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Canada’s energy trade
Energy exports have been growing at a much stronger rate than total exports, driven by strong price increases and surging energy demand. Higher oil and natural gas commodity prices pushed up the cost of imports while a six per cent decline in electricity prices helped mitigate the overall impacts.
The importance of trade
People have no doubt engaged in trade since prehistoric times when adventurers discovered others who lived in different regions with different resources that could be cultivated or developed, bartered ‘as is,’ or fashioned into products as varied as the skills, knowledge and ingenuity of the people who created them. At its most basic level, trade is simply the buying and selling of goods. At a global scale, trade plays a vital role in generating economic activity, building strong economies, alleviating poverty and compensating for a scarcity or lack of resources.
The benefits of Canada’s international trade
The benefits of international trade are well understood, both in theory and in practice. A country that trades internationally captures the benefits of efficiency and specialization in its production because it can trade for goods and services that could not be produced domestically, or that could only be produced domestically at much greater cost.
For Canada’s relatively small economy, trade also means that our markets can access many more customers than we have inside our borders. For industries such as automotive, agriculture and energy that produce sometimes more than double what Canada needs, trade opens a market for products, which in turn generates high-value employment and income. Trade based on Canada’s comparative advantage in energy products is translated into lower costs for many other products such as clothing, fruit and vegetables, consumer electronics and a variety of services.
The argument that selective restriction of trade in energy products would result in lower prices for Canadians has been proven faulty on many occasions. The most recent of these involved the attempts by some provinces to limit the increase in gasoline prices within their borders. In effect, the artificially lower “in-province” price resulted in no supply being sold to that province. Because higher prices were obtainable in nearby provinces, sellers simply took their business to where they would receive best return for their product.
The flawed logic of “selective trade” becomes apparent when the concept is applied to other products. Agricultural products like beef, forestry products like lumber, and industrial products like automobiles are all produced for export. All are costly to Canadians and are sold at “market price.” Restricting their export in an effort to afford Canadians a lower “made in Canada” price would remove any incentive to produce these products for sale in Canada. Investors would shift their money to businesses that could still command the market price for their products and Canada would become a much less wealthy, less well-served economy.
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