How should Canada respond to protectionism?

How should Canada respond to rising US protectionism?

  • Start a trade war (i.e. fight tit for tat).

    Votes: 2 16.7%
  • Shift taxes to natural resources.

    Votes: 2 16.7%
  • Do nothing.

    Votes: 1 8.3%
  • Other option.

    Votes: 7 58.3%

  • Total voters
    12

Machjo

Hall of Fame Member
Oct 19, 2004
17,878
61
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Ottawa, ON
How do you think Canada should respond to US-style protectionism?

Personally, I'd say change shift the tax base from income to resources (e.g. gas tax), but don't retaliate with tarifs.
By shifting to a gas tax, we'd create a downward pressure on the cost of services (after all, with a lower income tax, people could afford pay cuts), but a rise in the cost of gas and, as a result, the cost of products from distant parts of the o****ry, thus encouraging us to buy locally. Essentially, this would create a natural 'tarif' effect of sorts but without the potential political repercussions of an actual tarif, thus giving Canada the moral high ground in any WTO dispute against the USA.
A gas tax would also make Canada's resource exports less price-competitive, but a lower income tax could make our services more so, thus encouraging the export of finished higher-value products (i.e. products most of the value of which comes from the work put into it rather than just the value of the raw material put into it alone) and services, which could include such intangibles as tourism and education (foreign students studying in Canada), thus making our economy more tarif resistant in future (after all, how do you place a tarif on people leaving your country to exploit lower-cost services in Canada?).

With such a system, we would see the US resource industry grow while the Canadian resource industry would stagnate. However, we'd find our more service-oriented and more tarif-resistant industries grow possibly at the cost of the US services industries.

What would be yuor thoughts on an appropriate response to growing US protectionism?
 

darkbeaver

the universe is electric
Jan 26, 2006
41,035
201
63
RR1 Distopia 666 Discordia
Start the trade war and make them bleed faster while they are at thier weakest this would accellarate thier collapse. It will be them or us, like is is in reality anyway. The disintigration will not be signifigantly stalled by trade agreements anyway.
 

Said1

Hubba Hubba
Apr 18, 2005
5,336
66
48
51
Das Kapital
More resource dependence? Sounds like a good plan IF we were a third world country. Industrial trade barriers can actually be a good thing if a country uses the opportunity to develop (or in our case re-develop) it's own industrial bases. Also, the service based industry you mention would still leave us import dependent as our industrial base disappears. In today's economy, focus on tourism and foriegn students is better suited to state-capitalist style governments in the developing world.

There is no moral high ground at the WTO. Non-tariff trade barriers are allowed.
 

Ron in Regina

"Voice of the West" Party
Apr 9, 2008
22,843
7,790
113
Regina, Saskatchewan
Focus on establishing new trade partners that are open to free International trade.
Try to trade less with those already established trade partners who impose trade
barriers. Diversify new trade partners as, though more expensive at first, it will pay
off in the end. Start with the G19 I guess, and spread from there...
 

Unforgiven

Force majeure
May 28, 2007
6,770
137
63
See what they want to negotiate and bring to the table the things they don't want to negotiate. For example, lumber and gas, manufactured goods and electricity.

People think that the money that comes from that side of the border would kill everyone if it stopped. While in reality, it would hurt like hell in the US if the resources stopped coming out of Canada. Imagine the biggest oil supplier to the US stops trading with them.

Things are changing and we need to change with it. So arrangements need to be adjusted to work best for the times. No reason why we can't make a better agreement between Canada and the US. This is what we should be looking to do.
 

Praxius

Mass'Debater
Dec 18, 2007
10,609
99
48
Halifax, NS & Melbourne, VIC
How should Canada respond to protectionism?

By Banning all condoms, diaphragms and contraceptives..... you can't have protectionism if you don't have any protection..... Waka Waka.....

Forum Jester, AWAAAAAAYYYY!!!!

Oh by the way, I voted for "Start a trade war (i.e. fight tit for tat)."

If Obama wants to preach about how important it is to get a good relationship with Canada, and then allow something like this to pass that will screw us over due to NAFTA (Which I new was gonna screw us some how in the long run) ....... then I say why make the new guy's job easy if he doesn't want to make it easy?

Tit for Tat.... Start Isolating trade from them due to being burned and protect our interest by expanding our trade with other countries around the world...... we're gonna need to if we want to survive this screwed up budget.
 

Said1

Hubba Hubba
Apr 18, 2005
5,336
66
48
51
Das Kapital
There is no negotiation involved in fast-tracking. It's passed through congress on a yes/no vote. If that's the direction they go.
 

Machjo

Hall of Fame Member
Oct 19, 2004
17,878
61
48
Ottawa, ON
Start the trade war and make them bleed faster while they are at thier weakest this would accellarate thier collapse. It will be them or us, like is is in reality anyway. The disintigration will not be signifigantly stalled by trade agreements anyway.

I agree that a trade war would hurt them, but it would hurt us too. Isn't this a kind of 'drown him even if I drown with him' mentality?
 

Machjo

Hall of Fame Member
Oct 19, 2004
17,878
61
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Ottawa, ON
More resource dependence? Sounds like a good plan IF we were a third world country. Industrial trade barriers can actually be a good thing if a country uses the opportunity to develop (or in our case re-develop) it's own industrial bases. Also, the service based industry you mention would still leave us import dependent as our industrial base disappears. In today's economy, focus on tourism and foriegn students is better suited to state-capitalist style governments in the developing world.

There is no moral high ground at the WTO. Non-tariff trade barriers are allowed.

I agree that trade barriers can help us build or rebuild certain industries, but always at the cost of an alternative industry (after all, the opponent will generally retaliate in some way). Also, industries built around such barriers often become dependent on them, and thus don't develop beyond their own national boundaries and remain inefficient owing to low economies of scale.

As for services, that's my fault ; I should have been clearer. Here I'm using "service" in the sense of individual persons offering services to their employer or client, thus on a broad scale. Labour would have been a better word. So resources would become more expensive while labour would become cheaper. In this way, let's say a Canadian lumber company might become less competitive on the world lumber market. A furniture company might break even (the wood it buys would be expensive, but owing to low income taxes, workers wouldn't be worrying too much about salary increases). A consultant would be quite competitive compared to his US counterpart since he would use few resources other than his brain, and his income tax would be low.

So the US lumber market would likely experience a boom while the Canadian lumber market might suffer. The Canadian furniture industry might be competing neck to neck with their US counterparts (the US company would get its lumber more cheaply, but owing to high income taxes, its workers would need higher salaries). And a US consultant would suffer.

So some industries I could see suffering in Canada through this:

forestry, mining, petrol, etc.

Some I could see breaking even:

any company that uses a roughly equal mixture of resources and labour like furniture making, car manufacturing, resource-dependent tourism (bus tours, etc.) essentially any industry putting more intensive labour into its resources.

Industries I could see benefitting:

science, technology, research, tourism (at least resource-efficient ones like ecotourism, bicycle tours, conferences, etc.), education

Yes, we would still be dependent on imports, but less so than now. Our resource exports would likely drop, but so would our importation of manufactured goods and services (e.g. fewer canadians might travel abroad owing to a cheaper tourist industry at home, and Canadian education would likewise become cheaper, thus keeping more Canadian students in Canada, etc.). So what would likly happen with a resource tax, even without tariffs, would be an overall drop in both imports and exports.
 

Machjo

Hall of Fame Member
Oct 19, 2004
17,878
61
48
Ottawa, ON
Focus on establishing new trade partners that are open to free International trade.
Try to trade less with those already established trade partners who impose trade
barriers. Diversify new trade partners as, though more expensive at first, it will pay
off in the end. Start with the G19 I guess, and spread from there...

I would agree to building ever closer relations with the WTO.
 

Machjo

Hall of Fame Member
Oct 19, 2004
17,878
61
48
Ottawa, ON
See what they want to negotiate and bring to the table the things they don't want to negotiate. For example, lumber and gas, manufactured goods and electricity.

People think that the money that comes from that side of the border would kill everyone if it stopped. While in reality, it would hurt like hell in the US if the resources stopped coming out of Canada. Imagine the biggest oil supplier to the US stops trading with them.

Things are changing and we need to change with it. So arrangements need to be adjusted to work best for the times. No reason why we can't make a better agreement between Canada and the US. This is what we should be looking to do.

Actually, this would be one advantage of a resource tax at the source (i.e. imposed directly on the resource company and not at the pump). Owing to a higher resource tax, the company would have to calculate the tax into its overhead costs and pass it on to the customer. This would mean essentially that all customers of Canada's resource industries would be paying this tax to the Canadian federal government, even if just indirectly through higher costs.

Granted, even we Canadians would have to pay this higher price too. But the difference is that it would come back to us through government services. Looking at it this way, Americans would essentially be paying taxes to the Canadian government.

Of course there is one glitch to this: Americans have the option of shopping elsewhere. But here's how I see it. As long as the tax isnt' too high, Americans would still rather pay that than pay the extra cost of shipping oil translatlantic from countries further away:smile:

So if we look at it that way, they can tariff us all they want:smile:
 

Said1

Hubba Hubba
Apr 18, 2005
5,336
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Also, industries built around such barriers often become dependent on them, and thus don't develop beyond their own national boundaries and remain inefficient owing to low economies of scale.

That is a popular argument, but there is a better opportunity for regional integration, also. Shifting to import substitution would only require short term barriers on finished goods, even though there is a decent supply of raw materials and capital goods. As someone else pointed out, there are other people who need our stuff.

Labour would have been a better word. So resources would become more expensive while labour would become cheaper. In this way, let's say a Canadian lumber company might become less competitive on the world lumber market. A furniture company might break even (the wood it buys would be expensive, but owing to low income taxes, workers wouldn't be worrying too much about salary increases). A consultant would be quite competitive compared to his US counterpart since he would use few resources other than his brain, and his income tax would be low.

So the US lumber market would likely experience a boom while the Canadian lumber market might suffer. The Canadian furniture industry might be competing neck to neck with their US counterparts (the US company would get its lumber more cheaply, but owing to high income taxes, its workers would need higher salaries). And a US consultant would suffer.
People still use resources in their daily lives, outside of work. We would still need higher wages to account for higher resource taxes. While wages are low, things like housing and heating costs would rise. Would things such as taxes based on land usage decrease at the municipal level?



So some industries I could see suffering in Canada through this:
forestry, mining, petrol, etc.

Some I could see breaking even:

any company that uses a roughly equal mixture of resources and labour like furniture making, car manufacturing, resource-dependent tourism (bus tours, etc.) essentially any industry putting more intensive labour into its resources.
That is the bulk of the national industrial base suffering, as it is now. Bus tours are part of tourism, if you want that industry to expand then people need to come in the winter as well as remote places.





Industries I could see benefitting:
science, technology, research, tourism (at least resource-efficient ones like ecotourism, bicycle tours, conferences, etc.), education
Canadian R&D is heavily dependent on government resources as it is. And like I said, the other services are more vulnerable to other economic factors that a host nation has virtually no control over (weather) and is largely dependent on outside sources - although there is a decent tourism and hotel industry, with Canadian customers, already - why do we need more?

Yes, we would still be dependent on imports, but less so than now. Our resource exports would likely drop, but so would our importation of manufactured goods and services (e.g. fewer canadians might travel abroad owing to a cheaper tourist industry at home, and Canadian education would likewise become cheaper, thus keeping more Canadian students in Canada, etc.). So what would likly happen with a resource tax, even without tariffs, would be an overall drop in both imports and exports.

Both would drop with the implementation of Import Substitution - at least as a short term strategy. .
 

Kreskin

Doctor of Thinkology
Feb 23, 2006
21,155
149
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We need a healthy US consumer. I say let them get to work even if it means protectionism for certain industries. At least we'll be able to market other products to a place where people are employed, optimistic and buying again.
 

Machjo

Hall of Fame Member
Oct 19, 2004
17,878
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Ottawa, ON
Said:

You're right that salaries would not necessarily drop. But still overhead costs woudl drop for those industries that are less resource-dependent. But granted they would increase for those industries that are more resource-dependent.

I'm not denying that some of our industries woud suffer from such a shift. The question is, which industries are most valuable? Labour-intensive or labour-poor?

Generally speaking, what I was thinking of is that as the cost of resources, especially petrol, increase, it would make goods produced far away from the place of purchase (and thus would include imports except perhaps at border towns) more expensive, and would make goods produced near our home towns (which, granted, could include those produced just across the border if our home town is near the bordeer, but in most cases would be in Canada) more attractive. So we'd see an overall cost increase in goods produced far away and an overall cost drop in goods produced locally, with goods produced in the region but not locally likely staying about the same.

In this way, it would serve a purpose similar to tariffs. It wouldn't stop trade altogether, but would likely hurt US exports to all but the southernmost parts of Canada.
 

Machjo

Hall of Fame Member
Oct 19, 2004
17,878
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We need a healthy US consumer. I say let them get to work even if it means protectionism for certain industries. At least we'll be able to market other products to a place where people are employed, optimistic and buying again.

That's something I can agree to, and that's one reason I'd oppose tariffs or other forms of discriminatory trade barriers against the US even if they should introduce some against Canada.

In some ways, the US is suffering more than Canada is at the moment, and needs some extra help. Besides, another point is that the US government is introducing a much larger stimulus package than Canada as a percentage of its GDP. This means that Canada could benefit from the US stimulus package more than the US would benefit from the Canadian stimulus package. So it's natural that Americans figure that if they're going to carry all that debt, they might as well get something out of it.

Besides, as I'd mentioned before, even with a moderate US barrier minus any Canadian retaliation, Canada would still benefit significantly from the US stimulus package, with at least some fo that money trickling over to the Canadian side.
 

Machjo

Hall of Fame Member
Oct 19, 2004
17,878
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Ottawa, ON
Another thing I'd like to see would be for Canada to negotiate some kind of labour-mobility agreement with the WTO. That could help us weather this recession too.