bout de papier, Vol. 4, No. 3 (1986) — Fall 1986 // Automne 1986, p. 7
I believe that free trade with the United States is the most important economic, social, and political issue facing Canadians today. Its proponents argue that free trade will give us economic security in the short term and strengthen our economic base in the longterm; that it can be negotiated so as to leave our social programs and cultural identity untouched; and that it will strengthen, rather than weaken, our political sovereignty. In this paper, I would like to examine these claims because I don’t believe they are credible.
First, I would like to look at the economic context. The U.S. is increasingly concerned about its growing trade deficit, which currently stands at $150 billion. Its deficit with Canada of $20 billion is second only to its $50 billion deficit with Japan. Is it likely that the U.S. would agree to a trade agreement which left this trade imbalance untouched? But any reduction in Canada’s trade surplus with the U.S. means a loss of jobs here, not the gain which the free trade supporters claim. Moreover, since much of our trade advantage can be attributed to a tavourable exchange rate, would it be possible to negotiate a free trade agreement which does not provide for limits on our dollar? The recently-negotiated U.S.-Israeli trade agreement limits fluctuations of the Israeli currency.
More importantly, this agreement retains the right of the U.S. to apply countervail measures against Israeli imports. Recently, William Merkin, who will be the No. 2 negotiator for the United States in the bilateral trade talks, warned that there is almost no chance that the Congress would approve a trade treaty that eliminated the U.S. countervail process. Given that precondition, it will be impossible to achieve the free trade supporters’ goal of secured access to the U.S. markets.
It is argued that free trade with the U.S. will help the Canadian manufacturing sector to expand by forcing it to become more competitive and productive. Let’s consider what happened between 1974 and 1984, a period during which tariffs fell dramatically following the Tokyo Round of GATT. Canada’s share of world exports fell; our deficit in the critical machinery industry increased from $2.9 billion to $7.7 billion; in electrical products it increased from $1.2 billion to $3.3 billion, and in scientific professional equipment and related products it increased from $1.2 billion to $3.5 billion. Moreover, our per capita deficit in manufactured goods continued to be amongst the highest in the world. Given this history, why would we expect our manufacturing base to be strengthened and further developed as a result of a free trade agreement with the U.S.?
The supporters of free trade have argued that there will be adequate periods for phasing in tariff and non-tariff barrier reductions to allow certain Canadian sectors to adjust. But Mr. Merkin has said that “as a general rule”, Congress will refuse to give Canadian firms “a headstart” by allowing unequal time for adapting to the new trade rules.
Simon Reisman has said that if the U.S. seeks to put our social programs on the table, he will tell them to “go jump in the lake” • The Americans say that they are seeking a “level playing field”. The unemployment insurance program and federal fisheries support programs have already been raised in the context of a countervail case involving Atlantic groundfish. It is hard to believe that the U.S. will not seek changes to social programs and regional development policies which they believe give Canadian firms an unfair advantage. In any case, it is clear that in the context of free trade, U.S. social programs could become the ceiling for our programs. Even if social programs are excluded from the free trade talks, once an agreement is reached, all of those people who reassured us that social programs will not be affected will be warning us that, in the new competitive environment, we have no choice but to harmonize our policies with the U.S. For Canadian workers, an even greater concern is that the anti-labour environment in much of U.S. industry will be transplanted here.
With respect to our cultural identity, the U.S. Ambassador to Canada has made it quite clear that to the Americans, “culture is business” and they do not understand our sensitivity on this issue. This attitude should not surprise us, nor should threats of a “scorched earth policy” dissuade us from holding our ground.
The issue of political sovereignty is a particularly vexing one. Free trade supporters point to the Common Market in arguing that trade agreements have no impact on national sovereignty. Clearly, this is a specious comparison given the relative size and power of Canada and the United States. We have seen how effective the so-called “special relationship” has been in our dealings with the U.S. on acid rain, the pharmaceutical industry, and the Arctic. It is difficult to believe that having traded our economic independence for access to the U.S. market that we will not find our political independence constrained, for example, by the potential threat of the U.S. abrogating the free trade agreement.
I believe that the free trade debate is diverting us from the real questions we should be asking ourselves. The issue today should not be whether to increase our economic integration into the United States but rather — noting our already incredible level of integration – how we can reduce the degree of dependency. We shouldn’t be talking about “enhanced trade”,, but of enhanced Canadian Content to reduce our import dependency.
We should be asking: How can we do more research and engineering work? How can we process more of our resources before they’re exported? How can we build more of the machinery we use to get access to these resources? How do we develop a manufacturing base so we have the skills and capacities to meet our needs and the flexibility to adapt to a changing world?
Let me conclude by responding to those who defend their support of free trade as reflecting their confidence in Canada and who write off the critics as “timorous” and lacking in confidence.
Quite frankly, there is nothing in the economic and political context, nor in the arguments I have heard from the free traders, to inspire confidence. Moreover, it is hardly a sign of confidence when a government that prides itself on its openness and willingness to consult refuses to release completed research papers on the implications of free trade.
There are many of us who do have confidence in the collective potential to build a dynamic and progressive Canada, and we do not underestimate the difficulties in undertaking this task. But we view the move towards a bilateral free trade agreement with the U.S. not as a reflection of confidence in Canada, but as the giving up on what Canada can be. A
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Originally published in bout de papier, Vol. 4, No. 3 (1986) — Fall 1986 // Automne 1986, p. 7. Read the rest of this issue →
