Canada is a trading nation; it relies heavily on bilateral and multilateral trade to sustain its strong economy. However, with the rise in protectionism, international trade is at risk. Canada’s biggest trading partner – the United States, has reaffirmed their “Buy America” sentiment, which heavily relies on domestic production, rather than on foreign trade imports. Canada has suffered drastically due to this shift in values and has been focusing its attention on new horizons.
Currently, Canada has shifted its trade attention towards the Indo-Pacific Region and is expected to release its Indo-Pacific Strategy later this year (2022). The Indo-Pacific Region is home to 60 percent of the world’s population, which is around 4.3 billion people. It includes the economic superpowers China and India, as well as other strong economies such as Indonesia, South Korea, and Japan. Canada should take advantage of the Indo-Pacific Region because it offers broad lucrative opportunities; however, it also needs to shift its attention towards South America.
To do so, Canada can capitalize on an existing multilateral free trade agreement – the Southern Common Market (Mercosur). Mercosur is an existing trading bloc located in South America and is made up of four countries: Argentina, Brazil, Paraguay, and Uruguay. As a bloc, Mercosur provides a lucrative opportunity for Canada, it represents a real GDP of over $2.5 trillion and has a population of 295 million. This would allow Canada to have a stronger influence in South America, a geopolitical region that is ever-changing with eastern influence from superpowers such as China and Russia.
The largest contributor to the Mercosur trading bloc is Brazil. They are the centerpiece of the group and have the largest economy of all South American countries. However, there is a caveat when dealing with Brazil. Current Brazil president Jair Bolsonaro has created a divide within his country during the COVID-19 pandemic. His views and values differ from the common Western sentiment and he’s creating further separation both internationally and domestically. Bolsonaro has been accused of grossly mishandling the pandemic, which has left 680,000 Brazilian’s dead due to COVID-19. He spreads fake news, champions the anti-vax sentiment, and has failed to institutionalize a proper cash-transfer system which has left Brazilians with a more damaged social welfare than before.
The current Canada-Mercosur talks have stalled, with the latest negotiations being held in 2019. In large part, this can be due to the domestic issues within the Southern Cone, which has impeded these countries to continue further negotiating an agreement. Canada can change this sentiment and further its trade and development goal by providing development aid in the Southern Cone region. Canada can achieve this goal by using FinDev, a Canadian financial institution which supports the growth and sustainability of businesses in developing markets. Using FinDev provides a platform for Canada to access local communities in South American countries to further provide financial stability. This can be done by providing businesses with small interest pay back loans or business education.
Development as a Tool for Economic Power – The China Case Study
China has started to use development as a power to further its global economic dominance. The Belt and Road Initiative (BRI) heavily relies on infrastructure development in countries around the world to further China’s influence and economy. China offers new infrastructure such as roads, bridges, ports, and telecommunication towers (5G); in return they control more land mass to further their international trade. They are also using development as a way to control political issues. This includes having countries buy the Chinese COVID-19 vaccine or vote in their favour at a United Nations General Assembly meeting.
The underlying issue with the BRI is that it doesn’t help the communities in which they provide infrastructure development. These countries accept new infrastructure; however, it does not address the core development needs of the people. In most cases, the population suffers from malnutrition, lack of education, lack of medical aid, and lack of shelter. This form of development has a twist to it, it’s a facade. It does not address the root problem of poverty and never will.
Understanding that development can sway foreign governments is an important tool. China has executed this to perfection for their own personal benefit.
Canada should target Brazil’s social welfare development issues, as president Bolsonaro Cash Transfer program was suspended due to his lack of policy understanding. Using Findev’s tools, Canada can coordinate with Brazil to better implement the cash-transfer program. Providing financial aid and guidance to Brazil should leave Canada in their good grace while providing benefit to the population of Brazil.
With the rise in protectionism, Canada must take advantage of rapidly-growing markets such as Mercosur. The trading bloc provides access to new markets which can further Canada’s inclusive trade agenda and provide the ability to diversify its trade from protectionist countries such as the United States. Diversification has always been at the forefront of Canada’s agenda over the last few decades. Recently with the switch in United States “Buy America” sentiment, it has now forced the issue for Canada to try to further its trade with other countries. Canada must start using development as a tool to further its economic and political agenda. Establishing a cash-transfer program in Brazil through Findev will further help the Brazilian population and Canada’s overall international trade. Taking a different approach on trade through development may allow Canada to tap into more markets and diversify itself successfully. If done properly, Canada can address key development issues in foreign countries and further establish itself as a global trading power.
Adrien Chamberland-Mike is an Associate Editor at iAffairs Canada. He is an MA candidate at the Norman Paterson School of International Affairs, where he specializes in diplomacy and foreign policy. He completed his undergraduate degree in Political Studies at the University of Manitoba. His interests include global regions, such as the Arctic, Asia-Pacific, Latin America, and the Caribbean. He has experience working in the federal government at Transport Canada as a Policy Analyst. He has also worked for the Provincial Government of Manitoba as a Policy Developer at Manitoba Health.