Canada has learned a lot about free trade
TheStar.com – opinion/commentary – A quarter century of experience has taught Canada not to fear trade, but to anticipate adjustment pains.
Oct 25 2013. By: Carol Goar
The last time a Canadian prime minister triumphantly proclaimed that he had secured thebiggest trade deal in world history, the nation had no way of knowing what to expect. Would our sovereignty be compromised, our culture swamped, our industries overwhelmed? Would we be reduced to an adjunct of our powerful southern neighbour?
None of that happened. With hindsight, Brian Mulroney’s 1987 claim that the Canada-U.S. free trade agreement would bring more prosperity, more jobs and cheaper imports was largely true. But the country had to go through a wrenching adjustment process to reap the gains.
This time, there is no panic. Even the fiercest critics of the 2013 Canada-EU free trade pact aren’t forecasting doom or warning that our identity will wither. It is widely anticipated that the agreement will bring new business opportunities, price reductions and jobs, as Prime Minister Stephen Harper predicts — in time. But first, the country will have to go through a jarring transition. There will be winners and losers, destruction and renewal. The net impact won’t be known for years.
Experience has taught us five other important lessons.
- The phrase “trade agreement” is a euphemism. Comprehensive treaties like the Canada-U.S. accord and the Canada-European agreement go far beyond tariff elimination. They set the rules of investment for member nations.
The Canada-U.S. pact gave investors the right to sue either government for actions that negatively affect their business interests. The U.S. has used this provision — and its political clout — to strike down Canadian laws and press Ottawa to conform to American standards and regulations for hundreds of products. Its successor, too, will increase the power of globe-straddling corporations and reduce the ability of governments to fend for their citizens.
- Our preferential access to the European market won’t last.
We thought we’d won an exclusive deal with the U.S. 26 years ago. But Mexico soon got the same rights as Canada under NAFTA. Continental free trade was soon overtaken by a globalization.
We may have signed the first bilateral trade deal with the EU. But the U.S. is already negotiating a much bigger one.
- Unforeseeable factors often set the course of trade agreements.
We enjoyed a substantial price advantage through the 1990s because thevalue of the Canadian dollar fell relative to its American counterpart. That encouraged our exporters to ramp up production, investment and hiring. Without that currency boost, Canada wouldn’t have fared nearly as well.
But we can’t count on history repeating itself. Nor can we expect European buyers, battered by a five-year debt crisis, to scoop up Canadian goods and services.
- Regardless of the rules, the bigger bloc usually prevails in trade disputes.
Canada believed it had evened the odds with its giant partner when the U.S reluctantly agreed to enshrine an independent dispute settlement process in the trade pact. But the American government ignored the adjudicators’ rulings, discriminating against Canadian producers of everything from softwood lumber to steel. It violated both the letter and the spirit of the agreement by enacting its 2009 Buy America policy.
- Finally, a well-thought-out transition plan is essential. It is as clear today as it was 1987 that some sectors of the economy will struggle when their tariffs are dismantled. Economists have identified most of them (although there are always surprises.)
Mulroney promised generous adjustment programs to those who lost their jobs and businesses, but his government never designed or delivered them.
Harper is offering “compensation” to industries side-swiped by the European trade deal. But it is not clear what Ottawa’s money is meant to do: provide an income while the victims wind down their businesses; tide them over until they find a niche in the reconfigured market; or provide retraining. Nor is there any indication how long the federal assistance will last.
The provinces consider this a victory. It is certainly better than nothing. But it falls far short of a cogent adjustment strategy.
There is much we still don’t know. The forecasts we do have — 80,000 new jobs, a $12-billion annual boost to the economy, a 20-per-cent jump in two-way trade — are little more than optimistic guesses.
The broad brush strokes of Harper’s deal look promising. But history has taught us to read the fine print.
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