Trade Shocks and the Case for Diversifying Canada’s Trade

Abstract

Canada’s history features repeated external trade shocks of varying degrees of severity, on average about one every two decades. In each case, the shock prompted an urgent search for diversification of Canada’s trade to new markets or efforts to re-establish secure market access to Canada’s traditional major markets in the United States and Great Britain. This paper documents the historical trade shocks and Canada’s responses. It argues that trade shocks are an inherent feature of the global environment and constitute an important rationale for a policy of trade diversification. It considers the extent to which Canada has meaningful scope to further diversify its trade.

Keywords: Canada, trade diversification, trade shocks

JEL Classification: F14