Costs of protectionism are ‘steep’, Bank of Canada governor Stephen Poloz warns

Stephen Poloz said on Tuesday in a speech pushing back against rising anti-trade sentiment in both the United States and Europe. In a speech that did not mention monetary policy, Poloz said there is a direct correlation between economic progress and openness, and pointed to trade, immigration and foreign investment as necessary ingredients to Canada’s prosperity. “Protectionism does not promote growth and its costs are steep,” Poloz said in prepared remarks to Durham College in his hometown of Oshawa, in Canada’s manufacturing heartland. “So there are compelling reasons why Canada should continue pushing for open markets, both here and abroad.” Still, the central banker acknowledged the benefits of free trade must be shared to counter the negative impact that workers in specific indus- tries feel from automation and competition. “What is crucial is that we deploy some of the benefits of being open to assist those who need help adjusting to global forces. Failing to do so invites doubt and puts everyone’s progress at stake,” he said. A backlash against free trade and job losses, particularly in manufacturing, was seen as a driving factor behind some of the support for U.S. President Donald Trump and the Brexit campaign. Trump’s vow to renegotiate the North American Free Trade Agreement has caused concern in Canada and Mexico, and Canadian Prime Minister Justin Trudeau has taken pains to promote the benefits to both Canada and the United States of the bilateral trade flow. The United States is Canada’s largest trading partner, taking some 75 per cent of its exports. Poloz said fears of openness are heightened during times of economic stress, but experience has shown that such fears are “misplaced.” In the speech, which traced Canada’s economic history, Poloz argued there are compelling reasons to remain open to immigration to boost the labor force and productivity as well as keep Canada’s economic potential expanding. He also said it is important that Canada remains open to foreign capital flows, noting that “our domestic savings base has not been large enough” to finance the major infrastructure needs of a country with such vast geography and relatively small population, “so we have needed foreign capital.” Source: Financial Post