{"id":19197,"date":"2018-01-18T16:16:19","date_gmt":"2018-01-18T21:16:19","guid":{"rendered":"http:\/\/www.megalextoria.com\/wordpress\/?p=19197"},"modified":"2018-01-18T16:19:41","modified_gmt":"2018-01-18T21:19:41","slug":"canadas-prime-minister-only-pretends-to-support-free-trade","status":"publish","type":"post","link":"http:\/\/www.megalextoria.com\/wordpress\/index.php\/2018\/01\/18\/canadas-prime-minister-only-pretends-to-support-free-trade\/","title":{"rendered":"Canada\u2019s Prime Minister Only Pretends to Support Free Trade"},"content":{"rendered":"

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The lack of free trade <\/span>hurts poor people<\/span><\/a> the most. Therefore, we should welcome Canadian Prime Minister Justin Trudeau\u2019s\u00a0comments in support of free trade, right? Well, not so fast. <\/span><\/p>\n

During Trudeau\u2019s visit to China in December, the Canadian Press published an article titled,\u00a0<\/span>“World at ‘pivot point,’ needs to embrace free trade: Trudeau”<\/a>:<\/span><\/p>\n

The world is at a “pivot point” and will fail unless countries embrace free trade and elevate their citizens who have been left behind by globalization, Prime Minister Justin Trudeau warned Wednesday.<\/span><\/p>\n

…Trudeau came to the Fortune Global Forum, a Davos-style gathering of the world’s business elite, to sell Canada as a good place for foreign investment, but he went off script and delivered a stern warning about the dangers of allowing protectionism and inequality to flourish.<\/span><\/p>\n

“We are at a pivot point in the world right now, where we decide whether we work together in an open and confident way and succeed or whether we all falter separately and isolated,” he said.<\/span><\/p>\n

“As that anxiety spreads, people start to turn inwards. They start to close off. They start to get fearful,” he added. “If that continues to happen, make no mistake about it, we will all lose.”<\/span><\/p>\n

Trudeau didn’t mention the Donald Trump administration in Washington, but he’s already spoken out in China on the need to save the North American Free Trade Agreement [NAFTA] from demise…<\/span><\/blockquote>\n

Trudeau expressed concern about people starting \u201cto turn inwards\u201d and \u201cclose off\u201d because \u201cwe will all lose.\u201d He is referring to protectionism, and I suspect his comments are largely directed toward the United States. Much has been written about the NAFTA negotiations and Donald Trump\u2019s desire for more protectionist tariffs.<\/span><\/p>\n

Trudeau\u2019s position seems to be that free trade is economically beneficial and protectionism is economically harmful. I agree, but if we pay close attention, we see that the Prime Minister is merely paying lip service to free trade.<\/span><\/p>\n

Defining Free Trade<\/strong><\/p>\n

Free trade is a <\/span>simple concept<\/span><\/a> which exploits the <\/span>division of labor<\/span><\/a> to the fullest possible extent. Two parties want to trade with each other. They want to exchange goods for goods, or goods for money, or labor for money. If no one interferes with this voluntary exchange between the two parties, then free trade exists. If a third party \u2014 the government \u2014 intervenes and uses force to prohibit the exchange or to impose conditions on the exchange, then free trade does not exist. In today\u2019s world, <\/span>free trade does not exist<\/span>.<\/span><\/p>\n

Many countries negotiate \u201cfree trade agreements,\u201d but this is a misnomer. The essence of these \u201cagreements\u201d is to serve corporate interests through the establishment of rules\u00a0that reduce competition. These are lengthy, complex documents\u00a0that contemplate \u201cmanaged trade,\u201d not \u201cfree trade.\u201d The largest beneficiaries are multinational corporations, and the biggest losers are consumers who pay higher prices. The division of labor is suppressed, and political power becomes more centralized.<\/p>\n

Bill Curry, writing for the <\/span>Globe and Mail<\/span><\/a><\/em> before the US dropped out of the Trans-Pacific Partnership (TPP), referred to the TPP as an agreement which \u201cwould create a free-trade zone among 12 nations around the Pacific, making it the world\u2019s largest.\u201d However, further along in the article, we read this: \u201cTPP countries get duty-free access to 3.25 percent of Canada\u2019s dairy market and 2.1 percent of its poultry\u00a0market.\u201d <\/span><\/p>\n

So, more than 95 percent of Canada\u2019s dairy and poultry markets remain <\/span>unfree<\/span>. I am not sure why Curry defines this as free trade, but that is how the TPP is commonly described.<\/span><\/p>\n

Similarly, Canada\u2019s dairy and poultry markets are highly protected under NAFTA, which Trudeau wants to \u201csave from demise.\u201d The Prime Minister has a strange conception of free trade.<\/span><\/p>\n

Protectionism<\/strong><\/p>\n

If a firm is unable to sell its products at a price\u00a0that consumers are willing to pay, and which allows the firm to be profitable, then the firm is wasting resources \u2014 human labor and raw materials. I have written about this <\/span>here<\/span><\/a>. In the realm of free trade, lower-priced imports send a market signal to inefficient domestic producers. The signal says, \u201cYou must improve efficiency, lower your costs etc., or you will go out of business,\u201d thereby conserving resources for someone else who can utilize them more efficiently. <\/span><\/p>\n

However, producers hate these market signals, and they lobby the government for tariff protection. This penalizes consumers whose choices are limited to buying the expensive domestic product, or the formerly cheap import which is now expensive because of the tariff.<\/span><\/p>\n

The government claims it must approve tariff requests from these inefficient producers in order to \u201csave\u201d domestic jobs while simultaneously avoiding discussion about the economic cost of this policy. Studies often reveal this cost to be exorbitant when the \u201cadditional markup\u201d all consumers are forced to pay in a particular year is divided by the total number of workers whose jobs have been saved. The cost per job saved is often considerably higher than the worker\u2019s annual salary.<\/span><\/p>\n

For example, <\/span>according to calculations<\/span><\/a> by the Peterson Institute for International Economics, the total cost to American consumers from higher prices resulting from safeguard tariffs on Chinese tires in 2011 was at least $900,000 for each job \u201csaved,\u201d where the annual average salary for a tire builder was $40,070. Studies in other industries <\/span>have also revealed an exorbitant cost<\/span><\/a> for each job saved. \u00a0<\/span><\/p>\n

Furthermore, as the Peterson Institute tells us, tariffs have a ripple effect elsewhere in the economy:<\/span><\/p>\n

The additional money that US consumers spent on tires reduced their spending on other retail goods, indirectly lowering employment in the retail industry. On balance, it seems likely that tire protectionism cost the US economy around 2,531 jobs, when losses in the retail sector are offset against gains in tire manufacturing. Adding further to the loss column, China retaliated by imposing antidumping duties on US exports of chicken parts, costing that industry around $1 billion in sales.<\/span><\/blockquote>\n

NAFTA contains numerous protectionist measures favoring <\/span>special interest groups<\/span><\/a> at the expense of the general public. Prime Minister Trudeau knows this, and he wants to \u201csave NAFTA from demise.\u201d All his talk about the evils of protectionism is nothing more than political rhetoric.<\/span><\/p>\n

Get Government Out of the Way<\/strong><\/p>\n

Governments do not trade with each other \u2014 individuals do. If a government really wants to facilitate free trade, a legal document\u00a0that runs hundreds, or even thousands of pages, is unnecessary. A one-page document with two sentences would suffice: \u201cPeople are allowed to trade freely. The government\u2019s role will be limited to enforcing the terms of the contract which the private parties themselves have voluntarily negotiated.” <\/span><\/p>\n

I have seen no evidence that Prime Minister Trudeau is sincere about \u201cembracing free trade.\u201d He appears to be a typical politician, subservient to special interest groups while attempting to bamboozle the public with an <\/span>illusion<\/span> of free trade.<\/span><\/p>\n


\nLee Friday
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Following a 23-year career in the Canadian financial industry, Lee Friday has spent many years studying economics, politics, and social issues. He operates a news site at www.LondonNews1.com<\/a><\/p>\n

This article was originally published on FEE.org. Read the original article<\/a>.<\/p>\n

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