Familiarity Breeds Respect?

It seems as though one cannot watch a stretch of television (at least in North America) without catching a commercial for some online dating / matchmaking service – and no, I am not speaking of the late night spots where some attractive young lady wants to gossip with you for $5 a minute. The commercials I’m talking about target people who profess to having trouble meeting that special someone who could be ‘the one.’

Whether or not it’s a scholarly grandfather figure, a man doing interviews on the street, or a winsome figure telling the camera that they are seeking a soulmate, the inference is the same – compatibility is what counts. With the divorce rate in most developed countries approaching 50 percent, who can dispute the appeal to such logic?

And yet…

I bring this up not because I am an expert at dating advice or marriage. I have been married for the better part of twenty years and have managed to stay out of jeopardy – which may owe more to my wife’s patience and my dumb luck than anything else. I mention it because the arguments that seem so basic and intuitive to determine who our partners in life should be do not seem to translate elsewhere.

I’m talking trade, of course.

When countries seek out trade agreements, they often remind me of people who cruise bars for a hook-up. You may find that a bit unfair, but is it?

A leader talks about doing a deal with Country X. Okay, so why? Well, they have tens of millions of consumers and billions of dollars of GDP. But isn’t that the equivalent of saying you want to hook up with someone because of their looks and the contents of their bank account? Furthermore, what if you don’t like the same music, or books or films? What if you don’t like the same food, or you can’t agree on whether or not to have children? How long can a relationship last when the best thing you can say about it is “they look great naked and their father’s filthy rich”?

Population and GDP get you noticed. Population and GDP are, to borrow the phrase from the Kelis song, the “milkshake that brings all the boys to the yard.”  But if population and GDP were enough, then why isn’t trade working better? Why are people angry? Why do they protest against the TPP? Why did Britons vote to leave the EU?

Because there is a difference between quantity and quality.

Take, for example, the United States. Its two largest trading relationships are with China and Canada. If you are the superficial type, you look at both and say “China’s got a billion people and Canada has only 35 million. To hell with the Canucks – I’m heading to Beijing with a bottle of bubbly, some flowers and a Barry White CD!”

That is a strategy, but before you uncork the Reunite on ice (very nice) and place that red gauze scarf over the lamp in order to get some mood lighting, consider the following:

According to the Office of the US Trade Representative, the total amount of two way trade between the US and China in 2015 was $599.32 billion while the amount with Canada was only $576.76 billion. China is still more impressive by this measure, but look a little further.

The United States runs a trade deficit with both countries. With Canada, the trade deficit is $15.55 billion. With China, however, the deficit is $367.17 billion.

In layman’s terms, for every dollar of trade the US does with Canada, it’s losing about 3 cents. For every dollar of trade the US does with China, it’s losing 61 cents.   But hey – a billion people…

Okay, so you say ‘that’s not fair – you’re comparing apples to mandarin oranges’. Fine, then let’s look at another country with a billion people and a comparable low wage workforce. Two way trade between the US and India over the same period was US$66.24 billion, and the deficit was $23.34 billion. But that means that for every dollar of trade, the US loses 35 cents – almost half the loss as the trade with the PRC.

Let’s look at the US with Britain. Two way trade in 2015 was US$114.08 billion. Deficit was US$1.85 billion. That’s a loss of a little under 2 cents on the dollar.

But they’re in the European Union (for now), right. Okay, so let’s take another equally large EU country, say Germany, and look at the numbers. Two way trade was US$174.8 billion, deficit was US$74.85, totaling a loss of 42 cents on the dollar.

But, but but…Germany is an industrial powerhouse. That’s not fair! How about…France? Yeah, France! Okay – two way trade was US$77.92 billion, deficit was US$17.71 billion, for a loss of 22 cents on the dollar.

Seriously, folks – I can go all night here….What? Just one more? Well, okay – since you asked nice.

Italy. Two way trade was US$60.36 billion, deficit was US$27.95 billion, for a loss of 46 cents on the dollar.

Quality over quantity, folks. Quality over quantity.

Understand that many free trade deals are about the volumes – the two way trade. When it gets big, certain people make money. They are usually the ones on your TV and in the financial papers who are telling you that life has never been better. Of course, if your pay packet is largely a commission on transactions, how could it not be better? A couple of late night’s in the corner office, and then some quality time with the secret…oops, I mean, wife…as you broil you buns on the beaches of Ibiza.

Surplus, deficit - it doesn't matter. You get paid regardless of the direction the money flows.

Problem is that the overwhelming majority of people don't. They only get paid when the money is coming in. You may not have noticed, but they are the ones who made Bernie Sanders and Donald Trump's candidacies the topic of much kvetching on the news channels. They are the ones who made Brexit a reality. They are the ones who question the value of free trade altogether.

This is unfortunate, and admittedly short sighted. Just because the store managers pay themselves a fortune, or a few people dip their hands in the till doesn’t mean that the business model is flawed. It means there is a greed and graft problem.

It’s interesting to note that long before Canada and the US ratified their free trade deal in 1988, there were other trade deals between the two – dating back as far as the 1850’s and right up to Sir Wilfrid Laurier’s ill-fated attempt in 1911. Funny enough, none of them were called ‘free trade’ treaties. They were called ‘reciprocity’ treaties.

The Merriam-Webster Dictionary defines ‘reciprocity’ as follows: "a situation or relationship in which two people or groups agree to do something similar for each other, to allow each other to have the same rights, etc."  Of all the cases of two way trade with the US I've listed, the ones that approach what one would consider to be 'reciprocity' all have something in common. They are fellow Anglosphere jurisdictions.

To be clear, speaking English helps, but in a world with Google Translate and Rosetta Stone CD's, it should not be overstated. After all, in nearly 100 percent of divorce cases, both the respondent and the plaintiff can understand the words each are speaking.

Like in a more intimate relationship, it is about the intent behind the words, and not the syntax itself. It's not what is said, but what is meant.

The Anglosphere means a certain type of law, a certain type of government, and a certain type of relationship between individuals and civil authority. It makes a difference - even when geography and ethnicity vary. The common reference points that define what is right and what is fair have a tangible effect. 

Just look at Canada’s trade with the European Union. According to Statistics Canada, our total exports to the EU in 2015 were C$39.47 billion, but of that fully C$16.60 billion were destined specifically for Britain. That means that Britain took 42 percent of our products while the other 27 countries combined to take the other 58 percent. Of course, among the others you find Ireland and Malta, who took C$1.55 billion of our products in the same time period. That means that the 3 Anglosphere members among the 28 nation bloc accounted for C$18.15 billion, or 46 percent of the total of Canada’s exports to the EU.

In the decade that I have been advocating Commonwealth free trade, I have had people tell me that I was wrong - and sometimes in not the politest way either. That may account for some portion of my current sarcastic tone. Back then, it was 'Britain would never contemplate leaving the EU', followed by 'Well, even if they left, nobody would have anything to do with them.'

A little over two weeks - fourteen days, including weekends - since Brexit, we have the US and a dozen other countries clamoring for bilateral deals with the UK. We have not only offers of trade from Australia and New Zealand, but offers to 'lend' Britain their trade negotiators to work on the UK's behalf. As I write this, my country's International Trade Minister is in London, briefing Liam Fox on how Canada cut our own deal with the EU!

We also learn that as President Obama was giving his famous 'back of the queue' speech, his trade representative was working on a proposal for a US-UK treaty.

Our crowd has not been proven right because we possess some extraordinary intellect or power to define the future. We got it right because we know that in international affairs, as in our personal lives, compatibility still counts for something.

Some people may think 'familiarity breeds contempt.' In this case, however, maybe familiarity breeds respect.

A letter to my British friends

As a Canadian, I am loathe to make any comment about the affairs of a foreign country, even if that country’s head of state and mine are one in the same.

The fact is, though, the current campaign regarding whether or not Britain should – or should not – remain in the European Union has already had such influence insinuated into it. There are those in EU member states who have declared their opinion as to what Britons should do, and what they may do if the answer is not to their liking.

More importantly, those in the Remain camp declare that “the Commonwealth wants us to stay.” As a citizen of a Commonwealth nation, I do not recall being asked my opinion on this matter. On the other hand, if people in the UK have declared that the feelings and sentiments of Commonwealth kith and kin are valid, then I no longer feel that I have any particular prohibition on stating my views.

In 2006, I travelled to the UK and met with several people in relation to my book “The Case for Commonwealth Free Trade.” I received a very polite and sincere welcome, but also a warning. I was told that while the idea sounded splendid, and that Canada, Australia and New Zealand should certainly avail themselves of the opportunity, the EU meant that Britain could only stand at the sidelines and give its well wishes. There was a sense at the time that the move toward an ‘ever closer union’ was inevitable and that little could be done to halt the inexorable march of time.

Two years later, while my wife and I sat in a hotel room in the Caribbean, we tuned into CNN and the unfolding economic crisis – the precipitous crashing of stock indices and the impromptu gathering of bankers and politicians to show solidarity. Just like the proverbial receding tide at a nudist beach, much came to be revealed. For eight years, we have been treated to terms like ‘stimulus’, ‘quantitative easing’ and ‘liquidity’ on an all too regular basis. That may have been the obvious result, but something else happened.

Theories and plans that had been treated like articles of faith began to be questioned. Like Sir Karl Popper’s theory of falsification, people began to discover limitations to assumptions, where things began to break down. That included the ‘European project.’

To this interested observer, the origins of ‘Brexit’ trace back to the very beginning of the UK’s membership in the Common Market back in the early 1970’s.

It was based on two assumptions and a bit of a finesse.

The two assumptions were that:

• Europe was in economic ascendency while the Commonwealth was in decline; and,
• Economic unity in Europe was necessary to ensure political solidarity against the threat of Communism

The finesse was not necessarily to deny that the planned end-game of the EEC was a ‘United States of Europe’, but to suggest that Britain could sign up for the economic access without taking on the political project.

Four decades later, the reality is as follows:

• The European Union’s long term growth prospects are moribund while Commonwealth nations are among the star economic performers; and,
• The end of Communism eliminated the ideological threat, and what military threat may or may not remain falls within the purview of NATO – not the EU

The finesse, as well, has shown itself to be ineffective. 

Skeptical minds might question how Britain is not part of a nation-building project when it must submit its national laws to a European Court, adopt laws passed by a European Parliament, and elect legislators to said Parliament. Suggestions that Britain is not heading toward inclusion as a province or state of a larger federation is reminiscent of the Black Knight in ‘Monty Python and the Holy Grail’ who, after having had his arms and legs lopped off, dismisses the injuries as ‘but a scratch’ and insists that he’s still up for a fight.

You can say that you belong to a trade agreement, but that trade agreement has a flag, an anthem, a Parliament, a President, a currency, courts and a body of laws. If it waddles like a duck, and it quacks like a duck, then one can only be drawn to a particular conclusion.

Free trade agreements exist around the world and in different guises. In the past decade, Canada has signed more free trade agreements than I can count on my fingers. That, incidentally, includes the recently negotiated agreement with the EU. In none of these instances were we told that we would no longer have a Prime Minister, or that we should stop singing ‘O Canada’, or that Her Majesty would no longer appear on the front of our 20 dollar banknotes.

Understand that Canada kept her sovereignty and political independence when concluding the Canada-US agreement in 1988. Also bear in mind that it was an agreement between a nation with half the UK population versus a nation with ten times our population, who had amassed more economic and political power than any other country or empire in the annals of human history. Yes, 35 million Canadians managed to secure free trade access to the world’s only superpower without having to change our flag or sing a different song at sporting events. There is no NAFTA flag, no NAFTA Parliament full of NAFTA MP’s – never has been and never will.

The experience of jurisdictions in North America and around the world is that you can do trade without a political merger. The EU does trade deals with non-member states all the time, so a post-Brexit UK should not be any different.

And that is the central question – one of politics, not economics.

To this outside observer, leaving means you don’t want Britain to become a like a Canadian province or an American state to a larger federation. Remaining means you are supportive of Britain becoming the jurisdictional equivalent of Ontario or Alberta, Ohio or Massachusetts.

What this outside observer cannot tell you is what you should do. That is fundamentally a decision for the British people. If you believe that the world has evolved in such a way that the future of your society is better served under a different construct that is a decision that you can make. If you feel that the future of Britain – economically and politically – is better served by maintaining political independence, then you have your choice as well.

Canadians and Britons have gone through much over the decades and generations, and the result of this vote will not alter that. It is your choice, and those of us beyond your border wish you luck in this monumental decision.