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The Free Trade Debate Continues

April 1, 1986 -

It's hard to know what are the real issues, pro and con, in the arguments about free(r) trade between Canada and the United States.

On the one side are those who warn that more integration of the Canadian and American economies will jeopardize Canadian sovereignty as well as Canadian jobs. On the other side are those who argue that free trade with the U.S. is needed to invigorate the Canadian economy and so create more jobs. Who is right? It may be helpful to quote from both sides of this debate, and I'll begin with those who oppose free trade.

In a recent speech Mel Hurtig, a vociferous advocate of Canadian nationalism, warned that the Americans intend to use free trade as a means to fulfil their old dream of "manifest destiny," in which the U.S. would control all of North America. Mr. Hurtig stated, "Clearly they have the idea in Washington that Canada should be part of the U.S....The year 1986 is the most important year in modern Canadian history. The very future of Canada as a sovereign and independent country is at stake" (Globe and Mail, February 11, 1986).

According to Mr. Hurtig, Canadians have built a different society than the Americans, one which is "more compassionate, sensible, peaceful and sane." He is convinced that free trade with the U.S. would destroy those qualities.

In "An Open Letter to the Prime Minister" (Toronto Star, January 23, 1986) two other long-time advocates of Canadian nationalism, Walter Gordon and Abraham Rotstein, warned the prime minister that free trade will have a devastating impact on jobs and on Canada's national integrity. They wrote:

The present free trade initiative, we feel, is a symptom of this country's weakness and vacillation in the realm of domestic economic policies to strengthen our own future. We are inclined to hand over the responsibility we have for industrial development to others—to the anonymous currents and unpredictable forces of a bilateral trade agreement where we are by far the weaker partner.

Canada has every reason to protect and to improve its trade channels with the United States as it has done under the GATT agreement signed in 1979 and as it can continue to do in a new round of GATT negotiations. But closer trade links should not come at the price of abrogating our own control of our economic future. Herein lies the great danger of a free trade agreement. 

Dennis McDermott, president of the Canadian Labour Congress, called on Canada's labour unions to launch an all-out fight against a free trade arrangement with the United States. He warned that the federal government's trade initiative with the U.S. "is not only an attack on trade unions, it's an attack on Canada as a country and on everything we hold dear" (Globe and Mail, November 15, 1985).

On the other hand, there are those who believe that a free trade agreement with the Americans would be in Canada's best interests, although they concede that certain difficult hurdles would have to be overcome.

One convinced advocate of free trade with the U.S. is Professor John Crispo of the University of Toronto. Crispo responds to the accusation by many anti-free trade people that Canada's medicare and other social security programs would be seen by the U.S. as (non-tariff) trade barriers and therefore be put into jeopardy. Crispo believes that this argument is a red herring intended to scare the Canadian public. He points out that the American economy also has its share of industrial and social subsidies, particularly in its huge military industry. Such subsidies would also be subject to negotiations and trade-offs. In a Toronto Star article (March 10, 1986) Crispo gave this advice:

Without free trade and the scale and volume it will provide Canada's producers, there is a grave danger that this country's productivity and therefore standard of living will stagnate or, worse still, go down. As the U.S. standard of living continues to rise, this means that the disparity between our two countries' standards of living will widen.

If this happens, it is my judgment that the point will arrive when the hard-done-by West or hard-pressed East—which both have long favored free trade—will become so disillusioned with central Canada's selfish and short-sighted domination of their destiny that they will seriously consider leaving this country and joining the U.S. lock, stock and barrel. It Is In this ironical sense that the narrow-minded parochial activities of Canada's pseudo-nationalists could actually prove the undoing [of] this country.

At the centre of the free trade debate is Simon Reisman, a veteran of many delicate trade negotiations, including the Canada-U.S. Auto Pact. Recently appointed by Prime Minister Mulroney as the chief negotiator in the current free trade discussions, Weisman has openly expressed his stand. Following are some excerpts from an interview with Mr. Weisman which was printed in Canadian Business of March 1986.

Q. But with Ontario Premier David Peterson talking about the loss of 280,000 Jobs in Ontario alone....

A. Peterson released a paper that was misleading and you can quote me. It wasn't a study at all. The Ontario Ministry of Industry, Trade and Technology has classified the province's manufacturers according to how vulnerable they are to US competition. So they sinply took all the Jobs In industries, which their computers say are vulnerable, then added up the number of employees In those firms and said they're going to lose that number of Jobs. Now that's pure Junk, because it assumes there'll be no positive adjustment—nobody will respond, nobody will learn how to do It, nobody will take advantage of new market opportunities. The second thing it seems to assume is that we're going to take whatever protection is afforded Industry today and throw it out overnight. Well, nobody In his wildest dreams believes that that's how you conduct yourself.

You negotiate and, in respect to vulnerable sectors, you will look for a transitional period with transitional aid and one with programs that will get Canadian firms into a better position to compete and put Canadian workers in a better position to supply labor.

Q. Suppose it becomes clear to you that the Americans aren't going to give us the assurances and adjustment periods we need to make free trade work. What then?

A. If I don't feel that we've got a workable agreement that will provide Canada with major benefits, benefits that more than offset any of the risks, I won't hesitate for a moment to advise the government that we cannot find a basis for agreement. I can say that unequivocally and without hesitation. I never go into a negotiation believing that I must have an agreement. If you go in believing you must have an agreement, you'll never get a good one. I will not hesitate to walk away from a deal that isn't clearly of benefit to Canada, and to all regions of Canada.

Q. You must have thought the probabilities of getting a good agreement were fairly high or you wouldn't have taken the Job.

A. I wouldn't say that. I think this is going to be a pretty tough one. It's going to be tough to persuade the Canadian people, and it's going to be tough to negotiate at the bargaining table. The Americans have a large [trade] deficit and they're on a protectionist kick. As the weaker of the two countries, we're going to need a lot of understanding from the Americans. We're going to need transitional periods and transitional arrangements. The Americans don't need these things nearly as much as we do. They already have their big markets. With a few exceptions, we don't.

Free trade with the U.S. is not the solution to all of Canada's woes, nor is it a certain road to cultural and economic suicide. The warnings of the thoughtful critics (e.g. Gordon and Rotstein) should not be ignored. We must be careful not to trade everything away. But it is hard to take seriously the dire predictions made by anti-American and pro-socialist ideologues, e.g., certain spokesmen of the Canadian Labour Congress and the Canadian Centre for Policy Alternatives. The free trade advocates, especially when they stress the need for Canadian business to be dynamic and imaginative, have the more persuasive case. At least, negotiations in good faith should be undertaken. Whether such discussions can be successfully concluded remains to be seen.

The Free Trade Debate is Turning Into a Shouting Match

October 1, 1987 -

Why has Canada's recently concluded free trade agreement with the United States caused such bitter debate? This article attempts to uncover the main reasons for the current uproar.

Why Now?

Canada is a highly industrialized economy with a small home market. It is therefore enormously dependent on foreign trade. About 30 per cent of Canada's GNP is devoted to exports. The United States is Canada's biggest trading partner, accounting for nearly 80 per cent of our exports (and 90 per cent of Ontario's exports).

Canada's main objective in the free trade deal is not to expand that trade further (although that is not excluded) but to ensure that the current level of trade with the U.S. will not be curtailed by American protectionist measures. As stressed by the Macdonald Commission's report on Canada's economy, the free trade issue concerns security of access to our largest market. It observed, "The greater the amount of trade with any one partner, the greater the need for a certain and secure relationship with that partner."

It is clear that Canada needs American markets. But does the U.S. want a free trade deal? The American economy is seriously imperiled by a massive and mounting trade deficit, which has fanned the flames of protectionism smoldering there. That protectionist mood poses a grave threat to our trade with the Americans.

The Opposition

Canadians opposing the free trade deal claim it will eliminate jobs and jeopardize our political independence. For example, Canadian Auto Workers union president Bob White warns that the Canada-U.S. pact pushes us towards "a Rambo, dog-eat-dog, survival of the fittest society with no ability to maintain our social programs or ability to structure our own economy" (Globe and Mail, October 5, 1987). Ed Broadbent, leader of the New Democratic Party, has warned that within 25 years the Canadian border will cease to exist; that Canada will have been absorbed by the United States. This same refrain is heard from spokesmen for the Liberal party and the Canadian Labour Congress, such stalwarts of Canadian nationalism as Mel Hurtig, and everyone to the left of that coalition. The Toronto Star, claiming free trade endangers Canada's very survival, has directed a steady barrage of criticism at the agreement. Canadian free trade negotiator, Simon Reisman, accused the Toronto Star of engaging in a campaign of "smear tactics and scare mongering."

Speaking at a gathering of the Council of Canadians, Liberal trade critic Lloyd Axworthy charged that proponents of free trade with the U.S., specifically the government, will use any means to deceive the country. "You are going to see every ounce of political distortion, fabrication, that is possible, and this government is capable of great examples of distortion and fabrication," he said. Axworthy was impressed on his recent trip to Nicaragua with the willingness of the Nicaraguans to risk their lives in their fight against the United States. And here, he said, the Canadian government is voluntarily surrendering its independence to that country (Globe and Mail, October 18, 1987, p. 8).

Bernard Ostry, a long-time government bureaucrat, made this dire prediction: "Without the institutions we have created to ensure the survival of the Canadian arts and a Canadian voice in the media, those arts and that voice would survive only in the way that literature and art have managed to do so in the Soviet Union" (Canada Not For Sale: The Case Against Free Trade, Toronto: General Paperbacks, 1987, p. 65).

So free trade means political and cultural oppression for Canada. We are left to fight the Americans just like the Sandinistas in Nicaragua (now supported by the Soviet Union) and like the Soviet people fight their own oppressive regime. It does get rather confusing. The outrageous claims of Messrs. Axworthy and Ostry, rather than strengthen the case against free trade, demonstrate their ideologically motivated determination to destroy the free trade agreement no matter what.

Evaluation and Prognosis

The free trade agreement with the United States is not everything Canada would wish it to be, and many aspects remain to be ironed out over the next several years. But the basics are there. Canada has managed to ward off the bulk of the protectionist threat, and this is a crucial accomplishment. The new Canada-U.S. trade agreement is a step in the right direction and provides opportunities we should energetically exploit.

Peyton V. Lyon, professor of political science at Carlton University, scoffs at the "opportunistic politicians and labour leaders who claim that free trade will cost Canada its sovereignty, make it the 'fifty-first state,' and lead to total absorption." He writes that free trade arrangements have never been the cause of political or economic mergers elsewhere. "The smaller partners gain the most economically, retain their foreign policy independence, and are obliged to make only minor adjustments in their domestic policies. Why," he concludes, "should it be any different in North America?" (Globe and Mail, October 17, 1987).

The contemporary conflict between proponents of the interventionist state and advocates of a limited state seems to play a significant role in the free trade debate. This explains why the New Democratic Party (from which the Liberal Party is becoming increasingly indistinguishable) and those to their ideological left oppose the free trade deal. Ironically, NDP leader Ed Broadbent's riding of Oshawa, and Bob White's Canadian Auto Workers have vastly benefited from an existing free trade deal with the U.S., the Auto Pact, yet Broadbent and White are two of the most strident opponents of the new trade agreement.

Nevertheless, there are risks for Canada in the free trade agreement, and Canadian initiative and ability will be taxed to minimize the risks and make the best of it. No one can be completely certain of the outcome. But has anyone contemplated the dangers posed to Canada's economy if no agreement were reached? With 30 per cent of our economy going to exports, and 80 per cent of that to the U.S., doesn't that seem a lot riskier? And more of a threat to jobs? It is unfortunate that many have chosen to use this issue as an occasion to vent their principled anti-Americanism and their commitment to the interventionist state.

What are the prospects for the free trade deal? There is still a very strong likelihood that this agreement will be torpedoed. First, the American Congress may very well reject it, as strong protectionist lobby groups are hard at work there. Second, as Professor Michael Bliss pointed out in a letter to the Globe and Mail on October 17, the new Meech Lake accord means that the Liberal-dominated Senate can scupper the deal by refusing its assent. The clamour for an election already beginning will then force an unpopular Conservative government to have this issue settled by Canadian voters. Should that happen, brace yourself for a bitter campaign in which the naysayers will stick to the high ground of defending Canada against an evil American empire intent on swallowing up the entire continent. That strategy has worked before. We can only then hope that the rhetorical overkill of the Messrs. Broadbent, Axworthy, Ostry, and their allies will be seen by ordinary Canadians for what it really is. But don't bank on it.

The Free Trade Debate That Isn't

October 1, 1988 -

The Canada-U.S. Free Trade Agreement is now a source of bitter political controversy in Canada and is at the centre of the federal election campaign. John Turner of the Liberal party and Ed Broadbent of the New Democratic Party vie with each other in denouncing the agreement and Prime Minister Brian Mulroney's government. Those who are eager to understand the pros and cons of this agreement should keep a few things in mind in trying to cut through the fog of contradictory claims and confusion surrounding the FTA. (My bias is to support it, though it is not perfect and some companies and workers may be adversely affected.)

Many of the critics are engaging in rhetorical overkill. It is one thing to be opposed to the agreement on the basis of a careful and knowledgeable evaluation of the actual contents of this agreement. It is a complex and wide-ranging document; there is room for honest disagreement and differences of opinion. But it's quite another thing to do what its most vocal critics are now doing. They include spokesmen for the New Democratic Party, the Liberal Party, the Canadian Labour Congress, the so-called cultural establishment, certain churches and everyone to the political/ideological left of this amalgam. These critics argue that Canadian culture will be destroyed, that Canada will lose control over its own social, economic and political programs because the Canadian government has "sold out" to the Americans, and that all who favour this agreement are committed to a money-grabbing, market-dominated, and anti-people ideology.

Irresponsible charges and predictions abound. For example, Shirley Carr, president of the Canadian Labour Congress has said: "At the Canadian Labour Congress the Mulroney trade deal is looked on as nothing, less than a corporate blueprint to plunder a nation's treasure house and snatch away the soul of its people" (If You Love This Country, Laurier LaPierre, ed., p. 87). Everyone ought to suspect such sweeping denunciations.

The charges about the sellout of Canadian culture, resources, and social programs such as medicare, unemployment insurance and regional development programs, are simply not true. The FTA is a contract about commercial trade between two countries that leaves out many details of Canadian life and policies. In all likelihood, Canada will face serious difficulties with many of its programs in the future for a number of reasons in any case (see here). To argue that the FTA will destroy Canada and reduce it to an impoverished satellite of the U.S. is a form of demagoguery. A clear example of this is the recurrent claim that the Americans will be able to force us to sell them our water. The truth is that Canada is not forced to sell anything to the Americans except that which we voluntarily undertake to do. Once we do make such a decision, there will be all kinds of contractual conditions and requirements, as with any commercial transaction. We should therefore indeed be prudent in our long-term commitments regarding the sale of exhaustible resources.

The vehemence of the accusations by Shirley Carr and other likeminded critics can be attributed to their view of the state. The Free Trade Agreement leaves many decisions to individuals and companies in the private sphere. If you believe that the state is really the appropriate institution for the regulation of commerce and economy, then you will not like the FTA. In that sense, the New Democratic Party and all those to the left of it are quite consistent in opposing this agreement. But it does not necessarily provide them with infallible insight or morally superior motivations.

"God's Special Interest Group"

Of special interest to Christians is the opposition to the FTA by a number of social activist churches organized in an inter-church coalition called GATT-Fly. It is hard to find any original idea or insight about economic life and the regulation of international trade in GATT-Fly's literature. Instead, it is filled with the same arguments as those used by the NDP, the Canadian Labour Congress and the cultural establishment. The only additional component contributed by the ecclesiastical critics is their status as religious leaders and as moral teachers. But how do they use these unique qualifications in the free trade agreement discussion? It turns out that they are strong in their denunciation of "capitalism" and the "market ideology." When carefully examined, however, their alternatives amount to a withdrawal into self-reliant, small-scale and labour-intensive employment geared to the fulfilment of simple and essential needs. But such advice amounts to turning one's back on the modern world and seeking refuge on an island.

At the same time, GATT-Fly favours planning and an interventionist state. Consider, for example, the following advice in a piece against the Canada-US Free Trade Agreement:

Controlling and directing self-reliant development is not a matter of individual enterprises only. Economic planning for the entire community is necessary as well, for the nation and for the communities down to the township and village level. If such planning is to be effective it must be democratic. In material terms, perhaps the most important long-term role of government in the struggle for self-reliance is to organize economic planning and to coordinate plan implementations. Of course, plans must also be flexible and subject to modification in light of experience. (GATT-Fly, "Building Self-Reliance: The Alternative to Free Trade", Canadian Dimension, September 1987, p.31) 

How central planning, and therefore an interventionist role by government, can be reconciled with local control and self-reliance is a puzzle that GATT-Fly merrily skips over. But government planning for self-reliance and local control is like planning for freedom—a contradiction in terms. The central planners in Moscow, after a seven-decade long search for combining local initiative (or self-reliance) and central planning have reluctantly admitted that their efforts have been a colossal blunder and waste. The Canadian churches, organized in GATT-Fly, still haven't understood this elementary lesson about human nature and true freedom. That is perhaps the reason why their views are warmly applauded by the editors of Canadian Dimension, a well-known Canadian mouthpiece for Marxist propaganda. GATT-Fly is no help in learning the truth about economic matters, including the details and possible consequences of the Free Trade Agreement.

Richard John Neuhaus's criticism of religious organizations that pretend to speak for God, made in the American context, apply equally to the Canadian scene:

Religious organizations are special interest groups of a sort, although they do not like to think of themselves that way. They like to think that they transcend the special interests and approach these matters "wholistically." They look at things from the big perspective, even from God's perspective. Action groups and church-and-society offices can be useful instruments that simplify and clarify. They more commonly become instruments that simplify and distort. They more commonly succumb to the temptation to think of themselves as God's special interest groups. All those other groups are advocating their agendas, whereas we're pressing God's agenda—or so some Christians are inclined to think. Come an election, God's got his favorites, and we're here to tell the godly who they are. In this way of thinking, dangerous simplification locks arms with sanctimonious hubris, to the grievous damage of both authentic religion and democratic discourse. (The Religion & Society Report, October 1988, p.2). 

It's too bad that those who are called to provide spiritual leadership merely add their voices to those who appear to be motivated by not much more than a muddle of anti-Americanism, utopian statism, and a sense of moral superiority. They exacerbate confusion and antagonism in a situation that obviously cries out for wisdom and moderation.