Free trade theories failures

Cahier spécial : A policy vision to escape the race to the bottom

Re-think Trade Policy

Dans le document, il donne 10 suggestions pour améliorer le sort dans de l’industrie automobile, j’ai essayé de sortir ceux qui était plus globale pour l’ensemble de l’industrie.

Canada’s automotive trade relationship with the U.S. can broadly be considered as balanced and mutually beneficial.

The two-way flow is huge: $100 billion per year. Canada maintains a small surplus (in excess of $5 billion in 2011).

With every other trading partner

The result is an enormous, destructive trade deficit, equal to $21.5 billion for all countries other than the U.S. in 2011 (and which vastly swamps the modest surplus we continue to maintain with the U.S.). The utter lack of balance in trade is universally shared with all our non-U.S. trading partners. Our automotive imports from Mexico outstrip our exports there by a 14-to-1 margin; with the EU by an 18-to-1 margin; with Japan by a 135-to-1 margin; and with Korea by a stunning 224-to-1 margin. One-way flows like these cannot reasonably be defined as “trade” in any meaningful sense of that word.

Optimistic predictions of the free trade theories failures

Every time Canada signs another free trade agreement, the government publishes economic simulations which demonstrate the long-run economic gains expected to result from greater trade. In every one of those economic models, the assumption is that Canadian exports will grow as much as Canadian imports.

None of the models allow for a scenario in which our imports explode, but our exports are curtailed  

·         whether that is due to continuing foreign trade policy interventions (such as non-tariff barriers),

·         parochial foreign consumer tastes,

·         or the failure of Canadian-based firms to successfully develop and produce competitive products.

The precise reason for the failure to export,
on one level, does not matter.

The mere fact that the growth in imports is not offset by an equivalent expansion of exports is enough to completely invalidate the optimistic predictions of the free trade theories.

Importantly, existing international trade law allows plenty of scope for national governments to intervene to manage and curtail trade imbalances and import surges where they are found to be damaging domestic industries.

Canadian trade negotiators have a responsibility

Several countries have utilized these protections in the years since the global financial crisis to curtail import surges and prevent other countries from “exporting” their economic problems through beggarthy- neighbour export-push strategies. These include Brazil, China, Russia, Vietnam and even the U.S. – all of which imposed unilateral tariffs or other restrictions on automotive imports in order to prevent the destruction of domestic jobs.

Canadian trade negotiators have a responsibility to act similarly. Their role is not to promote an abstract philosophical commitment to “free trade” (which never appears in practice like it is supposed to in the economic textbooks).

Their function is to manage Canada’s relationships with other countries in a manner which enhances Canadian prosperity, rather than undermines it.

Qu’on arrête de parler de belle théorie économique, qu’on agit selon les faits, les Canadiens deviennent de plus en plus pauvres et les politiciens ne sont pas là pour appliquer des théories économiques utopiques, mais de protéger son peuple.

Canada’s international trade performance has been disappointing by any measure.

Auto Industry - Trade export by sectorWe have experienced large trade deficits in recent years. When we include tourism, services, and other international payments, our total deficit last year was almost $50 billion.

Compare that to a surplus of $30 billion back in 2000 – when the auto industry was at the top of its game.

Oil and gas exports are an important source of export revenue for Canada, without doubt.

However, by driving up the loonie far above its fair value,
the oil boom has hurt all other export industries.

Our trade balance in non-petroleum industries has collapsed from a $30 billion surplus in 2000, to a $40 billion deficit today.

Measured as a share of GDP (see Figure X), the improvement in petroleum exports is far outweighed by a deterioration in everything else Canada sells to the world: especially manufacturing, but also tourism and services.

Confronted with this deteriorating performance, the federal government can only seem to come up with a single response: sign even more free trade agreements.

However, empirical evidence shows that the more free trade agreements we sign, the worse our trade performance becomes.

If the goal of our trade policy is to strengthen our exports and our trade balance (and that is an important goal, because more export success means more jobs at home), then signing more free trade deals is exactly the wrong thing to do. The spate of new trade deals being pursued by the Harper government will undoubtedly contribute to even worse.


Tables des matières

1.       A policy vision to escape the race to the bottom

Summary :

Global pressures on the industry are more severe all the time

Impacts of a Canadian dollar

we must adopt a new approach

2.       Decline in auto manufacturing employment in Canada

To Hell and Back – Canada’s Auto Industry After the Crisis

Industrialized countries experienced a decline

Preventing plant closures

Government intervention

3.       Automotive trade deficit reached an all-time record of $15.6 billion

Auto  Industry - Free Trade

Canada-U.S. Auto Pact

World Trade Organization

Trade Balance


4.       CANADIAN Petro-Dollar

CANADIAN Petro-Dollar

5.       Race to the bottom

Race to the bottom

Donc, à qui profite la mondialisation ?

Les gagnants

6.       Productivity, Investment and Technology

Productivity, Investment and Technology


Investment and Technology

7.       Center of gravity is clearly shifting south

Re-thinking Canada’s : A New Policy Vision

And it won’t stop there

We do not accept this grim scenario as natural, efficient, or inevitable.

8.       Free trade theories failures

Re-think Trade Policy

With every other trading partner

Optimistic predictions of the free trade theories failures

Canadian trade negotiators have a responsibility

9.       The Bank’s power to bring down the dollar is unquestioned

Intervene to Reduce the Canadian Dollar Exchange Rate (1)

Canadian dollar r far above value

Theory freely floating exchange failures

Bank of Canada interventions.

10.    Restrict foreign resource takeovers

Intervene to Reduce the Canadian Dollar Exchange Rate (2)

Slowing down resource developments (especially in the oil sands)

Preventing foreign takeovers of Canadian resource assets

11.    Canada back is a lack of political creativity


Willingness by policymakers to play an active role.