Canada pummels poor Mexicans

Canadian Minister of Foreign Affairs Chrystia Freeland, Mexican Economy Minister Idelfonso Guajardo, centre, and U.S. Trade Representative Robert Lighthizer on Tuesday at the NAFTA talks in Mexico City. that the TPP contained “the strongest labor and environment provisions ever included in a trade agreement, and they mark a sea-change from earlier trade agreements like NAFTA.” Some might have assumed that’s what Trump disliked about the TPP, which he killed. But lo and behold, it seems to be the only thing he loved (assuming he read it).

The TPP’s environmental standards were weaker than its labour standards — probably because the environmental rules were mostly driven by political correctness, and not the full force of government-supported organized labour. But they would have been a mission creep waiting to happen.

Neither labour nor environmental standards were included in the main text of NAFTA. They were instead the object of side agreements with much less punch. Adding stronger such standards inside a renegotiated NAFTA would undermine one of the main reasons for the benefits of tree trade.

Consider carefully what higher labour standards would do to NAFTA. By increasing the cost of labour in the poorest of the three partners — Mexico — they would remove part of what economists call its “comparative advantage.” Wages are lower in poorer countries because labour there is less productive, which is exactly the reason why these countries are poor. For certain goods, productivity will be even lower than the low wages, and, for those goods, the poor country has no comparative advantage. But in sectors where productivity is higher than low wages — for instance, in Mexico’s case, manufacturing semiconductors — the goods are produced at prices attractive to foreign buyers, and the poor country is said to have a comparative advantage. A poor country can compete internationally where it has a comparative advantage, and get progressively richer.

What international labour standards do is to slow down or stop this process, by raising the cost of lowwage labour until it overcomes productivity. These standards thus protect rich workers in rich countries (like the U.S. and Canada) from the competition of poor workers in poor countries (like Mexico). Where are the social justice warriors to attack this ignominy?

The tragedy is that the Mexican government accepted labour standards in the stillborn TPP, so it may have to yield to them in the NAFTA renegotiation.

Ms. Freeland says she also wants to add “gender” to the regulatory standards in the renegotiated NAFTA. Why not? And why not simply write that all politically correct “rights” are protected? But for Gaia’s sake, this is supposed to be a free-trade agreement! (It all brings to mind an article published last year in the journal Progress in Human Geography, written by serious academics, titled “Glaciers, Gender, and Science: A Feminist Glaciology Framework for Global Environmental Change Research.” The authors claimed that “stereotypical and masculinist practices of glaciology” are linked to “imperial and hegemonic capitalist agendas,” and thus that “Ice is not just ice.”)

There is much ignorance and political stupidity in the world. The project of adding to NAFTA politically correct regulations — or “standards,” as we’re supposed to call them — is yet another illustration. Working Income Tax Benefit, wage subsidies and worksharing for people with disabilities, and an ambitious set of policies to support entrepreneurship, such as lowering capital-gains taxes.

The second takeaway is that public policy should minimize the extent to which it discourages hiring and employment. Policymakers often think about trade-induced or technologyinduced dislocation, but they rarely consider the risks of policy-induced job losses or opportunity costs. Higher costs in the form of rising minimum wages, a greater regulatory burden, and other policies risk undermining employment opportunities, particularly so for the “working poor.” Similarly, incomesupport programming with high clawback rates (what economists call marginal effective tax rates) can be an obstacle to recipients pursuing a job or expanded hours. Governments ought to therefore apply a “job lens” to different policy choices to better understand the possible employment effects.

Labour Day reminds us to recognize the importance of paid work as an economic and non-economic institution including with regards to poverty reduction. Now is the time to redouble our commitment and efforts to a work-centric policy agenda.