RIGHT WAY TO TEACH TRADE.

CORCORAN, FP9

TOO BAD THE BANK OF CANADA’S PRIMER DIDN’T COME BEFORE THE USMCA DEAL WAS REACHED.

In the wake of this week’s USMCA un-free trade agreement between Canada, the United States and Mexico, I suggested in this space that citizens of the world — our politicians, business leaders, dairy farmers, CBC hosts, auto workers, all of us — need instruction on the real nature of free trade: what it means, how it works and how it benefits consumers and producers in all countries. Otherwise, we will continue to be bamboozled by politicians and leaders who manipulate and distort economic ideas, creating trade wars and economic risks based on notions without foundation.

Instead of indoctrinating children from kindergarten through high school on the polar-bear scare and the alleged perils of climate change, we should start explaining how beneficial it is to exchange stuff with friends, neighbours and people everywhere.

It was just an idea. But it turns out to have already been taken up by Canada’s central bank. In a post on its website last week, the Bank of Canada launched a new digital publication “to help Canadians better understand the economy.” The Economy, Plain and Simple (the name of the publication) will, says the bank, “feature regular blog-like educational articles about current economic issues, using plain language and engaging visuals to explain concepts in simple terms.”

The first posting, Trading Up: How Countries Benefit from Freer Trade, offers what may well be the most succinct and useful summary of the economics of free trade out there. Its presentation style looks to be aimed at younger people, but we could all use a little refresher course in how trade works.

It should certainly become the first thing any prime minister or cabinet minister reads as part of their mission statements. President Donald Trump and Prime Minister Justin Trudeau and their respective officials could have learned much about a world free of the shackles of government protectionism.

Too bad the Bank of Canada’s primer didn’t come sooner, before the USMCA deal was reached.

Here are the main points of the Bank of Canada’s lessons in free trade. It starts off with a bang. “Trade is dominating the news these days. With the barrage of headlines and the talk about protectionism and tariffs, it’s easy to forget that much of our economic growth and prosperity comes from international trade.”

Below are the lessons, taken almost entirely verbatim from the bank’s online lesson (except where I’ve provided a bit of additional description). It’s a terrific lesson and all within a mere 1,400 words and a short video.

Lesson 1: All parties reap the rewards of free trade. Specialization means focusing on what each country produces most efficiently and trading for the rest. And because specialization is more efficient, it creates more wealth than if each country tried to do it all on its own. International trade is no different from domestic specialization and internal trade — few of us grow our own food or do our own dry cleaning. Instead, we specialize and trade. The lesson includes a short cartoon video featuring “Mark and Lucy” — aimed at kids but worth a presidential view — that explains the concepts of comparative advantage and opportunity costs.

Lesson 2: Trade protectionism makes everyone worse off.

While freer trade — in both exports and imports — makes us better off, the opposite is also true. Barriers to free trade, such as tariffs, have a negative impact on our economic well being.

Lesson 3: The pie isn’t divided equally. Freer trade has raised incomes across the global economy, but it has not benefited everyone. Countries engaged in free trade are better off overall, but some sectors and communities within countries have suffered. Governments have used policies such as ongoing learning and retraining programs to help affected workers adjust. This a better approach than shrinking the pie through trade protection. That would be worse for everyone.

Lesson 4: Trade deficits and surpluses are not a scorecard.

It’s important to debunk the myth that cheap imports are the cause of all the pain and that a trade deficit with another country is a bad thing. Looking at trade balances between a country and its trade partners, we should expect to see surpluses with some and deficits with others. This is specialization in action.

All in all, the Bank of Canada’s trade lessons should be made mandatory in schools beginning at least as early as grade 7, perhaps just before they start the latest sex-ed session and as a replacement for yet another class about global warming.