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I am writing with reference to ‘American economy: rest in peace’ by Paul Craig Roberts (September 13).
   In this context, it may be interesting to note that three major economies of North America — the United States, Canada and Mexico — have been debating as how to integrate their economies to become more competitive. But in the debate about the so-called Security and Prosperity Partnership (SPP) in North America, it is overlooked that its biggest economy — United States — is increasingly becoming a virtual economic protectorate of China. The United States is running a huge trade deficit vis-à-vis China and has also become dependent on China to finance its massive budget deficits. As Paul Craig Roberts so correctly points out: ‘The US trade deficit with Europe was $142 billion. With Canada the deficit was $75 billion. With Latin America it was $112 billion. The deficit with Asia-Pacific was $409 billion (of which $233 billion was with China and $90 billion was with Japan).’
   But it must be noted that unlike other countries, Canada is becoming almost totally dependent on the United States for trade and commerce. While America’s trade with Canada is about 20 per cent of its global trade, Canada’s trade with the US is more than 80 per cent of its entire trade. As such, Canada’s total dependence on the United States calls for diversification with the rest of the world, not further integration with the US. With the United States becoming extremely dependent on China, it will be pointless for Canada and Mexico to become further integrated with the US and they must diversify their trade and economic relations with the rest of the world. SPP will be of little use if the United States continues to run a massive trade deficit vis-à-vis China and become indebted to China.
   By the end of 2006, China achieved several important milestones: It replaced the US as Japan’s biggest trading partner, it replaced Japan as America’s second biggest trading partner after Canada (for a brief period, it even replaced Canada as America’s biggest trading partner) and it replaced the US as the European Union’s biggest trading partner. And it surpassed America as the world’s second biggest trading nation after Germany.
   It is also interesting to note that the US-China trading is a one-sided affair. According to the US Department of Commerce, while China exported a staggering $287 billion to the US, America exported a paltry $55 billion to China, leaving a $230 billion trade surplus in China’s favour. By the end of July, China’s trade surplus vis-à-vis the U.S. for the first half of this year rose to $112.5 billion, marking the first time it has exceeded $100 billion in a six-month period. If the economy keeps growing at this blistering pace, China’s total trade will reach more than $2 trillion this year, surpassing Germany as the world’s biggest trading nation.
   These would be staggering numbers anytime. The United States blames China for deliberately keeping its currency under-devalued to gain unfair advantage. But the American policymakers may be reminded both Japan and Germany have been able to maintain a balanced trade relationships with China. It only shows how uncompetitive the US economy has become. It is insatiable that American demand for Chinese goods, more than undervalued Chinese currency that makes Chinese surplus to grow by leaps and bounds. Despite US Congress’s griping about unfair advantage of under-valued Yuan, the Chinese currency has in fact risen against the US dollar by 8.9 percent since China stopped pegging to the greenback in July, 2005. This suggests that Yuan alone can’t be the reason for China’s rising trade surplus vis-à-vis the United States.
   With such US dependence on China, it will be pointless for Canada and Mexico to further integrate their economies with the US economy which is dependent on China for its viability. With 80 per cent of Canada’s trade and investment are with the United States, further integration with the US economy will only make Canada vulnerable to any downturn in the American economy. As US budget and trade deficit soar, the faltering US economy will ultimately drag down Canada’s booming economy.
   At the very least, the United States is becoming an economic protectorate of China. Canada should also heed to this warning and must not become further dependent on the United States in the name of continental integration. The United States must reduce its dependence on China and Canada must reduce its dependence on the US.
   Mahmood Elahi
   Iris Street, Ottawa, Canada