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Have another look at those reassuring statements about Canada’s good standing issuing from the new administration. They are invariably accompanied by some reference to Canada-U.S. trade being very nearly in balance, as indeed it is. The implication is that Canada should enjoy a privileged trade status as a reward for its good international trade citizenship — unlike, say, the perfidious Chinese. But the corollary is equally clear: should trade between the two countries stray out of balance, should we start running trade surpluses, we might not be looked

upon so favourably.

So it was that the news that Trump would revive the Keystone XL pipeline project, allowing hundreds of thousands of barrels of Canadian oil to flow across the border every day, was greeted not by unalloyed cheers in this country, as one might expect, but in some quarters by misgivings, even alarm. For what if the result of all those Canadian oil sales was to push our trade into surplus? Then where would we be?

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This is madness. It is nonsense for the Americans to make the trade balance the objective of their trade policy, and it is even greater nonsense for us to adopt it as our own, out of deference. Whether a country has a trade deficit or a trade surplus, that is — with the world in general, let alone with individual countries — does not make the slightest difference to its welfare. It is a primitive fallacy to think that it does.

To see this, it helps to remember that the balance of trade in goods and services, what economist call the current account, is only one type of international payments flow. The other is the capital account: the money we lend to or invest in other countries, or that they lend to or invest in ours. The two, current and capital, must sum to zero, a surplus on the current account matched by a deficit in the capital account and vice versa, not coincidentally but as an accounting identity: foreigners can only lend to us the Canadian dollars they earn from us on trade.