Is Canada Ready to Shift Focus from the US in Overseas Trade?

Prime Minister Mark Carney is embarking on a significant diplomatic mission to India, Australia, and Japan this week, aiming to strengthen Canada's trade ties and reduce its heavy reliance on the US economy. This trip is particularly crucial as it follows recent tensions in Canada-India relations and ongoing trade challenges with the US, highlighting Carney's strategy to diversify Canada's export markets.

Last updated: 28 March 2024 (BST)

What’s happening now

Prime Minister Mark Carney's trip is set to begin on Thursday in India, where he will meet with Prime Minister Narendra Modi. This meeting is significant as it attempts to rebuild relations that deteriorated after accusations of India’s involvement in the killing of a Sikh separatist on Canadian soil in 2023. Following India, Carney will travel to Australia to address the parliament, a rare occurrence for a Canadian PM, and conclude his visit in Japan with meetings focused on bilateral trade and security.

Key takeaways

Carney is visiting India, Australia, and Japan to strengthen trade relations.
This trip follows recent tensions in Canada-India relations.
Carney aims to double Canada's non-US exports over the next decade.
Key focus areas include energy, AI, defence, and food security.
The trip reflects Canada's shift towards diversifying its trade partnerships.

Timeline: how we got here

The recent developments in Canada's foreign trade policy can be traced back to several key events:

2023: Tensions escalated between Canada and India after allegations of political assassinations.
December 2023: Foreign Minister Anita Anand visited India to bolster relations, leading to renewed trade talks.
January 2024: Carney announced plans to diversify trade away from the US, aiming to reduce dependency.
March 2024: Carney's current diplomatic trip to India, Australia, and Japan, focusing on multiple sectors of cooperation.

What’s new vs what’s known

New today/this week

During this week's trip, Carney is expected to announce specific agreements aimed at enhancing trade in critical minerals and AI technologies. The visit to Australia is particularly noteworthy as Carney will address the parliament, marking the first Canadian PM to do so in two decades.

What was already established

Carney's commitment to doubling Canada's non-US exports is a long-term goal driven by existing trade tensions with the US, including tariffs on Canadian goods. Previous meetings between Carney and Modi have aimed to mend ties, and Anand's visit laid the groundwork for the current diplomatic engagement.

Impact for the UK

Consumers and households

While the primary focus is on Canada, UK consumers may feel indirect effects through shifts in global trade dynamics. As Canada diversifies its trade, it could create new markets and opportunities for British products, particularly in the technology and energy sectors.

Businesses and jobs

Canadian businesses, particularly those involved in critical minerals and technology, may find new avenues for growth as they engage with Australia and Japan. This diversification could lead to increased job opportunities in sectors that are crucial for the UK's energy transition and technological advancement.

Policy and regulation

For UK policymakers, Carney's trip may signal a shift in global trade partnerships that could influence the UK’s own trade negotiations post-Brexit. Observers will be watching how these developments might encourage the UK to deepen its own trade relations with non-EU countries.

Numbers that matter

75%: Percentage of Canadian exports that currently go to the US.
20 years: Time since a Canadian PM addressed the Australian parliament.
£2 billion: Estimated value of trade between Canada and India that could be unlocked through renewed relations.
3: Number of countries on Carney's current diplomatic agenda (India, Australia, Japan).
10 years: Timeframe set by Carney to double non-US exports.

Definitions and jargon buster

AI: Artificial Intelligence, technology that simulates human intelligence processes.
Critical minerals: Essential raw materials necessary for the production of high-tech goods and renewable energy technologies.
USMCA: United States-Mexico-Canada Agreement, a trade deal between the three countries that replaced NAFTA.

How to think about the next steps

Near term (0–4 weeks)

Expect immediate announcements regarding bilateral agreements, particularly in sectors like energy and technology, following Carney's meetings in Australia and Japan.

Medium term (1–6 months)

Watch for developments in trade talks between Canada and India to materialise into concrete agreements, which may take several months to negotiate and implement.

Signals to watch

Outcomes from Carney's speeches and meetings in Australia and Japan.
Progress reports on trade negotiations with India.
Any changes in US tariffs that could affect Canadian exports.

Practical guidance

Do

Stay informed about the outcomes of Carney's diplomatic efforts and how they may affect trade dynamics.
Engage with trade associations to learn about new opportunities emerging from these international agreements.
Monitor the Canadian government's updates on trade negotiations for insights into market changes.

Don’t

Ignore the potential shifts in supply chains that may arise from new trade agreements.
Overlook the importance of diversifying export markets for long-term economic stability.
Assume that US-Canada trade relations will remain unchanged regardless of these developments.

Checklist

Review trade policies and agreements relevant to your business activities.
Evaluate potential impacts of trade diversification on your supply chain.
Identify new markets for your products and services beyond the US.
Stay connected with trade bodies for updates on international relations.
Prepare for potential regulatory changes stemming from new trade agreements.

Risks, caveats, and uncertainties

While Carney's initiatives aim to strengthen Canada's global trade position, there are uncertainties that could impact the efficacy of these efforts. The ongoing geopolitical tensions, particularly with the US, could hinder progress. Additionally, the outcomes of trade negotiations are inherently unpredictable, and any agreements reached may take time to implement fully.

Bottom line

Mark Carney's trip to India, Australia, and Japan represents a strategic pivot for Canada as it seeks to reduce its economic dependence on the US. By focusing on diversifying trade relationships, Canada aims to create new opportunities for growth, albeit amidst an uncertain global landscape. The implications for UK businesses and consumers may evolve as these international relations develop.

FAQs

Why is Mark Carney visiting India, Australia, and Japan?

Mark Carney is visiting these countries to strengthen trade ties and reduce Canada's economic dependency on the US by fostering relationships in key sectors.

What are the main goals of Carney's trip?

His goals include enhancing cooperation in energy, AI, defence, and food security, as well as doubling Canada's non-US exports within the next decade.

How might this trip affect UK consumers and businesses?

UK consumers and businesses may benefit from increased trade opportunities as Canada's diversification efforts could lead to new markets for British goods and services.