By Ambassador Stuart Holliday, CEO of Meridian International Center
The Inflation Reduction Act has served as the centerpiece of broad-sweeping legislation passed by the Biden Administration. Aimed at combatting climate change through green energy investment, reviving struggling communities, and increasing economic opportunity for America’s middle class, its passing has been praised by supporters as a critical step towards revitalizing American industry. However, it has raised some diplomatic conversations in Europe about whether it constitutes protectionism by the United States.
European Union critics argue that the Inflation Reduction Act’s subsidies and tax credits discriminate against products imported into the U.S. to the potential detriment of EU companies, creating an unlevel playing field. With global trade facing headwinds and the global marketplace facing increased challenges due to the events of the past few years, building strong economic relations between nations has never been more critical.
To navigate this precarious time for the global economy, policymakers would be wise to look North for answers. Canada provides an excellent example of a balanced approach to trade, which could serve as a model for the future.
The Case for Canada
Canada has long been an overlooked partner in promoting U.S. global interests. Besides being a strong advocate of global economic cooperation, Canada has immensely supported U.S. efforts to combat terrorism, bolster regional defense, advance energy security, and enforce democratic norms where they have been threatened. The level of cooperation between the U.S. and Canada is perhaps deeper and more diverse than any other relationship in the world. Yet, Canada hardly gets the recognition it deserves, particularly its effective participation in mutually beneficial global trade. Throughout the COVID-19 pandemic, businesses across the world faced unprecedented challenges. Despite this, in 2021, Canada’s two-way trade in goods and services climbed to 14%, reaching a record high of $1.5 trillion. This recovery and growth are partly due to Canada’s participation in Free Trade Agreements (FTAs). Negotiating FTAs with its regional partners, including the U.S., Mexico, and the EU have resulted in diverse and resilient supply chains that have withstand the economic shocks of the past several years. Mary Ng, Canada’s Minister of International Trade, Export Promotion, Small Business and Economic Development, highlights that Canada is the only G7 nation “with comprehensive free trade access to the entire G7 and European Union. Canada’s 15 FTAs cover 61% of the world’s GDP and open markets to 1.5 billion consumers worldwide.” Access to a vast array of markets allowed Canadian businesses and the country’s economy to recover rapidly from COVID-19-induced economic issues, faster than many other developed economies. While its 2020 GDP saw a 0.9% reduction, it fared better than every other G7 nation outside of the U.S.
Embracing Trade and Public Diplomacy
Canada’s stable employment rate and its government’s commitment to harnessing its vast natural resources makes it an increasingly attractive global trading partner. Further cooperation between the U.S. and Canada will help reduce economic challenges facing western economies, particularly when it comes to energy security. One lesson the U.S. could draw from its North American neighbor is how to successfully invest and rebuild its own infrastructure. Canada has prioritized ambitious infrastructure spending on a national level, as opposed to the U.S. which has instead made localized efforts at upgrading to mixed results. The existence of a larger, more centralized plans has helped Canada achieved its trading goals and has enhanced the country’s economic competitiveness in a mutually beneficial way.
Canada’s foreign policy efforts have largely centered around robust public diplomacy initiatives in order to project soft-power and punch above the expected weight of what might be expected from a middle-tier power. Cultural programs, international education, international broadcasting, trade, and investment promotion have all been strategies the Canadian government has employed to project a positive image of Canada globally. This strategy has paid off immensely for a nation with a population slightly larger than those of Poland, Morocco, and Uzbekistan, as Canadian GDP ranks 10th in the world.
The Canadian Brand
Effective trade policy, prudent engagement in international security issues, and effective national branding have helped Canada project a positive image to the world. Timothy Grayson, writing for the Institute for Research on Public Policy, comments, “The maple leaf itself is already a brand that means, ‘Treat me well, I’m a decent and pleasant North American.’”
During the 2023 American National Football League’s Super Bowl, Dave Grohl, front man of the Foo Fighters, took a moment to express his gratitude to Canada for everything it has contributed to society. In Canadian whiskey’s Crown Royal commercial, Grohl began his thank-you list with “legends of music,” pulling out vinyl from artists like Celine Dion and Joni Mitchell to listing essential inventions like peanut butter, batteries, electric wheelchairs and to much surprise, even American football.
Beyond a hospitable disposition, the Canadian brand messages to the world opportunity for mutually beneficial economic cooperation that has paid dividends for its own citizens and the citizens of its partner nations and businesses alike.
A United North America
The U.S.-Canada relationship, a focus of numerous recent Meridian International Center Corporate Council events, will be one of increasing importance as other nations look to North America to confront challenges to the liberal-democratic world order and seek to decouple and diversify their economies away from belligerent and unreliable states.
Following the path Canadian foreign and economic policy has set forth, one of competitive cooperation instead of individual gain, will help the western world remain united as revisionist powers seek to disrupt global economic relations and upend democratic norms.