National Post (National Edition)
Freeland’s on the right road, but it’s rocky ahead
In a slew of speeches over the past couple months, including one on Thursday in Montreal, Chrystia Freeland, our international trade minister, has firmly stated a willingness to juke while others jive.
The U.K. can have Brexit, the United States can have Donald Trump and his autarkist tendencies, Italy can have its No voters — we're having none of it. No, Canada will remain committed to free trade and to openness in immigration.
While protectionist forces elsewhere sandbag their borders, we're going to pursue new trade agreements.
We’re also going to promote Canada as a destination for foreign direct investment, and forcefully support our export sector.
Clearly, the Liberal government sees opportunity in adversity — a chance to show that Canada is special (to use Freeland’s word), and perhaps more noble. As evidence, she has glowingly quoted The Economist, a publication she used to write for, which opined in October that “the world owes Canada gratitude for reminding it of what many people are in danger of forgetting, that tolerance and openness are well-springs of security and prosperity.”
Well, good for Freeland, and good for us, I guess. Let’s hope that the Liberals follow through on this bold vision, and that it has some good effect. Sadly, that might be a very tall order.
To be fair, you can’t dismiss the Liberal trade-isgood talk as just more hot air. Freeland snatched a victory on the Canada-European Union trade agreement (CETA) from the jaws of defeat at the hands of the Walloons last year. She is about to begin exploratory talks with China on a freetrade agreement, and she has pledged to beef up Canada’s investment in trade promotion. In November, she signed Canada on to the Trans-Pacific Partnership (TPP), for what it’s worth now that the U.S. has pulled out.
On that note, the death of the TPP and the U.S. president-elect’s frostiness towards China on trade (and Taiwan, and the yuan, and so on) probably do represent an opportunity for Canada to deepen trade ties with the Far East. But how much will any of that really matter?
For one thing, new bilateral agreements are incredibly complex and timeconsuming. Even agreeing to start negotiations takes years, and actually negotiating them takes many more. And then there’s the problem that bilateral agreements typically aren’t completely free, thanks to the horsetrading in the negotiation process. Country A might give up rice tariffs if Country B drops import duties on steel, but Country A is allowed to protect its aircraft industry in return for Country B still protecting its dairy farmers.
If Canada really aims to be a beacon of anti-protectionist hope, it would be nice if it would make a clear, strong and public commitment to acting unilaterally in the name of trade liberalism. New Zealand is the real poster child here. In the 1980s, it got rid of a slew of agricultural tariffs and subsidies — which once accounted for nearly 40 per cent of farmers’ income — to significant benefit to both agriculture and the economy.
Canada wouldn’t even have to go so far as ditching its precious supply management system, for instance, to show its free trade bona fides. We could start by unilaterally eliminating tariffs on hundreds of goods that simply cost time and money for businesses, while adding very little to government coffers. Mike Moffatt at the Mowat Centre has convincingly argued that paring the list of 15,000-plus Canadian import tariffs could save businesses almost $800 million a year, with little cost to government.
But the reality is, Canada’s trade fortunes depend on what happens in the United States, which is and will remain our largest trading partner by a very wide margin. In 2015, Canada’s trade with the U.S. was more than eight times our trade with the European Union, more than 12 times our trade with China, and more than 36 times our trade with Japan — the third largest economy in the world.
Sure, we should try to mitigate the risk inherent to our dependence on the U.S. economy by cultivating trade elsewhere. But while the States shouldn’t be our only dance partner, it’s clearly the most important — so much so that you could argue our efforts would be better focused on protecting and expanding NAFTA than on hoping for freer trade with Costa Rica, say.
On that front, the prospects don’t look good. Trump’s trade team comprises a bunch of hawks, including a commerce secretary (Wilbur Ross) and head of a new National Trade Council (Peter Navarro) who seem to believe that valueadded taxes (like Canada’s) are trade barriers and that restricting imports will boost growth. Trump’s new trade representative, Robert Lighthizer, has been a sharp critic of free trade policies. He’s more likely to fight than dance.
In the end, we need to recognize that protectionism is a form of economic self-harm that politicians trot out as a form of self-defence. For that reason alone, Canada should pursue more open trade relationships. But as our largest trading partner seems bent on going the other way, we shouldn’t hope for too much.
WHILE THE STATES SHOULDN’T BE OUR ONLY DANCE PARTNERS, IT’S CLEARLY THE MOST IMPORTANT — SO MUCH SO THAT YOU COULD ARGUE OUR EFFORTS WOULD BE BETTER FOCUSED ON PROTECTING AND EXPANDING NAFTA. — JOE CHIDLEY