Canada still worlds apart with current trade policies
We must be more in line with realities of a global economy, Danielle Goldfarb writes.
New York Times journalist Thomas Friedman told us that the world is flat. Over the past decade, global trade has exploded and global supply chains have taken root and grown.
Yet, from Canada’s perspective, the world is still somewhat round. Canada is not taking full advantage of the opportunities a flatter world presents. Over the past decade, Canadian exports have stagnated.
To address this challenge, Canada’s policies need to continue to adapt and align with the realities of globally integrated production, including the rise of less visible types of trade.
Past policies focused on removing tariff barriers. Tomorrow’s policies need to be broader to address global production and new kinds of trade. For one example, imports should get as much attention as exports in trade policy, especially in light of global supply chains. A 2014 Statistics Canada study shows that engaging in two-way trade boosts company productivity.
Openness to imports would have the added benefit of bringing poorer countries more fully into the global economy. In particular, it could help women in those economies gain income by participating in the more lucrative export sectors.
On the investment front, past and current policies attempt to encourage inward investment, while restricting it in certain sectors and circumstances. Updated policies more in line with current global production realities would continue to remove barriers to investment flows in both directions (appropriately qualified in cases where other public interests are at stake).
Policies should also give services trade weight in line with its economic potential.
Traded services represent some of Canada’s fastest-growing exports but are relatively invisible (as they are in many developed countries), and garner less public and sometimes less policy attention than do resources and manufactured products — both of which also matter for Canadian living standards. The risk is that more visible trade can crowd out attention that should be paid to smoothing the path for Canada’s less obvious traded services.
Canada’s future global commerce policy needs to keep it real to best advance its economic interests while also contributing to a more prosperous world.
Compared to tariffs on products, barriers to traded services — such as restrictions on people movements, information flows, or investment — are more challenging issues. Fortunately, the next generation of Canada’s trade agreements is already starting to address these kinds of barriers.
Giving services trade its appropriate weight means that government agencies that provide loans to exporters need to continue to reframe their thinking.
The traditional approach is to value manufacturing plants as assets or collateral for loans. Forward-looking policies need to fully assess intellectual property as an asset.
Governments may have a role to play as markets may under-provide loans for servicebased companies.
It is also critical to take a hard look at how we measure global commercial activities. Governments base policies on what gets measured. But official statistics in all countries have evolved slowly in response to global economic change. Conference Board of Canada research shows that Canada’s trade statistics overweight trade with the United States vis-à-vis the world, and trade in products or raw materials compared with traded services.
Statistics Canada has already started to examine new ways to capture this kind of data.
Tomorrow’s global commerce policy needs to be clear-eyed in measuring, recognizing, and addressing the hyper-linked, hyper-competitive reality that Canada faces.
Policymakers will need to continue to help educate Canadians about the new realities, and work on creating frameworks that permit Canada to seize the benefits of the global economy — while preparing them for its inevitable challenges and vulnerabilities.
In short, Canada’s future global commerce policy needs to keep it real to best advance its economic interests while also contributing to a more prosperous world.