Role of international politics on agri-food trade: Evidence from US–Canada bilateral relations

Abstract

A well-functioning trade relationship between Canada and the United States is crucial to the economic vitality of the Canadian agri-food industry. However, agri-food trade is more susceptible than other sectors to political interventions. The Trump presidency has strained Canada–US relations and his trade policy actions have significantly increased trade restrictions and trade policy uncertainty and undermined the rules-based global trading system. We examine the pattern of agri-food trade between the two countries and find that the upward trajectory of bilateral agri-food trade ended in 2013. Although this flatlining predates the Trump administration, we show that Trump increased trade policy uncertainty starting in 2017 and likely impacted further expansion of trade. We examine what might change under the Biden presidency and argue that the new administration is likely to restore strong relationships with allies and work to rebuild important international institutions such as the World Trade Organization (WTO). Although protectionist forces will continue to impact bilateral agri-food trade, we expect closer political ties between a Biden administration and the Canadian Prime Minister. This should have a positive effect on the Canadian agri-food industry by reducing trade uncertainties, thereby increasing agri-food trade between Canada and the United States.