bout de papier, Vol. 4, No. 2 (1986) — Spring/Summer 1986 // Printemps/Été 1986, p. 6
The most useful statement so far on U.S.-Canada negotiations leading to a free trade area has been made by Lane Kirkland, president of the AFL-CIO – ’the best time for free trade is when both economies are healthy’ — i.e. fully employed and productive. Until that time arrives, each country can employ its resources best in reducing unemployment and trade deficits at home.
In fact, this is the basis on which free trade theory rests. David Ricardo set up a model of two countries, each fully and efficiently employing their labor, land and capital. How could these countries still improve their performance and, hence, the standard of living of their people, he asked. By trading with each other! With different resources, skills etc., if country A were more efficient in producing cloth and country B in producing wine, then it would pay each to divert resources to the more efficient sector and trade for the products in which it was less efficient. Trade led to a greater total output which would be shared.
Ricardo went further in his comparative advantage model by posing the situation in which one country was more efficient in producing both (or all) products. Such a nation would obviously be more efficient in producing some products than others. Let that nation devote all its resources (remember, economists live in a full-employment world) to the things that it does best and leave the rest to its neighbor.
Economists call this abstraction, pure theory. Our religious leaders would call this love thy neighbor as thyself economics’. I would prefer to call it ’out of this world economics’. Name one nation that has taken this approach to trade or, alternatively, one that might contemplate such a policy!
Great Britain adopted free trade in 1846 when it was the only industrial country in the world worthy of that name. And not for reasons of theory or charity. The United States did not cease to be the harsh protectionist until after World War Il when it was indisputably the strongest industrial power in the world.
Neither Canada nor the United States believe in free trade. If they did, manufacturing for the North American market would take place in Korea, Singapore, Japan, etc. This would benefit consumers enormously; the only problem – without work, wages and salaries what would our consumers use for money to buy the imported goods?
I suppose that the Japanese could lend the United States and Canada the money to buy their exports, but for how long? A Tokyo already on the way to supplanting New York as the financial capital of the world, as New York once upon a time supplanted London, would sooner or later ask for its money back.
Ironically, by demanding that ’everything be put on the table’, the United States might be able to do for Canada what Canada has never been able to do for itself, i.e. create a free trade area within the country. Interstate commerce, free and unimpeded, was the foundation of American domestic policy and is often cited as the example that proves the merits of free trade at the international level. Applying this policy in the negotiations would mean the end of all non-tariff barriers that impede trade flows not only between the United States and Canada but also between the provinces within Canada.
If there are no barriers to trade, the nations of the world would resemble provinces within a single mighty empire, as Adam Smith pointed out. We must be able to protect our differences. If the people who live in Canada are not able to create and shape a society that contains their values, objectives and priorities and the means of their achievement, there will be no meaning to being a Canadian.
A nation – whether it be capitalist, communist or fascist – must have control over its own economy, its own present and future or it does not deserve to be called an independent country. It will cooperate and trade with other countries but the policies controlling production, distribution and exchange must be made at home. Without this economic control, there can be no political sovereignty and without political sovereignty there can be no freedom to pursue our own social and cultural priorities.
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Originally published in bout de papier, Vol. 4, No. 2 (1986) — Spring/Summer 1986 // Printemps/Été 1986, p. 6. Read the rest of this issue →
