and now Canada.
While Mexico has been the administration’s piñata since Day One, Canada, thinking it was free and clear from this administration’s protectionist actions in light of the warm and positive meeting between President Trump and Prime Minister Trudeau, received a rude awakening last month.
On April 24, the U.S. Department of Commerce imposed duties averaging 20 percent on imports of Canadian softwood lumber (expect a rise in new housing costs), alleging that Canadian firms pay too little to harvest trees. Dairy farmers and producers of steel and energy are also slated for punishment, with the United States claiming unfair trade practices such as subsidization and dumping. (Never mind that that U.S. import restrictions and tax subsidies to the tune of billions of dollars support agriculture, financial services, utilities, oil and gas, telecoms, and scores of other industries.)
U.S retaliation aimed at Canadian dairy is especially egregious and absurd. Any objective evaluation of the situation will show that Canada's dairy policies are not the cause of financial loss for dairy farmers in the United States. The latest USDA dairy outlook report clearly indicates that poor results in this country are are because of overproduction, in the United States and globally. As made clear in the report, Canada is not a contributor to the overproduction problem. Noteworthy also is that dairy trade between Canada and the United States favors our country by 5 to 1. During the past five years, U.S. exports of milk protein substances — including diafiltered milk, processed to create higher protein concentration — to Canada tripled, reaching $90 million in 2016.
Under the NAFTA, the United States has duty-free and quota-free access for milk protein substances. This access has not changed.
Why should Floridians care about these unfortunate developments in U.S.-Canadian trade relations? Because Canada and Florida are natural, complementary partners for both business and leisure. In fact, Canada remains Florida’s No. 1 global economic partner, according to an economic impact study prepared for the Consulate General of Canada in Miami.
Canada is Florida’s fourth-largest international investor, mainly concentrated in manufacturing, construction, real estate, technical and professional services, and transportation, and warehousing. As for exports, Canada’s total merchandise exports to the Florida market have grown by about one-half during the past three years and are now valued at about $5 billion annually, according to Enterprise Florida. In addition to consumer goods, many Canadian products shipped to Florida are intermediate production inputs for Florida’s leading industries such as aerospace, information technology, and medical device manufacturers.
On the import side, Canadian imports from Florida have grown by more than 50 percent over the past decade. Today, Canada ranks second to Brazil as the world’s largest market for goods made in Florida. Canadian businesses and consumers import some $3 billion to 4 billion worth of Florida-origin goods each year including IT products, aerospace products and parts, medical devices and equipment, fertilizers, pharmaceuticals, electronic components, telecommunications equipment, fruits and vegetables (including orange juice), packaged foods, motor vehicle parts, ships and boats, metal products, and nursery plants.
The strong and growing partnership between Canada and Florida is unquestionably one of mutual benefit. In a trade war with Canada, Florida is bound to lose as more than a few Canadian tourists decide to vacation in the Caribbean instead, while Canadian investors may refrain from moving ahead with their projects, and retaliatory actions by Canada vis-à-vis U.S. exports to Canada would negatively affect Florida’s exports, as well.
Hopefully, clearer heads in will prevail, de-escalate the trade tensions, rescind any punitive actions by the Trump administration. Canada is not a good neighbor; it is a great neighbor — one whose trade, investment, and commercial activities are highly beneficial to our state, our region and our community.
Jerry Haar is a business professor at Florida International University and a global fellow of the Woodrow Wilson International Center for Scholars in Washington, D.C.