What’s Bad for the U.S. is Bad for Canada

Stephen Harper

Stephen Harper

David Frum writes that what he deems poor U.S. economic policy could be good news for Canada:

At recession’s end, the U.S. will be forced to raise taxes heavily just to pay the interest on Obama’s debts; Canada will be positioned to maintain and even reduce taxes. Obama’s indebtedness will exert unending downward pressure on the U.S. dollar, while higher energy prices and superior economic management cause the Canadian loonie to rise.

A decade ago, incomes per capita, even in wealthy Ontario, trailed those of every U.S. state except Mississippi. Obama’s poor economic management offers the opportunity for a stunning reversal of fortunes.

For one thing, I think Frum’s wrong about the merits of the Obama economic agenda. But beyond that, if you grant Frum that premise it strikes me as extremely unlikely that poor economic performance in the United States could possibly be good news for Canada. Exports account for $461.8 billion of Canada’s $1.3 trillion economy. Of that $461.8 billion, 79 percent—or $365 billion—goes to the United States. Unless Canada wants to go through a truly wrenching transition to a completely different economic orientation (ask the Finns about this) then Canada’s economic prospects are going to be very closely linked to America’s. It’s true that poor economic performance in the U.S. could lead to an improvement in Canada’s relative standing (though if I were number three on the Human Development Index the way Canada is, I wouldn’t be too upset about it) but ultimately a rising America is likely to lift Canadian boats, and it’s very hard for Canada to sustain robust growth in the face of a sluggish United States.