Can Australia learn from Canada?

canada

A highly developed economy is readying itself for an upcoming tight election, an economic slowdown with talk of a recession growing louder, nervousness over a declining dollar, and concern over the impact of freer global markets on key economic and political constituencies. It is mineral rich, and increasingly focused on developing its relationship with the Asia-Pacific region, where it sees its future prosperity guaranteed.

Australia? Canada actually.

There is a lot for Australia to learn from the Canadian experience. While our economies and political systems and traditions are similar, they are not entwined. Although we are complimentary, we are also competitors. No more is this obvious than the drawn-out talks over the proposed Trans Pacific Partnership (TPP) where Australian negotiators are increasingly exasperated by their Canadian counterparts’ reluctance to make concessions over their noisy and politically vital dairy and poultry sectors.

No Canadian concessions most likely means no TPP agreement until at least after the nation’s 19 October election. Given the tightness of the three-way political race, as well as the staunch opposition to the agreement by the emerging force of the New Democratic Party (NDP) and the ambivalence of the Liberal opposition, it would be a very brave Canadian Conservative Prime Minister, Stephen Harper, who chose to push a free trade agenda to the top of the issues pile.

Seeking his fourth term as Prime Minister and hoping to be the first leader in a century to achieve this feat, Harper is running on his record, his reliability and his robustness. His key ministers are supporters of free trade but are reluctant to commit to the demands of the other 11 TPP economies to open up Canada’s sensitive agriculture sector to increased competition, especially from Australia and the United States. As the vote nears in what will be one of the nation’s longest official election campaigns, trade may in fact become of the defining issues as the economy slides towards recession.

Although the nation’s key economic indicators remain relatively robust, the collapsing oil price and a heavy reliance on resources extraction and export make a recession – as defined by two consecutive quarters of contracted growth – more likely than not. The nation’s GDP has been shrinking all year, exposing the dependence on oil and gas as the global energy market retreats. The Canadian dollar, which is usually around parity with its US counterpart, now trades at around 75 cents and is falling.

The proximity and dependence on a single economy – the US, where trade across one bridge between Ontario and Michigan equals total US trade with Japan – is both a blessing and a curse. As US slows or gathers pace, it pulls Canada along with it, disproportionately impacting the smaller nation.

Having recently lost the traditional Conservative stronghold province of Alberta to the left leaning NDP, the Conservatives are increasingly wary of picking fights outside of the realm of national security, economic trustworthiness and not taking risks with untested opposition parties.

For Australians visiting Canada, the reflections and the lessons are stark. While trade is not yet a forefront issue in the political debate, a wild and misleading union campaign supported by some towards the right of the political spectrum over the proposed China free trade agreement threatens to make the federal government’s free trade agenda a larger issue in the national debate. The TPP looms as another major trade debate in the months ahead.

The perceived reliance on the resources sector is another similarity. As Australia’s economy slows, with its own declining dollar and concerns about demand and confidence emerging daily, the fact that Canada sits on the cusp of recession driven by an over-reliance on one sector must be a wake up call to political and economic commentators and practitioners, who have not seen the sense in developing a diversified and resilient economy that can switch gears as activity and demand changes. Likewise, the single-minded reliance on one market ( in our case, China) leaves our economic fate in another country’s hands should the tap be turned off, or the wind change direction.

Australians could do worse than look to their Canadian cousins to learn lessons about the future. Although they sit on the other side of the world as a mineral rich economy with a sparse population and high expectations of high living standards and continued growth, it may just be they are a little ahead of us on the economic road.

This Blog post was originally published by the Australian Institute of International Affairs.

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Innes Willox
Ai Group Chief Executive since May 2012, Innes joined as Director International and Government Relations in 2008. Prior to this he held a number of senior roles in both the public and private sectors: Australian Consul General to Los Angeles (2006-08); Chief of Staff to Minister for Foreign Affairs, Alexander Downer (2004-06); and Manager for Global Public Affairs, Singapore Airlines (2000-04). He began his career as a journalist, with his positions including Chief Political Correspondent and Chief of Staff at The Age.

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