Monday, May 21, 2012

The Flaw in Conservative Free Trade

Jim Stanford writes this morning that, as soon as the Harper government won a majority, it began dashing around the world signing free trade deals. But free trade alone does not amount to smart economic policy:

There’s a big difference, however, between signing free-trade pacts and actually doing something about trade. Canada’s trade performance deteriorated badly over the past decade. The quantity of goods and services shipped abroad is seven percentage points lower than when the Harper government took office, lower even than back in 2000. And what we do export increasingly consists of raw resources (especially oil). Our once-impressive trade surplus has melted into deficit. Despite accelerating petroleum sales, we’re running up international red ink at the rate of 3 per cent of GDP per year.

What's wrong with the Harper strategy? Trade needs to be developed and supported. And Harper budget cuts are undermining support for trade.

Ottawa trumpets its latest free-trade pact (with Honduras) as evidence of a commitment to trade. Honduras is an impoverished quasi-dictatorship where journalists are routinely assassinated. Canada sells less than $50-million a year there (while importing four times as much). We export more to the United States in 88 minutes than to Honduras in a year – yet as we ink this blockbuster deal with Honduras, we close trade offices in the United States. What’s the net impact on trade? Clearly negative.

The government's right hand doesn't know what its left hand is doing. That's because it never does a thorough analysis before implementing policy. The justification for any policy is that the Harperites possess the moral high ground  -- truly simplistic, magical thinking.

Stanford writes:

Canada’s export failure cannot be blamed on foreign trade barriers. Instead, we must look in the mirror – at the structural inadequacy of our business sector. Canada has chronically failed to nurture and develop domestically based globally active firms that produce innovative, high-value products for world markets. Working to fix that problem (through proactive technology, innovation and sector-development strategies) would do more for our actual trade than all the free-trade talks in the world. If you truly believe in trade, don’t be distracted by the trade deals.

Despite all the Harper government's self congratulation, it really doesn't know much about doing business.


Anonymous said...

To be fair, under various governments, Canada has been an exporter of raw materials ranging from furs, fish, and timber in its earliest days to oil, natural gas and minerals today. The Harper government, in emphasizing the export of oil over the development of Canadian manufacturing, is simply following that long-established, but short-sighted tradition, unlike our neighbours to the south who have always made the most of their natural resources by fully processing them before they were exported.

However, Harper's government has hit a new low by consistently advertising the need for specific improvements while undermining its announced intentions for improvement with counterproductive policies. Trade, as you pointed out, is one muddled area where its left hand is out of sync with its right. So are its budget cuts that throw more people out of work while weakening essential services such as ensuring food and environmental safety. Its proposed Employment Insurance "reforms" will devastate numerous Maritime communities forcing seasonal workers like fishermen to other areas of the country to find full-time work. The government's failure to install the sophisticated surveillance satellites which were to have helped protect Canadian sovereignty and economic interests in the Far North is another example. But the most egregious example of our government's blindness is the billions of dollars still earmarked for the purchase of F-35 fighters at the expense of so much else of immediate importance to Canadians.

Over and over, this government has shown it hasn't the capacity to meet the important needs of individual Canadians or their nation.

Owen Gray said...

There is nothing wrong, Anon, with exploiting natural resources in a sustainable way.

And a good economist -- which Mr. Harper is not -- would insist that those companies benefiting from natural resources pay the full freight associated with any environmental damage caused by that exploitation.

Modern economies are much more complicated than the model the Harperites view as gospel. And labour patterns are much more varied than the one they hold as morally superior to the ones we have had for generations.

Like the Crusaders of the Middle Ages, they suffer from tunnel vision.

kirbycairo said...

The ironic part of this discourse Owen is that while the Harpercons prattle on about their business acumen, all the while causing chronic underdevelopment and turning Canada into a de facto third world nation, the NDP (which is consistently labeled 'socialist') has developed actual economic policies that would develop real economic benefits over the long run and turn Canada into a 21st century economy.

What I can't follow is why so-called 'business' people are so remarkably ignorant of basic economic principles.

Owen Gray said...

I've always found it ironic, Kirby, that NDP provincial governments -- with the exception of Bob Rae's government -- have better records for balancing budgets than either the federal Conservatives or Liberals.

Usually the epithet "socialist" comes up in a conversation about the party; and nobody considers its economic track record.

Anonymous said...

Guys what do you expect from a man that made all his money in politics?

"Stephen Harper is the Prime Minister of Canada and leader of the Conservative Party, with a net worth of $5 million. Stephen Harper has earned his net worth through his years in politics, as the MP of Calgary, the head of the Canadian Alliance and helped to form the Conservative Party of Canada."


Apparently we have to blame the ones that kept voting him in :)

Owen Gray said...

This is the first time I've seen any reference to Stephen Harper's net worth. If that number is accurate, it's easy to understand his policies.

He's simply protecting his stake.

e.a.f. said...

Socialists frequently are better at balancing budgets because many of the older ones came from families who did not have credit & were unable to obtain it. Hence, they had to balance the family budget. Many socialists also had an aversion to paying interest to big banks.

You might also want to look at the educational track record of many of the "socialists". Anyhow bob Rae was know as a "cadillac socialist". that was a little different than a regular socialist.

Harper, stevie slime & his slimers are only interested in big corporations. They have no interest in how it affects people, the enviornment, etc. They haven't even figured out social programs frequently save money in the long run.

Owen Gray said...

I've always admired Tommy Douglas's talent for consistently balancing budgets, e.a.f.

He came from humble beginnings and knew how and why people had to put food on the table.

Stephen Harper looks like he has never struggled to put food on his table.