What were they thinking? A global economy?

As I have said before, we all have to deal with our own ideological contradictions.    One of the most challenging positions is the one that is dead set against free trade.  There is no doubt that free trade has formed basis of an economic revival in much of the world from China to Brazil to Africa but all the benefits that were supposed to accrue to the rich countries – that’s a harder sell.  Sure, we have seen a fairly high number of jobs created in higher end occupations and, for a place like Canada, a greater demand for our natural resources.  There is also no doubt that global trade has kept the cost of a lot of products from cell phones to underwear much lower than they would have been.

But we are in relatively heavy debt – public and private, we have entitlement programs that are taking an ever increasing share of our economic output and we are well below full employment across Canada with some areas much worse than others.

I remember discussing global trade back in my MBA days – in 1989-1990 – and even then thinking it would ultimately be more beneficial to the have-nots than the haves but I thought then, and now, that maybe a little belt tightening in the rich world for the benefit of the poor part – not a bad trade off.

But as the dust settles and we look forward, we need to be thinking about how we foster economies that create at or near full employment and enough revenue to pay for our public services and infrastructure.    If the rich world has to belt tighten more and more  – it is reasonable to assume that eventually we will get more protectionism, more stifling of trade and investment flows and more bitterness between countries.  The optimists will retort that as countries like China get richer, they will need more and more products/services from the rich countries and it behooves these countries to get good at stuff the Chinese want.  Canada is lucky enough to have oil and potash and other minerals.

We probably should also have some high value services or produced goods.

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2 Responses to What were they thinking? A global economy?

  1. mikel says:

    You’ll have to be more specific. MORE trade does not necessarily mean ‘free trade’. We have no free trade agreement with China-there is MORE trade because basically they opened up their economy and provided access to cheap labour and low to no environmental standards. Much the same happened in the eighties when trade with Japan skyrocketed because they did much the same, plus introduced most of the electronic gadgets.

    Whether people are better off depends on the term ‘people’. The US is still the richest country in the world, yet has almost no services for the poorest. Norway is not as rich, but is more ‘equitable’. The division between rich and poor, and have and have not provinces have ZERO to do with free trade.

    Canada’s GDP is $48,000 per person. Thats the ‘price’ of the services and products in the economy. IF that were shared, each person would have 48 grand, and each family would have 100 grand. And that doesn’t even include the undervaluation of natural resources.

    So there would really be no question about poverty, and even with a flat tax, there would be TONS of money for social infrastructure. Obviously there would be structural changes IF money were split in such a way, but if you look at how numerous government entities ‘do business’ then it wouldn’t be THAT different with the right approach (and how less realistic is it than saying that Canada gets lower prices in telecommunications because of free trade? Come on!)

    There is a mix in between all these scenarios. Brazil is better than China, but scandinavia pretty much leads the way. But as for health care and education, heck, CUBA does better in most cases than the US OR Canada. So yeah, you can’t get digital products in Cuba because of the embargo, but your a lot healthier and better educated (which seems a better deal to me).

    So arguments about ‘free trade’ are really non starters. Its like ‘capitalism’, or ‘socialism’ , where the most that can be said is “it MAY work if somebody actually tried it”. Even those who drafted Canada’s free trade agreement have all pretty much agreed that most of these documents are “INVESTOR RIGHTS agreements”. And THAT is a VERY different thing.

    PS: numerous ‘academic’ articles, that is articles from unaffiliated economists, have shown pretty clearly that Canada’s economy did NOT benefit from the conditions of the countries free trade agreements. Again, Canada has ALWAYS had trade with the US, and anybody that thinks free trade is what it is, well, just ask how much stuff you brought back from your last shopping trip to the US. Or just mention potatoes or softwood lumber.

  2. Canadians need to get motivated to innovate and create again. We need to challenge ourselves to do things in new ways so that we do have something competitive to offer the world.
    However, I don’t think it is fair to judge free trade as of yet, since we have never had any.
    Even with NAFTA trade is not free. Just in the last few months did we finally take away one of our agricultural protectionist barriers (the Canadian Wheat Board). I suspect this was due to demands coming from the tail end of negotiations on the EU Free Trade Agreement.
    We will also need to get rid of the dairy board and the poultry board along with the quotas that go with them.

    More importantly though, we need our biggest trading partner to stop subsidizing their sugar, corn and other agricultural products beyond reach. They end up dumping this excess supply into developing countries and wiping out any chance they had at having fair local prices for their own local produce. I suppose we should be thankful that they don’t dump it here!

    So yes, we should prepare ourselves to have something to offer, as well as dismantle our own protectionism. But we should also use our power to pressure the US into doing the same.
    Canada, Europe and the United States have been unwilling to cooperate or budge on this issue since the last round of the World Trade Negotiations in Doha 2008.

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