English classical economist David Ricardo (1772-1823), put
forward the theory of international trade, called the theory of comparative
advantage. It forms the basic claim of
economists that free trade operates to the advantage of every nation, the advanced
as well as underdeveloped or oppressed nations. But today, more often than not,
politics is interfering with the basic objectives of the theory; this is
clearly more evident in Canada.
Since 1994, when the North American Free Trade Agreement
(NAFTA) came into effect, we have seen strong economic growth and rising
prosperity for Canada, the United States, and Mexico. NAFTA, like other Trade
Agreements has shown that free trade increases wealth and competitiveness, and delivers
real benefits to families, farmers, workers, manufacturers, and consumers.
However not all participants in free trade have honoured their agreements. In
many instances we still see trade deficits among participants. It is one of the
reasons for Trump’s demand for a re-negotiation of the current agreement.
While Trudeau’s government is trying to play hard ball with
the U.S, it is the type of proposals he has put forward that is worrisome. For
some observers there is too much emphasis on including ‘progressive ideology’
in free trade agreements. Instead of really negotiating the factors of
comparative advantage, Trudeau has included the rights of labor, gender,
environmental and other social issues in the debate. In my view these demands
will be obstacles rather than negotiating factors. To Canadians who too often
are paying higher costs for too many goods, it is time that we take down some
barriers and negotiate in good faith,
In my view abolishing the soft lumber subsidies and the
constant irritants that is supply management will benefit rather than harm
Canadian consumers. By the same token we should be negotiating to get better
access to more markets in the U.S for the goods that we are better at
producing, for example our oil and other natural resources.
It is not only Trudeau who does not understand the benefits
of free and fair trade. When it comes to free trade, Canadians have no idea
what it means. We are a nation of protectionists. We have barriers for
everything; from the movement of labor to the free movement of goods and
services. We have more restrictions within the country than we have with other
nations. Canada as yet to negotiate a comprehensive free trade agreement among
all the provinces, and instead of seeing trade barriers fall, we see more
barriers being erected.
Preaching from the environment altar , provinces have
started an internal battle against oil from Alberta. Quebec opposes a pipeline
east, and BC stands in the way of a pipeline west. We want trade with China but
we cannot find a way to get oil to them, while we buy oil for the eastern
provinces from a communist regime in Venezuela.
In a political move to protect Bombardier from a trade
dispute with Boeing, the Prime Minister chooses to buy used F-18 planes from
Australia instead of purchasing new F-35 from Boeing.
Internally Canada does
not fare very well either. The NDP
government of Alberta imposed a tax on craft beer brewed outside of the New
West Partnership (British Columbia, Alberta and Saskatchewan). In another case
of sheer protectionism, The Supreme Court of Canada will hear a Crown appeal of
a New Brunswick ruling overturning a ban on bringing alcohol across provincial
boundaries.
In a new twist, Alberta’s NDP Bilous is furious at
Saskatchewan over a few trucks and Brad Wall in his last days as Premier gets
into the fray and we now have a potential war between the neighboring
provinces. It looks as if the days of free traffic flow between Alberta and
Saskatchewan are over. Drivers of heavy equipment, trucks, or cars to the work
site with Alberta plates instead of the green and white plates of Saskatchewan
“will have a week to comply or be sent home.
At home and abroad, the idea of free trade has reached a
watershed moment. When PM Brian Mulroney negotiated the trade agreement, he was
a leader who understood the concepts of comparative and competitive advantage.
But today across the world the forces of populism led by Trump is causing havoc
with Ricardian principles. It is not that free trade is bad, but it is the claim
that fair trade no longer exists. The progressives have taken over the ideas of
free trade to politicize their ‘open border agenda’. Instead of promoting the
free movement of labour they insist that it should be the free movement of
people, no matter whether they are skilled or unskilled, whether they are legal
or illegal. Furthermore trade imbalances and deficits are the main reason for
the need to re-negotiate existing agreements.
Unfortunately for Canadians, who in the main are totally
uninformed about the ramifications of free trade, are led by a leader who has
no concept of Ricardian principles. Instead he seems to be under the influence
of some progressive agenda to promote social causes around the world, to the
detriment of economic advantages for Canada. He has already botched the TPP and
mangled any possible trade with China.
Furthermore, mired in his environmental convictions Trudeau
has been unable to get a free trade agreement between provinces. However, Canadians,
in general, are to blame for this situation, which may well cost us in the long
run. As a nation we are too insular, and protectionist. Understandably we are a
small country demographically, but we must open our trade borders internally as
well as internationally. We have much to offer, and we must take advantage of
our resources and abilities. The 21st century can belong to us, if
we embrace free trade
We need real leaders on trade in Canada, not protectionist
provincial politicians who would look no further that their next election when making
decisions on trade. We need Canadian consumers to understand that there are
better ways to reduce prices and costs, and that includes a freer market and
the free movement of goods and services.
Instead of following the lead of the mass media and blaming
Trump for our trade woes, maybe Canadian trade morons should look in the mirror
and embrace the notion that Trump may well save us from ourselves.
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