Sunday, April 21, 2013

It's About Fair Trade, Not Free Trade

Canada's three major parties now endorse Free Trade. Tom Walkom writes:

Free trade is now orthodoxy in Canada. It used to be debated fiercely. It no longer is.

Stephen Harper’s Conservatives embrace free trade. So does Justin Trudeau, the new Liberal leader.
 As part of their ongoing effort to pretend that they are not New Democrats, so do Tom Mulcair’s New Democrats.

The problem is that politicians have reached this consensus just as the evidence confirms that free trade isn't working. The problem is that what sounds good in theory never works in practice:

The 19th century theory of competitive advantage that lies behind free trade is a venerable one. And in some instances, it makes sense. Canada is probably better off trading lumber in exchange for bananas than producing both.

However, theory is only theory. In the textbook version of free trade, time does not exist and all parties always win immediately. But in the real world of free trade, entire generations can be savaged as jobs and capital slosh around the world.
In countries ranging from Greece at one extreme to Canada at the other, this is what’s happening now.

It didn't used to work that way. Canada used to insist that trade support manufacturing:

Previously, Canada had a more nuanced approach to trade. We were happy to sell resources freely as long as some refining was done here. We protected some fruit and vegetables from foreign competition (which, among other things, encouraged food processing). We protected most manufacturing, which gave rise to factories throughout southern Ontario.
In the auto sector, trade was managed between the U.S. and Canada in a way that ensured production in both countries. Japanese firms like Toyota and Honda were enticed to set up plants in Canada in part by making it harder for them to ship finished autos here.

The people who tout free trade don't believe in fair trade.


The Mound of Sound said...

Too true, Owen. Out here we learned that lesson the hard way. The Americans wanted to buy B.C. raw logs so they could get the lucrative, value-added wood product processing revenue.

We argued that, since they're our logs, we should be able to employ our people to process them into those value-added wood products. We should have the factories, we should have the jobs, we should have the tax revenues.

For that impertinence we got our asses sued off under the trade deal we have with the U.S. If we wanted to sell raw logs to Canadian mills we had to sell raw logs to American buyers as demanded. Cap in hand.

Bad as the softwood lumber deals have been, Harper made them vastly worse.

The Mound of Sound said...

Here's a little background story on the softwood lumber scandal

Owen Gray said...

Thanks for the link, Mound. It wasn't the first time Emerson sold out his constituents.

Owen Gray said...

The problem, Mound, is that -- in Harper speak -- free trade means protecting the interests of investors.

All of the deals since NAFTA have been about making the world safe for investors.

christopher babcock said...

I recommend Sir James Goldsmith's book 'The Trap' for anyone interested in a succinct explanation as to why global free trade does not work. It was written in 1995 as a rebuke to GATT and it looks more and more accurate as each day turns to the next.7679 elcurrow

Owen Gray said...

Thanks for the tip, Christopher. Unfortunately, we have been sold a bill of goods which history has proven is self destructive.

No one mentions these days that, if you are looking for the causes of World War I -- and there were many -- one was the brutal competition between nations which free trade in the 19th century promoted.