Revisiting the Free Trade debate

Monday, August 29, 2005

With the recent developments on the mad cow and softwood lumber files, it seems that the subject of free trade (or lack thereof) is again dominating the news — although, certainly not to the extent that it did in the late 1980s. As a participant in that debate (as if there’s any doubt, I was on the no side), I thought it might be fun to revisit some of the claims made by both advocates of the Canada–U.S. Free Trade Agreement. How accurate was each side in the debate in predicting the fallout from the deal?

Free Trade and Jobs
John Bulloch, then president of the Canadian Federation of Independent Business, appeared on Canada AM on January 25, 1988. During the interview, he stated that:“We’ve got a new free trade agreement. Every single one of those tariff cuts is going to mean a new company formed. So we’ve got all kinds of excitement ahead and that’s what we should be talking about.”

Throughout the election campaign, Prime Minister Brian Mulroney claimed that the deal would mean “greater harmony and prosperity” as well as “more jobs and more wealth” for Canada.

Can those who advocated for Free Trade demonstrate that a new company was formed for every tariff that was cut? On the contrary, the ratification of the agreement in 1989 was followed by the worst recession since 1939, with hundreds of thousands of Canadians being thrown out of work. As a candidate in the 1988
election, I was able to “plant gate” at Labatt Brewery, Seagrams, Sunar Hauserman, and Uniroyal Goodrich. By the time the 1993 election was called, all of those factories had closed…so I plate gated at the Canada Employment Office.
By May 1990, the Canadian Labour Congress estimated that Free Trade had already cost Canada over 105,000 jobs. In the two years after the deal came into effect, 42 auto parts plants closed, with more than 4,000 jobs lost. When he closed Ogilvie Flour Mills in 1989, company president Terry McDonnell commented that “Free trade indirectly doomed all 89 jobs” at the mill.

Free trade and social programs
Opponents of Free Trade argued that the agreement was the first step towards harmonizing Canada’s social programs, which were far more generous that American programs (where American programs existed at all). Of course, advocates of the deal called these claims “exaggerated fearmongering” and said that Free Trade would have no effect on social programs. But, the ink was barely dry on the deal before those same advocates began arguing for cuts to social programs. In a February 1990 letter to the Minister of Finance, the Canadian Manufacturers’ Association said that free trade meant that it was “more urgent that we tackle outstanding issues that affect our competitiveness…. Because 60 per cent of program spending is tied up in statutory programs, with most of this on social programs, this is the spending area that must be reduced.”

Of course, it could be just a coincidence that the percentage of income paid to (Un)Employment Insurance recipients was decreased from 66 to 50 and that it is more and more difficult to qualify. It’s possible that the Mulroney (and Chrétien) governments would have discontinued funding for social housing anyway and cut back on spending for health care and post–secondary education even if Free Trade had not become a reality. Whether Free Trade was the chicken or the egg may never be known, but we do know that business ordered an omelette and
business had an omelette delivered to their table.

Free trade Protection from protectionism
Mulroney liked to call the Free Trade Agreement “an insurance policy” against US protectionism, then manifesting itself in disputes over steel, softwood lumber and pork products. But, the much ballyhooed dispute settlement mechanism only ensured that Americans complied with their own trade laws. And, 17 years later, we still see situations (on commodities including softwood lumber) where the US ignores panel decisions that it doesn’t like. It seems the Mulroney didn’t read the fine print on his “insurance policy,” which prevents Canada from making any claims.The recently lifted ban on Canadian beef imports ignored signs that the US had its own problem with mad cows — even as it resisted adequate testing that would have proven this to be the case. The Americans like to argue in favour of Free Trade, but they don’t like to practice it.

In reality, Free Trade has never really been about trade at all. The Canada–US Free Trade Agreement, NAFTA, and other deals like them are more like charters of rights for corporations. In the name of promoting trade, they restrict governments from acting in the interests of their citizens, if those interests happen to conflict with those of corporations (which, lets face it, they usually do).

That said, it seems unlikely that any Canadian government is going to be able to withdraw from the agreement now, even if they thought it was a good idea. What we can insist that they do, however, is to admit that benefits of Free Trade weren’t exactly as advertised and that much has to be done to improve the impact that such agreements have on jobs, social programs and fair access to American markets. And, as corporate leaders tout ideas such as “deep integration” with the US, we’d be wise to learn the lessons from 1988 and apply the brakes now.

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