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.

Some thoughts on Brexit

It has been a little over ten years since I made a trip to London. Early May, and very warm.

A few months before that, I had published my book ‘The Case for Commonwealth Free Trade’. In the days and weeks that followed, I had made the acquaintance of a good number of people – many of which I am still proud to count as valued colleagues and friends.

During that trip I met with a great number of individuals involved in government and business who told me that they liked the book and it’s general direction (although some felt that the idea of a Free Trade bloc encompassing the entire Commonwealth was far too ambitious).

Almost to a person, they told me that it was a great idea and that Canada should partner with Australia and New Zealand, and possibly a couple of other member states. They also said that it was a shame that they could never contemplate any involvement in such a venture. They explained that membership in the EU precluded them from ever contemplating signing on, but that they wished us every success.

During a few candid moments in private, I asked whether or not they saw a day when this might change.

Almost all of them, regardless of party stripe, remarked that they didn’t see this as a possibility, although they would certainly back a change.

For years, I had the sense that the sentiments in Britain were akin to what you would see at a grade school dance. Boys lined up along one wall, with girls along the other. A slow dance is playing, but the only thing dancing are the lights reflecting from the mirrored ball.

Possessing perfect knowledge and some degree of mind reading, you determine that there are at least a half-dozen cases where a boy would not be refused a dance by the girl he likes and vice versa. A dispassionate and neutral observer might see the attractions, but they don’t. What they see is the prospect of humiliation and disappointment. Given the notorious degree of self-consciousness among adolescents, those involved sit through ‘Stairway to Heaven’, moving either to the washroom or the refreshment table, not to the opposite wall.

Almost every Briton I spoke to was unhappy with the European Union. Yes, they wanted to trade freely with the continent, but the whole incremental move toward a United States of Europe was an entirely different matter.

The thing is that in the spring of 2006, the call to have a referendum was a decidedly minority view, and the push to quit the EU even more exclusive.

Today, ten years and about five weeks later, not only is there a vote on the issue, it will be decided in less than a week and if polling is to be believed, that departure is a real possibility. In short, a significant portion of the British electorate has summoned the courage to cross the dance floor and seize the moment.

What changed?

A lot of people will have their own views on what represented a pivot moment, and many theories are equally valid. Having said that, I have my own.

In October of 2008, while celebrating our 9^th wedding anniversary, I lay in a hotel suite in a Cuban resort. The television was turned to CNN and the camera was panned to a group of Congressmen and Senators in Washington. At the same time, to the side of the image, one could see the Dow Jones and NASDAQ dropping like a two ton boulder off a sheer cliff face.

Like a great deal of the world, we were shocked and nervous, although the abundance of rum and sun were effective distractions.

The biggest crisis to the global economy dictated a concerted response, and the world through everything it had at the situation. Interest rates at near zero, deficit spending and ‘quantitative easing’ on a historic scale.

The good news is that it worked, but even the most effective medicine has some nasty side-effects. When using chemotherapy, doctors can kill cancer cells (which is good), but the tradeoff is to knock your immune system down to nearly nothing.

In fixing the global economy, governments and authorities did something else. They exposed their weaknesses. Like the proverbial receding tide at a nudist beach, modesties and shortcomings were revealed.

The Eurozone had always had its inconsistencies and contradictions. Harmonizing currencies among still sovereign states with greatly differing economies and economic policies was going to be a difficult task at the best of times. The difficulty lie in the fact that abandoning a significant symbol of nationhood – a currency – meant rolling back the cause of an ‘ever closer union’. That’s what it’s been all about – a European Parliament, European Courts, European laws, and yes – European money.

The Euro was not so much a deception, but a delusion – that you could harmonize the currency before you harmonized the forces that controlled and regulated it. But delusions are as stubbornly held as deceptions, and are defended just as vigorously. The defense is also similar in its pathology – defend a deception by laying down another one to cover it. If that doesn’t work, then add another.

The problem is that a delusion, no matter how stubbornly held it is, is just that – a delusion.

The delusions in this case led to drastic economic measures, and it is in the effects of those drastic measures that everyday citizens felt the pain – higher unemployment, bank failures and credit constrictions.

Had 2008 not happened, I doubt that Britons would be presented with the referendum. There would certainly have been calls for one, but they would have been dismissed by the powers-that-be as a ‘fringe’ opinion.

Delusions have a short shelf life, and even with that, require a great deal of energy to sustain. For those fighting to create a ‘United States of Europe’, the delusions have been plentiful, and the effort to keep them up equally demanding.

The delusions that you could ignore national and cultural identities and histories, that you could introduce a single currency without fully merging economic and political power, that you could create political institutions without giving them democratic legitimacy are all significant, but they pale in comparison to the one that – for Britain – started it all.

It is the delusion that you must give up your flag, your Head of State, your currency, your laws and your system of government in order to sell 10 percent more widgets.

This coming Wednesday, the world will learn if the delusion holds, or if it collapses under the weight of its own inherent inconsistencies.

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.

Ruminations on the British election from a nosy by-stander

As shocking as the recent UK election has been for the British people, and for pundits of all stripes, it has the eerie feeling of familiarity for those of us in Canada.

To deconstruct this result in an organized and thoughtful manner would be pointless, so I humbly offer an outsider’s view:

1.    The economy – Sure, it’s not where people want it to be, but based on the measures, it’s doing reasonably well. Advantage to the powers that be.

2.    Holding the base – In agreeing to be part of the governing coalition, the Liberal Democrats signed on for policies that were anathema to their base. Your base is party members, the people who canvass, phone neighbours, and cheer at rallies. They donate their time and money. They lend their name and reputation to your cause. As Canada’s federal Progressive Conservatives learned in 1993, lose your base and you will lose your deposit.

3.    A mile wide, but an inch deep – UKIP and the SNP demonstrate the fact that when it comes to votes in a Westminster style First-Past-The-Post system, you need quality as much as quantity. Back to the 1993 Canadian federal election, the total number of votes cast nationally for the Progressive Conservatives and the Reform Party was roughly at par.  Yet, the former earned two Commons seats while the latter attained over 50. The Bloc Quebecois received even less than them and ended up with even more seats than that!

4.    Fear trumps all – It is an old bromide of political veterans that voter intentions really get sorted out in the final 7 days of the campaign. That’s when the undecided start to move and soft support begins to shift. In this vote, that timeframe was dominated with reports that neither the Tories nor Labour could get a majority, and that the SNP would be the kingmakers. If you were a voter in England or Wales who fretted about the notion that the people who initiated the independence vote last year would have any control over Parliament, you may have decided to pick the party who was closest to the finish line. It was Hadrian’s Wall rebuilt with ballot papers instead of stone and mortar.

No analysis would be complete with some nosy neighbor advice, so here it is:

1.    The promise of a Referendum on Europe will need to be kept. Given popular opinion on the idea of a vote, let alone how it would go, a government that reneged on this promise would burn through its political capital like a rogue currency trader on a bender

2.    The Unity issue needs more than an ad hoc treatment. It is all well and good to say that you will keep your referendum promise and give more to Scotland, but understand that in doing so you set a precedent. Imagine coming home to your four children and giving one of them a brand new PS4 gaming console, then explaining to the other three why they got nothing. Yeah – thought so. Remember that a big component of the success of Canada’s Reform Party was based on the sense that Ottawa favoured Quebec at the expense of the western provinces. If the voters in England and Wales feel that Westminster is prepared to give Scotland things that no one else will get, then expect a bump for Plaid Cymru and whatever party seizes on comparable English discontent the next time around.  In the end, the best approach may be the dreaded f-word…federalism.

3.    Scottish votes for Scottish questions, etc. is a dangerous idea – How would this work? Imagine the Gentleman Usher of the Black Rod playing nightclub bouncer and kicking out 90 percent of the elected MP’s at Westminster because the government needs to vote on buying 5 acres to extend the runway at Edinburgh Airport. How does quorum work on this? With only one MP in Scotland, how does the government argue its policy? Would every bill, in this instance, be a private members bill? Even if you resolve all this, what if 80 percent of the money for said airport expansion came from English and Welsh taxpayers?

When all is said and done, every election is a setup for the one to follow. Those of us in Canada who have endured referenda and numerous constitutional debates should have some empathy for the British people. Even if we’re too polite to give advice (which evidently I am not), we should be willing to offer some reference to consider on the long road ahead.