It is easy to be small and ignored. But to be large and ignored, it helps to hide within the shadow of an even larger entity. In the realms of economics and geopolitics, there are three very large countries which, though not actually ignored, do not always receive the respect their size demands, as they inhabit the shadows thrown by the world’s colossi, the USA and China. These countries are Canada, Mexico, and Japan.
Japan has by far the third largest economy in the world, by far the second largest developed economy in the world, by far the second largest population among developed economies, and the tenth largest population globally.
Canada is the second largest country in the world, the fourth largest possessor of renewable freshwater, the fourth largest producer of renewable energy, the fourth largest exporter of oil, and the tenth largest economy.
And Mexico has the world’s eleventh largest population, thirteenth largest territory, and fifteenth largest economy. (Only five other nations are top-15 in all three categories: the US and the BRICs). Mexico has 2.5 times the population of the next largest Spanish nation (Colombia), plus a diaspora of 35-45 million in the US. It is also the twelfth largest oil producer in the world. The Greater Mexico Region (including Mexico, Texas, California, Venezuela, and US waters in the Gulf) produces more oil than Saudi Arabia or Russia. This region also has an economy larger than any country in the world, apart from the US or China.
The League of the Overshadowed
At the moment, however, trade between Canada, Mexico, and Japan is quite small. Neither Canada nor Mexico are even among Japan’s top fifteen trade partners. And while Mexico and Canada do trade with one another more often — Mexico recently overtook Britain to become Canada’s third biggest trade partner — trade with Mexico still counts for less than three percent of Canada’s total. Their trade with one another is overshadowed by that of the US. Indeed, California alone trades far more with Canada, Mexico, and Japan than those countries do with one another. There is no League of the Overshadowed… yet.
It may be worth noting, though, that US politics have to a certain extent put trade with Canada, Mexico, and Japan into question. President Trump’s first executive order was to withdraw from the Trans-Pacific Trade Partnership, in which Japan would have accounted for over 60 percent of the twelve member-states’ GDP apart from the US. Trump has also signalled his intention to renegotiate NAFTA, tighten the US-Mexico border, raise tariffs on Canadian farm and forestry products, and keep American fossil fuels cheap.
If these policies are followed through on, they could have the effect of driving US trade partners somewhat closer together. Obviously, Canada and Mexico have an interest in showing that they can trade with one another regardless of what Washington intends to say or do about NAFTA. Both also have an interest in exporting more fossil fuels to Asia, where prices remain more expensive than in the shale-rich US. On June 1, in fact, Canadian senator Paul Massicotte wrote an op-ed calling for Canada and Japan to sign a free trade agreement with one another as quickly as possible, given the failure of TPP and risks for NAFTA. Especially as both Canada and Japan have large majority governments right now, such a deal may happen.
An economic relationship between Canada, Mexico, and Japan could turn out to be far more significant, however, than being just a knee-jerk response to Trump’s America-First politics. As we will see, Canada, Mexico, and Japan are in fact complimentary nations, both economically and geographically. Already they have a propensity to trade with one another that is larger than their absolute trade levels suggest (see graph below). So long as Japan’s economic growth remains stagnant, Mexico remains poor, and Canada remains underpopulated, this propensity does not matter much. But if these conditions do not remain, we should expect trade between these three significant, overshadowed countries to grow by a very large amount.
Economists often talk about land, labour, and capital, considering them fundamental inputs of productivity. In the case of Canada, Mexico, and Japan, these inputs are epitomized: Canada has land but not labour, Mexico labour but not capital, and Japan capital but not land. Together, then, they could make a formidable team.
In Canadian politics and business, it has become common in recent years to say that by exporting natural resources to China, Canada can finally reduce the near-monopoly that the US has on buying Canadian exports. This view, however, is based on a false extrapolation of a trend that is now nearing its end: industrial growth in coastal Chinese cities. As China now seeks to rebalance its economy, by investing instead in its service sectors (which are less resource-intensive) and interior cities (which have a lower propensity to engage in trans-Pacific trade), its demand for Canadian resources is unlikely to continue to surge. Most of the resources it does buy will probably continue to come from within its own borders — China only imports 15 percent of the energy it consumes — or from its “One Belt, One Road” partners in Asia.
In Japan, on the other hand, the reverse is true. Japan has few resources of its own, and no Silk Roads to tap. Japan imports 90-plus percent of the energy it consumes, mainly from the Middle East. Its access to the Middle East, however, is imperilled, both from competition with other Asian countries (notably, China and India) as well as from Middle Eastern conflicts. Consider, for example, that Japan accounts for 30-40 percent of LNG imports globally, yet its primary supplier, Qatar, is now in an open feud with Saudi Arabia. Between competition and conflict, Japan could have to rely more on trans-Pacific trade to get resources. It would not be the first time: in the 1930s, eighty percent of the oil Japan consumed was imported from the US.
Even more important may be the impact of labour-saving machinery — robotics — upon Japanese trade. Because Japan has the oldest population in the world by far, it is planning to become a leader in robotics. Even, for example, as soon as the Tokyo Olympics in 2020, Japan is planning to showcase its robotic prowess. Yet robots are highly energy-intensive, and industrial robots resource-intensive. If Japan really does become the leader in robotics, it is likely to start importing lots of energy and other commodities from resource-rich countries like Canada. It may also be likely to start exporting its robotic technologies to countries like Canada, given Canada’s abundance of resources but lack of a large, cheap, human labour force.
Today, if you exclude the US or Europe, Canada and Mexico have the largest combined economies of any pair of countries which are part of the same trade bloc (see graph 1 below). Yet if you include Europe, Canada and Mexico still rank quite a bit lower than a number of pairings of Europe’s largest economies (graph 2).
In other ways, however, Canada and Mexico rank ahead of these European pairings. In population they do so (graph 3). In land they do so too (indeed, Mexico alone is larger than any four countries in the EU combined). And in terms of their indirect, second-degree trade (their combined trade with a third country), Canada and Mexico as a pair lead the world (graph 4), a result of their both trading hugely with the US.
While Canada’s propensity to trade with Mexico is greater than with any significant country apart from the US, it is still only around half as high as its propensity to trade with the US. The reason for this is simple: Canada and Mexico do not share a border with one another. They are not even very close in proximity to one another. More than 3000 kilometres separate Mexico City from any of the largest cities in Canada.
This separation is also reflected in Canada’s lack of a significant Spanish-speaking diaspora, particularly relative to that of the US. In spite of the fact that 21 percent of Canada’s population is foreign-born, compared to just 14 percent in the US, only 0.3 percent of Canada’s population is Mexican, compared to an estimated 11 percent of the population in the US. Even the state with the smallest share of its population being Mexican or Mexican-American—Maine—has a higher share, 0.4 percent, than Canada does.
But this may be likely to change, for two reasons. First, there is a political faction in the US which is wary of further Hispanic immigration, seeing it as a threat to the singular position held by the English language in America. Second, whereas the population of the US is relatively young, the population of Canada is Boomer-dominated, inching towards old age. This is especially true of the population of Canada’s French-speaking provinces, Quebec and (partially) New Brunswick. These provinces also, because of the far smaller language gap between French and Spanish than between Spanish and English, have a much higher propensity to attract Latin Americans than do other parts of Canada (see graph). Between demographics of this kind and US immigration politics, the next major wave of Latin American emigrants could be to Canada.
The aging population of Canada’s Baby Boomers, and especially of Quebec’s Baby Boomers, also indicates another area in which Canada-Mexico economic ties—both direct and indirect—are likely to grow: tourism. Already today, Mexico is the largest destination for Canadian travellers apart from the US, while the areas of the US that Canadians spend the most time in — Florida, the Southwest, and New York — are ones in which Mexican-Americans (or in Florida’s case, Hispanic-Americans in general) inhabit in large numbers. As Canadian Baby Boomers reach old age or retire, they are likely to spend more time in places like Mexico, in order to avoid much of the discomfort (even danger) of dark, icy Canadian winters. This will be most true of Quebec, given its older population, colder winters, and greater ability to learn Spanish.
As the chart above implies, the US reconciliation with Cuba may also lead Canadians to spend more time in Mexico. During the past generation, the US rivalry with Cuba has given Canadians a near lock on the Cuban market. Canadians account for an estimated forty percent of all visitors to Cuba, and Cuba accounts for a disproportionately large destination (given Cuba’s relatively small size) for Canadian tourists. As the US allows its own population to go to Cuba, however, Canadian snowbirds will lose the advantage of having such a cheap, warm country all to itself. Many will re-route to other Latin American beaches.
An even more important pull factor for Canadian snowbirds will be “e-commuting”. The ability for young Canadians to spend time in a cheap, warm country in the winter is likely to increase dramatically as a result of the modern Internet. This is also likely to impact the Baby Boomers. If, for example, it becomes easier for a Boomer’s children and grandchildren to come visit them in Florida or Mexico for, say, a whole month over Christmas, rather than for just a week, then Boomers will be likelier to go in the first place.
And the relationship may not even remain one-way only: Mexicans may begin to visit Canada more often too. Today Mexicans do not go to Canada much, because they lack the disposable income to do so. If and as Mexicans become wealthier, however, they may look to Canada as a place to go in the summer; a place where the summer weather is not too hot, the major metropolises are not too crowded, and a cottage by a northern lake may be rented at an affordable rate. Climate change could, sadly, also play a role in this equation. Mexico — and the Southwestern US, in which tens of millions of Mexican-Americans live — is dangerously arid, whereas Canada is in possession of an abundance of renewable, surface-level freshwater.
Conclusion—The New Drivers of Trade
Today, the main driver of trade is proximity. Countries which share borders with one another tend to trade a lot — though, of course, there are many exceptions to this — whereas far-away countries tend not to. However as (or, admittedly, if) globalization continues, proximity may no longer matter as much. Complimentarity may matter a lot more. We have seen here various ways in which Canada, Mexico, and Japan may be complimentary to one another. Canada has land but not labour, Mexico labour but not capital, Japan capital but not land. Canada has cold, dark winters but warm, water-rich summers, Mexico warm bright winters but hot, arid summers. All three countries have coasts on the North Pacific Ocean; none are part of the Asian (or Eurasian, or Afro-Eurasian) continent. And all three countries are very large, yet are overshadowed by neighbours that are far larger than they are. They may end up, if only informally, a formidable League.
In Israel’s last major war, in 1973, 0.08 percent of Israel’s population was killed. During Israel’s last serious financial crisis, in the 1970s and early 1980s, its economy faced hyperinflation. In the four decades since, Israel’s casualty rates have declined while its real income, per capita, has risen. Israeli casualty rates as a result of the Arab-Israeli conflict were 0.03 percent in the 1980s, 0.004 percent in the ‘90s, 0.03 percent in the 2000s, and just 0.001 percent since 2010. Israel’s per capita income has grown from $3,500 in 1975 to $35,000 in 2015. Since the end of Operation Protective Edge in Gaza in 2014, Israel has had a casualty rate of 0.0004 percent. Its economy grew at 3-4 percent annually during this time, twice the average rate of the developed world. Since mid-2015, the Israeli economy has been outgrowing the developing world’s too.
It may be that Israel will continue this success in the years and decades ahead. But it may not. Israel might instead have to face new challenges to its economy and security, which are already becoming visible from afar.
One new challenge Israel may face comes from the development of software and devices that replace human labour. Thus far, labour and technology have been Israel’s twin competitive advantages. Part of the reason that Israel’s economy and tech sector have been growing is that Israel has a labour force that is far younger than those of Europe, Northeast Asia, or the United States. Soon, however, Israel may enter a phase in which, for the tech sector to continue succeeding, it will have to create technologies that will directly undercut Israel’s labour advantage. A glimmer of this future challenge can already be seen, for example in Intel’s 15.3 billion dollar acquisition of a driverless-car technology company, Mobileye, earlier this year. It was the largest windfall in Israeli hi-tech history—yet it could also put Israeli nahagim out of work.
A second threat to the Israeli economy may be climate change. Though it is very difficult to know when, what or even whether the impacts of climate change will be, it is obvious that the Middle East is not a part of the planet one would love to be living in if and when they do occur. As many in Israel must have been thinking during the recent spell of nearly 40 degree temperatures—especially inside Gaza, where electricity has been mostly unavailable—any future warming or drying in the Middle East is a frightening prospect.
Perhaps even more importantly, it is not certain to what extent Israel’s trading partners will decide to enact carbon tariffs in the coming years. Such tariffs could put Israel in a difficult position, as Israel relies on burning fossil fuels, particularly coal, to generate its electricity. Israel has actually benefited from this of late, since fuel prices have plummeted worldwide. But with the possibility of large countries deciding to enact tariffs on carbon (or methane) emissions, these energy sources represent a risk for the Israeli economy.
A third risk to the Israeli economy also comes from its commercial relationships with foreign countries. Israelis do a lot of business in the world; particularly in Europe, where Israelis live and work in countries like Germany while French and British Jews spend tourist and investment dollars in Israel. Israel imports more goods from German-speaking countries than from the United States. Israel also increasingly does business with Asia: Israel exports roughly half as much to Chinese-speaking economies as to the United States.
Today, however, Israel’s economic relationships with both Europe and Asia are at risk, at least in the short term, because of the slow economic growth in both those continents. Europe has barely grown in the past decade outside of Germany, and continues to suffer extreme unemployment in its Mediterranean countries. China, meanwhile, which was growing at over 10 percent just a few years ago, is now growing at just 6.5 percent. And that’s the official rate: most analysts guess China’s real rate is now only 3-6 percent.
Growth in European and Asian economies could bounce back, of course. But until it does, it bodes ill for Israel.
Most worrying for Israel should be Germany, which has thus far been the major exception to Europe’s economic and unemployment crises. Germany has lately shown signs that it may finally be on the verge of succumbing to Europe’s general sluggishness. Germany is an enormously export-driven country, but the economies it exports to are either struggling or, in the case of the United States, have been talking about raising tariffs on imports of German goods. Israel could be hurt if Germany falters, as it is Israel’s largest economic partner by far apart from the US. Lots of Israelis could flow back from Berlin, needing jobs.
Germany also shares a political trend with Israel: long-lasting leaders. Merkel is now in her 12th year as Chancellor and approaching her fourth election. Netanyahu is in his 11th year in office (when counting his previous three-year stint in the ‘90s), approaching his fifth election. As Ruchir Sharma, a top investor at Morgan Stanley, argues in his recent book, The Rise and Fall of Nations, countries with leaders who stay on too long past their “best before date”, like Bibi and Angela are doing, tend to watch their markets do relatively poorly over time. Time will soon tell whether or not Israel will conform to this rule. It already has done so once before (though perhaps coincidentally), when it struggled in the ‘70s after Labor’s long reign.
Finally, there is Israel’s security challenge. This has declined in the past generation, first because of Israel’s peace with Egypt and then because Israel’s rivals in Arabia and Iran became distracted by their own wars; notably the Iran-Iraq War (1980-1988), the long Iraq war (1991-2017), and now of course the Syrian war (2011-2017). Israel’s smaller but nearer rivals, chiefly Hezbollah and Hamas, have also been distracted of late. Hamas’ supporters—in the Brotherhood, Damascus, and lately Qatar—have weakened. Hezbollah has become directly drawn into the civil war inside Syria. More recently still, in mid-2015, energy prices crashed, weakening Israel’s historic rivals in the Arab world, Iran, and Russia all at once. Though it is not certain how much these events have caused Israel’s casualty rates to drop, they have possibly played a big part.
But Israel is not the only power in the Middle East that can withstand both cheap oil and crises in the Arab world. The largest economy in the region, Turkey, can also do so. Indeed, Turkey is now facing a power vacuum in every direction. To its east are the oil economies of the Gulf Arab states, Iran, and Central Asia. To its north is another oil economy, Russia, plus a divided nation in Ukraine. To its west, Greece is stuck in a Great Depression, the Balkans are divided, and the European Union has fractured politically. And to its south, Syria, Iraq, and Libya (and more distantly, Yemen) are all at war. At some point, assuming that oil prices do not rebound, it might be presumed that Turkey will take measures to fill this vacuum.
Turkey’ government, led by Recep Tayyip Erdogan, has been consolidating its own power domestically in the past two years. Erdogan’s three recent victories—in the election of 2015, the coup of 2016, and the referendum of 2017— has put him ahead of rival factions like Turkey’s secularists, Gulenists, and Kurdish parties. While Turkey’s relationship with Israel today is not too bad (they have put the Mavi Marmara incident of 2010 somewhat behind them) there is no guarantee what they will look like in the future. Turkey’s economy is now estimated to be 2.9 times larger than Israel’s, twice as large as Iran’s, 1.3 times larger Saudi Arabia’s, and even two-thirds as large as Russia’s. If oil stays cheap, Israel might soon find itself sharing the Middle East with a significant regional power for the first time since….well, since the Turks, a century ago.
Of course, this is taking a rather negative view of things. There are reasons to be hopeful about Israel’s future as well. The fact, for example, that fewer Israelis have been killed by Palestinians since 2002 than there were in just two years from 2001-2002, bodes relatively well for Israel and Palestine both. Between this reduction in casualties and the possibility of an eventual cease-fire in Syria (even if it is gained by way of a victorious Iranian-supported regime, or a Turkish invasion of Syria), the region might even find some peace.
More broadly, if the long, slow trend towards global peace, integration, and economic convergence, which began in 1945 and has (contrary to popular wisdom) continued since, is not derailed, Israel could be an ideal place to live. It is at the crossroads of Africa and Eurasia and of the Atlantic and Indian basins; it can speak English, Arabic, and Russian; it can attract Christian and Muslim pilgrims; and it has Jewish and Israeli connections globally. Israel could do well in a peaceful and equitable world, should such a world come to be.
On the other hand, history may not be so nice. Israel’s past forty years have been pretty decent, all things considered. But new challenges are coming. It is still not clear whether Israel will finally secure the peace and prosperity it has been labouring towards; or instead merely catch a glimpse of them from its current peak.
The Korean War, fought from 1950-1953, was a result of two earlier wars in the 1940s: the US-Japanese War, which ended with the destruction and occupation of Japan in 1945, and the Chinese Civil War, which ended in a Communist victory (and Nationalist retreat to Taiwan) in 1950. With the Communists and Americans as the only powers in East Asia following these wars, the Korean peninsula was split in two, each side taking a piece for itself.
When the US triumphed over the Soviet Union around 1990, many expected the North Koreans to fix their broken ties with South Korea. That this did not occur was partly the result of inertia, partly the result of Kim Il Sung’s living until 1994, and partly the result of the 1997 East Asian financial crisis, which kept the South Koreans too poor to want to bear the cost of investing in North Korean infrastructure or labour.
It was also partly the result of a miscalculation on behalf of North Korea in 1987, twenty-four months before the Berlin Wall came down. Seeking to ruin the South’s first-ever Olympics in 1988, the North blew up a commercial airplane. It was by far the deadliest attack on the South since the armistice began in 1953. South Korea’s anger and mistrust of North Korea as a result of this deed persisted during the ’90s.
When the 21st century arrived the situation changed again. The US, after having fought the bulk of its four major 20th century wars in East Asia—in the Philippines, WW2, Korea, and Vietnam—shifted its focus elsewhere in 2001. This shift was mainly a result of US wars in Afghanistan, Iraq, and Libya. To a lesser extent, it has also been a result of recent Russian interventions in Georgia, Ukraine, and Syria .
In East Asia, meanwhile, China’s GDP surged, while Japan’s continued to stagnate like it had in the ‘90s. Between Chinese growth, Japanese stagnation, and US distraction, East Asia became again a two-power region: those powers being the United States and China. But this may now be ending. In the years ahead, East Asia is likelier to become either US-dominated again, like it was in 1990s, or balanced between three separate powers: the US, China, and Japan. The two-power status quo could remain in place, but is hardly certain to do so.
In a one-power or three-power region, the powers involved may have less to gain from the continuation of poor relations between North and South Korea. There will be much less reason to split Korea in two, as it has been for 67 years now, when East Asia as a whole is not split between two major powers, as it is today.
The move to a US-dominated East Asia, or a US-China-Japan-dominated East Asia, is likely for three reasons:
First, the US has been drawing down from the Middle East. It had 150,000 soldiers fighting in Iraq and Afganistan in 2011, but now has fewer than 15,000. Unless it decides to wholly reverse this process — Trump has announced the addition of 4,000 soldiers to Afghanistan, but that is a far cry from the Obama-era surge—the US will have the ability to focus on other regions, like East Asia, more than it could during the 2000’s.
Second, China’s GDP growth has slowed, from 10-15 percent growth during the 2000s to 3-7 percent (depending on whether you believe its official growth rate, 6.7%) last year. In order to keep up with 2.5 percent US growth, China must grow around 4 percent. China’s challenge in doing this is that its labour is now much dearer and older than it used to be, while its resource wealth, most notably its coal, has led to pollution.
China may struggle to keep up with US power. As it is, the US economy is an estimated 1.6 times larger than China’s. The US-Canada-Britain-Australia alliance, meanwhile (which, unlike China itself, more or less speaks a single language) has a GDP 2.2 times larger than China’s. The US GDP alone is larger than that of East Asia as a whole.
Third, the economy of Japan, which today is an estimated 37 percent as large as China’s and 18 percent larger than Germany’s, is likely to benefit from the crash in oil and other natural resource prices that began in mid-2015. Unlike China, Japan has few resources of its own, and so depends on imports to fuel its economy.
While Japan’s aging population continues to be a challenge — Japan’s largest age cohorts are 40-45 year olds and 65-70 year olds — it may be able to address the challenge via a combination of robots, cheap energy to power robots, and a labour force dominated by highly skilled 50-80 year olds. Japan is already planning to advance its robotic prowess in the near term: it wants to showcase them at the 2020 Tokyo Olympics.
Japan’s robot drive is likely to have consequences not just for the Japanese economy, but also for the Japanese military. Japan has already begun to rebuild its military of late, first in response to China’s rise and then in response to Donald Trump’s rhetoric that US allies should “stop freeloading, and pull their own weight”. Already today the Japan ranks 8th in military spending, despite devoting just one percent of its GDP to it. Should Japan double this, to reach the 2 percent of GDP that France and Britain spend, it would then become the third largest military spender in the world, and move far ahead of the next largest, Russia. (Were Japan to spend 5 percent of GDP on its military like Russia does, it would move far ahead of China).
Even if Japan does not re-emerge, East Asia might not remain a two-power region. Rather, China could fall behind the US sufficiently that, in effect, it will be a one-power region again, like it was in the 1990s. US power is rising not only due to its withdrawal from the Middle East, but also because its rivals, most notably Russia, are being hurt by the fall in resource prices. As in the ’90s — when oil prices were at all-time lows — cheap oil works in the US’s favour. And if US power in the region does rise, the North Koreans might be less willing to resist its demands.
There is an additional reason for improving relations between the North and South: it may benefit the South’s economy. Unlike in the 1990s, South Korea is now a relatively wealthy country. Yet because of its rapid growth, it has become dependent on imports of natural resources and exports of manufactured goods. South Korea has been importing resources mainly from the Middle East, and exporting mainly to China.
The Middle East, however, remains unstable. Qatar, for example, the world’s largest LNG exporter, sells more to South Korea than to any other country. But Qatar is now in open conflict with Saudi Arabia. Uncertainty of this kind threatens South Korea’s GDP growth. In addition, as China tries to shift from coal to gas, and as Japan tries to shift from human labour to fuel-powered robots, South Korea may have to deal with rising competition from its own enormous neighbours when importing fossil fuels from the Middle East.
Similarly, South Korean exports have been limited by the slowing Chinese economy. China accounts for a quarter of all South Korean exports, more than the US and Japan combined. South Korea has also been hurt by its own success: its labour is no longer so cheap like it was in previous decades, when it was still a poor country. For these reason, South Korea has already grown more slowly in the past two years that at any time since 1997 (excepting the global financial crisis in 2009).
These economic troubles are occuring at a bad time for the South. South Korea will host the the first-ever Winter Olympics in continental Asia this year. It wants the world’s perceptions of itself—namely, that it is a remarkable country, with remarkable companies like Samsung and remarkable economic prospects in general—to endure. It also does not want the North to cause trouble this time, as occured in 1987.
Trading with North Korea could help address both these concerns. North Korea has an extremely cheap, Korean-speaking labour force; a labour force that includes cousins, and in some cases even siblings, of the South’s. It represents a potential Korean-speaking market for South Korean exports, both of media and manufactured goods. It even, if ties improve enough, offers opportunities in tourism. And it offers access to natural resources. The North Koreans are rich in coal; the South Koreans are top coal importers. More importantly, the North offers a land route by which South Korea can access resource-rich Manchuria and Siberia.
It is possible, of course, that the Korean issue will be addressed by war rather than by trade. In the past year alone, the US has prepared for such a war. It is also possible that the North will not be addressed at all; that the tyrannical staus quo will endure. But for the reasons outlined above, I believe reconciliation is the most likely, and the status quo the least likely.
Dennis Rodman, who played on the the 1990s Chicago Bulls (Kim Jong Un’s favorite basketball team) has lately met with Un. Do not be suprised if Rodman’s Celebrity Apprentice co-star, Donald Trump, follows suit.
NAFTA stands for the North American Free Trade Act, but President Trump does not. After campaigning on a promise to repeal the Act, then adapting his position to that of merely supporting the Act’s renegotiation, Trump recently announced that he would no longer tolerate the status quo arrangement for American imports of dairy and forestry products originating from Canada.
Proposing, on April 24, to add a 24-percent tariff on US imports of Canadian softwood lumber, Trump kept up the pressure on Canada the following day, tweeting “Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!”.
Watch! indeed: the value of the Loonie fell sharply the week of the tweet, as investors worried how Canada will fare when it comes to the broader renegotiation of NAFTA Trump continues to promise.
Trump’s targeting of Canada in this way is not likely to have been random. Nor was it entirely economic in its intention. Rather, Trump brought up the issue in order to prove his anti-NAFTA bona fides to his political base, yet in a way that manages to avoid the hairier subjects associated with NAFTA’s other signatory, Mexico, such as immigration, racism, or The Wall.
Trump has admittedly been careful to direct attention to goods of lesser importance, like dairy products and softwood lumber, rather than to Canada’s key exports of oil (from Alberta) and auto parts (from Ontario). Still, he has been far tougher on Canada—at least in his rhetoric—than has any other recent president. To use a Trumpian phrase: Canada has now been put on notice.
Obviously, this may worry Canada’s Prime Minister, Justin Trudeau. Elected with a rare majority government in 2015, Trudeau’s “political honeymoon” now finally seems to be nearing its end. The NAFTA/Trump issue was just one of four indications of this to occur this spring. The other indications were the election of a new federal opposition leader, Conservative Andrew Scheer, on May 28; the expectation of an NDP-Green minority government forming following an election in British Columbia in May; and the continuing decline in oil prices that has occured thus far in 2017.
Of these, the price of oil is likely the most troubling sign for the Canadian economy, and by extension for the approval ratings of Trudeau. West Texas Intermediate crude oil prices crashed in mid-2015, hitting lows of 26 dollars a barrel in February 2016 but staying mostly within a range of 40-55 dollars since then. They began 2017 at 54 dollars, and remained there until mid-April. However in recent weeks they have fallen again, so that as of this writing (June 21) they are at just 43 dollars a barrel. The Western Canadian Select oil price, which is the price that Canadian oil tends to sell at, is barely over 30 dollars. This does not bode well for the Canadian economy.
The biggest political news in Canada, meanwhile, has been the victory of the new Conservative leader, Andrew Scheer. Scheer narrowly (and quite unexpectedly) defeated Quebec MP Maxime Bernier at the Conservative Party convention, and so will now replace the party’s interim leader Rosa Ambrose as Canada’s leader of the opposition.
The impact of Scheer’s victory is likely to be twofold. First, Trudeau now finally has to face a real political opponent in parliament, rather than a mere interim leader as he has faced until now. This may draw some media attention away from political narratives created by Trudeau, instead giving his Conservative opponents some more air time. Indeed, Trudeau may now no longer be the only golden boy in Ottawa. Scheer is just 38, seven years younger than Trudeau.
The second impact of Scheer’s victory is that, unlike Trudeau, Scheer is not from Quebec. Bernier, who had been expected to beat Scheer, would have been the first Conservative leader from Quebec since Brian Mulroney, who was Prime Minister from 1984 (the year Trudeau’s father left office) until 1993.
In every election since then, the Conservatives have trailed behind the Liberals, NDP, and Bloc Quebecois in Quebec. This is not a trivial fact: Quebec is home to 23 percent of Canada’s population, and tends to vote for home-grown politicians. Given that Quebec has tended to be anti-Conservative, and western Canada pro-Conservative, Scheer’s victory over Bernier could mean that the next national election in Canada will be decided in Ontario. This fact could influence Trudeau and the Liberals during NAFTA negotiations, given that Ontario depends far more on trade with the United States than do any of the other Canadian provinces (apart from New Brunswick).
The month of May also saw a shakeup in Canadian politics at the provincial level. In British Columbia, the third largest of Canada’s ten provinces, the incumbent Liberal government failed by just one seat to hold on to a majority government. The NDP and Green parties have now announced that they plan to form a minority government in BC instead. This announcement has already had consequences for Trudeau, as the new provincial government is not expected to support the planned expansion of Kinder Morgan’s Trans Mountain pipeline from Alberta to BC’s coast.
Indeed the BC election, which was held on May 9, just a few weeks before Kinder Morgan held what it had expected to be the fourth largest IPO in Toronto Stock Exchange history, caused Kinder Morgan’s stock to plunge. If Alberta cannot export its fossil fuels to world markets via BC, then it will probably remain more dependent on sending them to refineries in the United States. Obviously this would be likely to reduce Canada’s leverage in any trade negotiations with the US.
If and when these negotiations do occur, it is difficult to know what the details of any new NAFTA agreement will be. Canada is obviously at a disadvantage relative to the US when it comes to trade negotiations. Not only is the Canadian economy much smaller than that of the US, and more dependent on trade with the US than the US is dependent on trade with Canada, but Canadian politics are also—contrary to popular wisdom—more internally divided than those of the US.
To give only one relevant example of this, there is the division between Canada’s provinces in to the extent to which they depend on US trade. The value of Ontario’s trade with the US is equal to an estimated 49 percent of Ontario’s GDP. In contrast, in Canada’s other major provinces — Quebec, BC, and Alberta — trade with the US accounts for just 23, 16, and 31 percent of GDP.
With these figures varying so widely, it could be difficult for Trudeau to present a unified front during negotiations. On the other hand, the political interests of the US are global in scope, so the US cannot afford to spend as much of its political capital haggling with Canada as Canada can afford to devote to haggling with the US. Thus it is always difficult to know which country holds the more leverage in the Canadian-American relationship.
What is obvious, though, is the importance of the relationship. Canada may appear small when compared to its southern neighbour, but it is the tenth largest economy in the world, and has growth prospects that out-rival most other wealthy economies. The US and Canada have the second largest trading relationship in the world, trailing only (for now) trade between the US and China.
Now that they are both finally settled into office, it will be fascinating to watch how these two countries’ utterly different leaders, Trudeau and Trump, will steward and steer this relationship going forward.
Winnipeg and Las Vegas, the two newest NHL franchises since Minnesota and Columbus joined the league in 2000, have one thing in common: nobody lives near them. Apart from much larger, regional capitals, like New York City or Phoenix, both Winnipeg and Las Vegas account for a far bigger share of their state or province’s total population than do any of the other cities with NHL teams.
In other words, both Winnipeg and Las Vegas are located pretty much in the middle of nowhere.
In spite of this, Winnipeg and Vegas represent opposing strategies to adding new teams to the NHL. Returning a team to Winnipeg was an example of what we will call a short-distance strategy. It was (to state the obvious) intended to capitalize on hockey fans, a.k.a. Canadians, who live in Winnipeg. As Winnipeg had been the largest Canadian city without a team, and Manitoba the largest province without a team, bringing the Jets back was an obvious decision for the NHL to make.
The league does not, however, expect many people at Jets games to have come from afar. Even outside of Winnipeg’s metro area, most Manitobans live not far from the city. Winnipeg’s neighbours, moreover, are distant andd sparsely populated. Saskatchewan has just 1.1 million people; its largest city, Saskatoon, is 710 km away from Winnipeg. Calgary and Edmonton are 1200 km from Winnipeg. Fargo is 330 km to Winnipeg’s south, Minneapolis 615 km. And almost nobody lives in northwestern Ontario. Toronto and Ottawa are more than 1700 km away. Manitoba cannot rely much on its neighbours to buy hockey tickets.
Las Vegas is following the opposite strategy: a long-distance strategy. It hopes to attract fans (aka gamblers, tourists) from hundreds or thousands of kilometres away: from Canada, the rest of the United States, and even overseas.
Even the Vegas locals, who the NHL hopes to convert into hockey fans, are dependent on long-distance tourism. Without tourism, Las Vegas’ economy would dry up and force many of the locals to leave (or at least, to spend less money on hockey tickets). This the Las Vegas Golden Knights would not be able to afford. Once the Oakland Raiders move to Las Vegas in 2019, Nevada will have the smallest population per each of its major sports franchises of any state or province—with only one exception: Manitoba.
Pittsburgh and Nashville
This year’s Stanley Cup contenders, Pittsburgh and Nashville, are very different than Winnipeg and Vegas. For one thing, neither are the largest cities in their states. The Greater Nashville metro area is home to only an estimated 27 percent of the population of Tennessee; Pittsburgh’s metro area is home to just 13 percent of Pennsylvania’s population. Pittsburgh was fifth from the bottom on both of the blue graphs above.
For Nashville, not only are the Predators the only team in Tennessee, they are also surrounded by five states with no NHL teams: Georgia, Mississippi, Arkansas, Alabama, and Kentucky. Tens of millions of people live within a few hundred km of Nashville, and none of them have their own teams.
Pittsburgh too is in a region with a large population yet relatively few hockey teams—albeit not nearly to the same extent as Nashville. This region includes Ohio, which has no team north of Columbus, and the Virginias, which have no teams at all. Most importantly, it includes part of southwestern Ontario. Pittsburgh is located closer to the Canadian border than any other American team apart from Buffalo or Detroit.
Pennsylvania is also one of just two states that has exactly two NHL teams. (The other, Florida, relies on tourists and snowbirds, like Las Vegas will). This is a useful arrangement, creating an intrastate rivlary in which western Pennsylvania can cheer for the Penguins and the east for the Flyers.
Golden Knights or Goldilocks?
Pittsburgh and Nashville are both examples of a medium-distance strategy for NHL expansion. Whereas Vegas will rely on fans jetting in from thousands of km away, and Winnipeg relies on Manitobans keeping the seats full, the Predators and Penguins can both — in theory, at least — attract fans or ticket-buyers who live within tens or hundreds of km of their arenas.
The question is however: which strategy is best?
The reason I bring this up is, as the title of this article indicated, robots. If Sillicon Valley is right, and technologies like autonomous cars really are coming just around the corner, might this make a medium-distance strategy wiser? Would it make the recent expansions to Winnipeg or Las Vegas ill-advised? After all, an autonomous vehicle could make driving tens or even hundreds of km to come home from a game—at night, in the winter, on a rural highway, after having drunk a beer or two earlier—safe and easy. This might increase dramatically the distance that fans are prepared to travel to go to a game.
A medium-distance strategy for future NHL expansion should, in general, prioritize cities that are in Canada or near the Canadian border. Such a team would allow Canadian hockey fans could come to games without having to travel too far a distance. Such cities might include Quebec City, Hamilton, Cleveland, Seattle, Milwaukee, or perhaps even Halifax, Saskatoon, London (in Ontario), Portland, or Toledo.
Most of these cities could not support a team without some new major advance in transportation technology, such as autonomous cars: the number of hockey fans who live in them is simply too small. Some may not be able to support a team even with robot cars. Halifax, for example, has a mere 400,000 inhabitants. It would need to draw in many fans from other Maritime cities to become viable.
While Quebec City and Hamilton are arguably the most sensible additions the NHL could make if following a medium-distance strategy, Seattle is I think the most intriguing one. Seattle is of course a sizeable city in its own right; it accounts for 50 percent (by metro area) and 9 percent (by municipality) of Washington’ population—middle-of-the-pack figures for cities that have NHL teams. Yet Washington as a state has only two major sports franchises (the Seattle Seahawaks and Seattle Mariners) for 7.2 million people. Along with neighbouring Oregon, Idaho, and British Columbia, the Pacific Northwest has only four teams (Seahawks, Mariners, Trailblaizers, and Canucks) for 17.5 million people. It used to have six, but the Supersonics and Grizzlies moved away.
One reason the Pacific Northwest has so few sports teams per capita is its mountainous terrain. The mountains make land expensive, raising the cost of an arena. They also make driving tricky and limit the number of highways available, creating traffic. This makes it difficult for fans from other cities to drive to and from Seattle, Portland, or Vancouver to take in a game. For a Seattle NHL team this would be an especially important challenge, as the team would want hockey fans to visit from Canada. It is 236 km from Vancouver to Seattle, and 278 from Portland to Seattle. It is just 115 km from Victoria, BC’s capital city (with a population of 368,000), but only as the crow flies.
Autonomous cars could, perhaps, help the Pacific Northwest overcome these challenges. They might do so by allowing an arena to be built further from Seattle’s expensive downtown core, or by allowing an arena to have much smaller parking lots (and therefore to occupy less expensive real estate) or by making it easier to drive hundreds of km through the region’s rugged and rainy terrain.
On the other hand…
Of course, it is easy for me to just say “autonomous cars” and then try to make up a cool-sounding argument around it. But that does not mean in any way that my argument is a good one.
In this case, it may instead be that a short-distance or long-distance approach, of the Winnipeg or Las Vegas variety, really will be better than a medium-distance one. This is something that the league should, I think, try to determine for itself.
If a short-distance strategy is determined to be best, then the obvious choice for expansion would be to put a second team in Toronto. Even with two teams, the municipality of Toronto would have approximately 1.4 inhabitants per NHL team and 700,000 inhabitants per “Big 4” sports franchise. In contrast, the municipalities of of Hamilton and Quebec City are home to only around 500,000 people each.
The Greater Toronto Area (not even including nearby Hamilton or Kitchener-Waterloo) would have 3.2 million people per NHL team and 1.6 million per Big 4 team were it to add a second NHL franchise. The Greater Montreal Area would have just 2 million people per team were it to do so.
A long-distance strategy, on the other hand, might focus on cities in the south, where hockey-loving snowbirds could flock. This could mean a first NHL team in one of the southern states without any, or a second team in Texas, or a third attempt at a team in Atlanta, or maybe even a fourth team in California.
Indeed, the most recent round of NHL expansion in southern cities was during the 1990s, when, perhaps not incidentally, the cost of travel was cheap and the Canadian dollar was weak, as oil prices were at an all-time low. San Jose, Anaheim, Miami, Tampa Bay, and Dallas all got teams during 1991-1993 (Ottawa also got a team in 1992), while Phoenix, Denver, Raleigh, Nashville, and Atlanta got teams during 1995-1999.
In contrast, the three since then have been northern: Columbus and Minneapolis in 2000, then Winnipeg in 2011. A long-distance approach, however, might be less friendly towards northern cities—particularly far-northern cities, such as Winnipeg, Quebec City, or Saskatoon. It might worry that too many Canadians will flee the cold and dark of winter to seek the bright sun of the south.
Countries, or even entire regions, sometimes change dramatically soon after hosting major sports events like the Olympics or World Cup. For the next five years, these events will all be held in countries surrounding North Korea. The 2018 Winter Olympics will be in Pyeongchang, South Korea, the 2018 World Cup in Russia, the 2020 Summer Olympics in Tokyo, and the 2022 Winter Olympics in Bejing. This could, maybe, foreshadow a coming political change.
The Olympics Curse
In the relatively common phenomenon known as the “Olympics Curse”, countries or even entire regions change dramatically soon after hosting major sports events like the Olympics or World Cup. Sometimes this change is for the better, but often it is for the worse. It is, typically, the result of boom-bust economic cycles: countries bid for the tournaments during periods of growth but, by the time the tournaments finally take place, leaner years have set in.
During the past decade the curse of the Olympics has been especially striking. It was felt most recently in the aftermath of the “BRICS” economic cycle, which had led to Olympics in Rio de Janeiro in 2016, Sochi in 2014, and Beijing in 2008, and to World Cups in Brazil in 2014, South Africa in 2010 and (for cricket) Mumbai in 2011.
The BRICS boom first began to waver in 2008, the year of the Beijing Olympics, as the global financial crisis began and called China’s exports to the US and Europe into question. This forced the Chinese to rely instead on growing debt — and then on a new cult of personality, that of Xi Jinping —to keep their boom going.
The slowing economic growth in Europe and China also took a toll on commodity prices, which in turn crushed the Russian, Brazilian, and South African economies. Russia responded to this economic threat by going to war with its neighbours, first in Georgia in 2008 (the day before the Beijing Olympics), then in Ukraine in 2014 (three days before the end of the Sochi Olympics).
Brazil, meanwhile, entered what has been perhaps the worst recession in the country’s modern history; its president, Dilma Rousseff, ended up being impeached last summer (ten days after the Rio Olympics) in a political scandal that just won’t end.
While India escaped the BRICS slowdown relatively unscathed (and also never hosted the Olympics), it too has undergone a political shift in recent years, with the defeat of the Congress Party and success of Hindu-nationalist figures like Narendra Modi and, recently, Modi’s chosen leader for Uttar Pradesh, Yogi Adityanath.
Even the Olympics in Vancouver in 2010 and London in 2012 were, in effect, extensions of the BRICS boom. Both cities are hubs of activity and investment for persons originating from China (in Vancouver’s case) or emerging markets in general (in London’s). Both have also experienced some trouble of late. Vancouver is experiencing a housing affordability crisis partly as a result of capital flight from China, while London — where housing prices are not exactly affordable either— suffered a harsh defeat in its country’s Brexit vote last year.
Before the BRICS sports spree began in 2008, there was Europe’s. Athens hosted in 2004, Turin in 2006. Berlin too played host in 2006, to the World Cup. It was the year before the 2007-2008 financial crisis, which led to a “lost decade” in Europe that has, among other things, wrecked Greece, weakened Italy, and brought Germany nearer than it would like to becoming again the most decisive but reviled country in the region.
For South Korea, which will be hosting the first-ever Winter Olympics in continental Asia at the beginning of 2018, in a city less that is than 100 km from the DMZ, the hope is that the worst of the curse has already taken place in the past year. South Korea’s economy grew more slowly in 2015 and 2016 than in any year since 1998 (with the exception of 2009, the year of a global recession), and its president was impeached in the closing days of 2016.
Yet if the effect of the Olympics truly is a consistent phenomenon, then there is no reason to expect that Korea won’t continue to change. Not only is South Korea hosting in the winter of 2018, but all of the major sports events in the near future are going to be held in countries that surround the Korean peninsula. The 2018 World Cup will be in Russia, the 2020 Summer Olympics in Tokyo, and the 2022 Winter Olympics in Beijing.
Even the host of the 2022 World Cup, Qatar, has Korean connections: South Korea is the number one destination for Qatar’s exports.
For North Korea, the changes in the region that these upcoming sports tournaments may foreshadow are, if anything, only one more indication that the status quo on the peninsula is becoming less and less likely to hold.
Whether through rapprochement, reunification, or regime change, it seems that the country and the region are headed for a significant change in political conditions.
It is possible that sports will play even a direct role in this change. Sports diplomacy, after all, has a long history in the region. The US and China played ping-pong in 1971, just months before Nixon’s infamous trip to Beijing; the ping-pong players were at the time among the first Americans to officially visit China since the end of the Korean War two decades earlier.
More recently — just this past week, in fact — South Korea’s Chung Mong-gyu, the first Korean to hold a seat on FIFA’s council since 2001, announced that he and FIFA’s president Gianni Infantino both support the idea of a proposal for South Korea, North Korea, China, and Japan to co-host the football World Cup in 2030.
Even Dennis Rodman, who played on the 1990’s Chicago Bulls (Kim Jong Un’s favourite basketball team), used a sport trip to North Korea in 2014 as an opportunity to reach out to the isolated, tyrannical regime.
If war is to be averted, we can hope that Rodman’s Celebrity Apprentice co-star, Donald Trump, will now follow suit.
In last year’s Republican primaries, there were two somewhat charming, sometimes ferocious Northerners, both running in ways that were neither conventionally “establishment” (like Bush, Rubio, and Kasich) nor conventionally “anti-establishment” (like Cruz, Carson, Fiorina, or Perry).
Both of these candidates were fat—though one had once been skinny, while the other had once been humungous. One was your common politician type, willing to make a deal with the devil in order to rise to power. The other was the devil; who, as usual, did not adequately reward the deal.
Okay, I think you see where I’m going with this. One was named Donald Trump and the other Chris Christie. Trump ended up getting 24.3 percent of the votes in the Iowa Caucus, and 45 percent of the primary votes nationally; Christie just 1.8 and 0.2 percent.
Christie ended up becoming Trump’s attack dog, famously helping to take down Marco Rubio in a primary debate just before dropping out of the race to endorse Trump. Christie was not picked as Trump’s VP in return for this, as many had expected him to be, nor was he even offered a high-ranking cabinet position. Trump, as we know, opted to stack his cabinet with businessmen, far-right types, Reince Priebus, and family instead.
Now, why did Christie do poorly in the primary? There are several possible reasons, but one theory, at least, has to be that he was taken down by the media. He was the (big) butt of many, many fat jokes, and even more Bridge-gate jokes. This seems like history now, but in 2013 and 2014— just when Christie’s future had otherwise looked so promising because of his weight loss, re-election, and love of Bruce—it was constant.
Don’t get me wrong: I am not so squeamish as to be against fat jokes of political figures. And I am not so naive to doubt Christie having been highly corrupt in Bridgegate. As his strong support of Trump has since displayed, Christie’s ambition has few limits.
The question is whether the media’s negative coverage of Christie was proportionate to his crime. I don’t have any data to say whether it was or was not, but, from my own recollection, I would guess that it was highly disproportionate. This is not surprising, really, since any event involving New York City — which Bridgegate did, of course — is likely to be covered more than it deserves to be. Moreover, the media tends to be at least somewhat left-leaning, and inhabited by skinny people, and so is perhaps not so disposed to be sympathetic to fat Conservatives like Christie.
Finally, the Republicans themselves did not rush to Christie’s defence in the wake of Bridgegate, at least not to the extent they typically do to their own (and, indeed, as they have since come to Trump’s, whose crimes—at least against morality, if not also against the law—are far worse). This may have been because both the Conservative establishment and Tea Party saw Christie as a possible threat in 2016. They were afraid of the wrong Northeasterner. But then, why should they have been worried about Trump, who at the time was still just a crazy celebrity making Youtube videos about how his people were trying to locate Barack Obama’s birth certificate?
Many people would say I am underrating Christie’s crime (and, maybe, overrating his political charisma). They may be right, of course. Obviously we don’t know what Christie’s odds against Trump would have been had there never been a Bridgegate, or if comedians did not find fat jokes amusing.
Is there a lesson here? I don’t know that either. (But I am sorry for asking so many rhetorical questions). If there is, it may go something like this: if you work in the media, and see a fat corrupt man get taken down, think twice about piling on. That fat corrupt man might be the only one capable of obstructing the bridge the devil must cross on his road into Washington D.C.