Going long on trade
On back-to-back nights earlier this month, we saw our St. Louis Blues break the longest Stanley Cup drought among active clubs – with a team of mostly Canadians. Then the Toronto Raptors won their first-ever NBA championship – with a team of mostly Americans. In sports, as in trade, we can both win when our countries work together.
Next week, people on both sides of our border will celebrate national holidays – Canada Day on July 1, and Independence Day on July 4. In many border communities residents will attend joint celebrations of each holiday, reflecting the long and close friendship between our two countries.
Within our own BMO family, many of our American colleagues celebrate their Independence in their Canadian homes, while many of our Canadian employees mark Canada’s Confederation in their U.S. communities.
What’s so remarkable about this deep integration is that it’s mostly unremarkable to an outside observer. It’s the natural by-product of running a business serving both Canada and the U.S. for over 200 years. These fundamental cross-border links have existed since the earliest days of our bank and today 14,000 or one-third of our employees are based in the United States.
We should not lose sight of this as talk turns to politics around the holiday barbecue grill. By all accounts, last week’s meeting between Prime Minister Trudeau and President Trump at the White House was a successful one. This is encouraging, considering the twists and turns we’ve observed over the past year. The successful negotiation of USMCA led to necessary but fair compromises.
While there’s no shortage of breaking news out of both capitals, we ought to take care as we look ahead – to see past the tweets and posts, to the day-to-day economic reality on the ground. Put simply, the U.S. and Canada benefit from the most successful bilateral relationship in the history of modern commerce.
Consider the following:
- Canada is the number one export market for 33 of 50 U.S. states. High on that list are both Illinois and Wisconsin – which shipped goods worth more than US$24 billion to Canada in the latest period
- In 2018, Ontario exported more to Michigan than all of Canada did to China, the United Kingdom and Mexico, combined
Underlying these numbers are enduring fundamentals: Canada and the U.S. are each other’s closest neighbour and ally; the vast majority of Canada’s 36 million consumers live near our border; and, we share common language, traditions and business practices.
Naturally, over the past year the state of the North American political and economic relationship was a regular topic of discussion when I met with clients, shareholders and government officials. Heading into the holiday weekend I thought I’d share a few thoughts on how I’m considering these issues.
At BMO, we’ve succeeded in periods of political and economic uncertainty by following the same advice we provide our customers as we help to grow their businesses or investment portfolios.
We take a long-term view and, where possible, diversify our business to take advantage of opportunities across geographies and asset classes. We also stay very close to the fundamentals of the Canada-U.S. relationship.
Diversification works: the downside of one market tends to be offset by the upside of another. Over time, as goods and services are produced in advantaged regions on the one hand, the benefit of cost and value flows to wherever the demand is in the other – often on a global basis.
Still it is natural that our best trading relationships are with those people we are closest to, those we know best, and those we’ve come to trust. In the case of the U.S. and Canada, that’s the result of an unprecedented relationship forged through many generations of trade, military alliance and family ties.
USMCA represents a significant reflection of this reality by the three governments that signed it. Ratification by respective legislatures will provide confidence and certainty to investors and companies making important decisions on how and where to expand.
Negotiators from all parties deserve to be recognized for their dedication and patience in concluding a deal that works for everyone. From a Canadian perspective, wheels are in motion for the formal ratification of the agreement. Meanwhile, Mexico was the first out of the gate to ratify the agreement just last week. We’ll be keenly watching political developments in the U.S. as they proceed down their own route in Congress.
For our part, BMO is committed to helping our customers take advantage of expanded markets for their products and services, and the growth opportunities the deal provides.
So to you, your friends, and your family, on this 1st and 4th of July, I wish you all the best for a safe and happy holiday – and for a spirited backyard grill debate. Only 97 days to go until the first game of the 2019-20 NHL season.
*Adapted from an earlier internal message to employees
