Stop Laughing at Canada

As we enter a new year that promises to be filled with acrimonious trade disputes, it might be helpful to look at the experience of a country that has repeatedly found itself in trade battles, yet has benefited from open trade. The country is not the U.S. Or Japan. Or even France.

The country is Canada, and its ability to amicably resolve its difficulties makes it an international model of trading prowess.

I know, the Great White North is an unlikely candidate for global economic leadership. It is a small market, a country of only 31 million people, with an economy strongly stilted toward natural resources, albeit with strong high-tech industries.

And Canada certainly has not been immune to nationalistic pressures to restrict products from other countries, as demonstrated by its longstanding conflicts with the U.S. over cultural issues. Most recently, the Canadian government has tried to ban U.S. magazines without sufficient Canadian content. One Canadian minister referred to the U.S. as a "culture vulture" not too long ago, apparently ignorant of the fact that it is only an issue because the Canadian people want to buy American magazines.

Yes, the Canadians have mastered the art of the minitrade dispute -- and not just with the U.S. They have squabbled with the Brazilians over subsidies for the two nations' competing airplane manufacturers, Embraer (in Brazil) and Bombardier (in Canada). They joined the U.S. in the dispute over the European Union's refusal to buy beef treated with hormones. Here at home, they have managed to annoy Minnesota Gov. Jesse Ventura because of a dispute over fishing rights in lakes that border Canada.

Yet, the Canadians have also worked to resolve those disputes, not let them get too heated. They have managed to keep them from affecting overall relationships with other countries. The magazine dispute was resolved a few months ago and the Canadians have a pretty good record of abiding by decisions they have lost before the World Trade Organization, in stark contrast to the Europeans.

Europeans and Americans could learn from the way the Canadians have grasped the benefits of trade. Beginning with the North American Free Trade Agreement with the U.S. in 1989, trade has contributed to a surge of investment in Canada, record exports, low unemployment and annual growth of roughly 3% since 1993.

That performance has contributed to a strong stock market. Canada's benchmark TSE 300 index is at around 8114, up 21% from 6729 a year ago. American investors, caught up in their own bull market, too often ignore Canada. In fact, I could find only one Canadian mutual fund, the Fidelity (FICDX)Canada Fund. Last year, its return was 30%, almost double the increase in the S&P 500.

However, U.S. investors do have more than ample access to Canadian companies in the U.S. -- over 200 companies are listed either on the Nasdaq or the New York Stock Exchange. The stock of Nortel (NT), Canada's biggest telecommunications-equipment company and the largest company listed in Toronto, saw 62% of its turnover traded in the U.S. last year. It tripled in value.

And Canadian markets are now actively exploring an alliance with the Nasdaq. Such a link would make it still easier for Americans to trade Canadian stocks.

I can imagine the howls of protests from my former colleagues in the U.S. trade office should they read this column. The Canadians have been a thorn in their side for years -- and Canadian negotiators have the reputation for being a pretty humorless bunch. I remember one official dismissively griping about our northern neighbors. "When was the last time you heard this sentence?" he sneered. "Let's order out for Canadian tonight."

Canadian food might be uninspiring, but we can learn a lesson from their attitude toward trade. Something to keep in mind this year as trade fights rage from the halls of the U.S. Congress to the streets of Paris to the headquarters of the WTO in Geneva.

>To order reprints of this article, click here: Reprints