Agricultural issues stalling Canada-Europe trade deal, EU official says

By Julian Beltrame, The Canadian Press - Thursday, May 9, 2013 at 5:18 PM - 0 Comments

OTTAWA – The Canada-European Union free trade talks are nearing an end with agriculture issues the last major stumbling block to an agreement both sides say will boost economic growth, the EU ambassador Matthias Brinkmann said Thursday.

In a free-wheeling discussion with Canadian reporters, Brinkmann suggested that most other issues in the four-year talks have been resolved or are close to being resolved, and that two specific sticking points — how much Canadian beef to Europe and how much European cheese to Canada — is keeping the sides from a deal.

“I think we have the landing zones identified for all sectors … but like in most negotiations it’s agriculture which is the most difficult one,” he said.

“Canada wants to export beef to the European Union and wants better market access, but the European Union wants also better market access for dairy products, cheeses and yogurt and so on. The beef sector is protected in the European Union and dairy products in protected in Canada, so there has to be a certain give and take.”

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The anti-trade budget

By Stephen Gordon - Monday, March 25, 2013 at 10:37 AM - 0 Comments

Full credit to the government’s communications strategists: they managed to produce budget-day headlines that said the exact opposite of what was in the budget.

The first thing I read on the morning of budget day was the National Post story about cutting tariffs on hockey gear. There was also a matching A1 story in the Globe and Mail and I walked to the budget lockup in a cheerful mood. Even though the numbers involved were tiny, I couldn’t help but feel encouraged about how the measure was being marketed. Almost without exception, trade liberalisation is presented as a concession to the demands of foreign exporters, but the real gains from trade are those obtained from being able to purchase cheaper imports. These gains can be obtained by reducing tariffs unilaterally – the most famous example is the repeal of the the UK Corn Laws in 1849. There was no drawn-out process of negotiations with corn (wheat) exporters in other countries: the UK government simply eliminated tariffs so that the population could have cheaper food. The morning headlines led me to believe our government was going to implement a unilateral tariff reduction for the simplest and best reason: because it increased consumers’ purchasing power.

I was wrong, of course.  Yes, there were those 37 tariff reductions, but there was also the measure to ‘modernize’ Canada’s General Preferential Tariff (GPT) regime by ‘graduating’ 72 countries from the GPT; imports from these countries will now face higher tariffs. Mike Moffatt estimates those 37 tariff reductions will be accompanied by 1,290 tariff increases.  By my count, there are 84 GPT countries, but I still haven’t been able to track down a list of which countries will be removed from the GPT (Update: Mike Moffatt informs me 12 of these already have separate agreements with Canada, so that brings it to 72). The budget does name some examples: Korea, China (second-most important source of imports to Canada), Korea (seventh) and Brazil (twelfth), and the GPT countries as a group account for more than 20 per cent of imports. This measure is expected to generate some $300 million in extra revenues, on top of about $5 billion in existing excise duty revenues.

So instead of a unilateral reduction in tariffs, the government is planning a unilateral increase. This is not how a pro-trade government behaves. (Imports from the countries with which the Conservatives have negotiated free trade agreements are dwarfed by those from China alone.) Nor does a pro-trade government offer these justifications for raising tariffs:

“We should not be subsidizing by a preferential tariffs, countries that are no longer in that category of being underdeveloped countries. This includes the BRIC (Brazil, Russia, India, China) countries and they’ve been removed from the list,” [Finance Minister Jim Flaherty] said.

When the government released its budget last Thursday, it highlighted the removal of tariffs on baby clothes and sports equipment, but relatively little mention of changing the preferential tariff regime.

Flaherty said that’s because the decision was ultimately a foreign aid arrangement.

“That’s why the general preferential tariff was created and we’re talking about countries now that are no longer entitled to that kind of assistance from Canadian taxpayers,” he said.

“We’re trying to modernize our tariff arrangement. It’s a preferential tariff. It’s designed for countries that are growing their economies that are relatively weak. That’s not true of China or Brazil or India or Russia, and that’s why we’ve taken them off the list.”

I still can’t get my head around the truly bizarre notion that low tariffs are a subsidy to other countries on the part of Canadian taxpayers, especially since raising tariffs requires Canadian taxpayers to cough up an additional $300 million a year to the government. But if we needed any more evidence that this government is not serious about free trade, here it is. Instead of viewing cheaper imports as a way of increasing consumers’ purchasing power, the Conservative government views them as a problem to be solved.

After seven years in power, the Conservative trade legacy consists of higher tariffs and more obstacles to foreign investment. The Council of Canadians must be thrilled.

Our Stockholm Syndrome about supply management

By Stephen Gordon - Tuesday, March 5, 2013 at 9:00 AM - 0 Comments

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.

Adam Smith, Wealth of Nations, Book IV, Chapter VII

This point is incredibly obvious to anyone who spends any amount of time thinking about the issue, but you will find almost no trace of it in Canadian public debates about international trade, including the latest over the Comprehensive Economic and Trade Agreement with the European Union. Trade agreements are always about “concessions” in which foreign suppliers are grudgingly given — or, more often, indignantly denied — the right to sell Canadians goods and services at prices lower than what we pay now. Let’s be clear here: lowering the price of consumer goods and services has the exact same effect on household welfare as an increase in incomes. But I defy you to name an elected politician who will list “the ability to buy cheaper stuff” as the most compelling reason to support free trade: more than 200 years since Adam Smith wrote that paragraph, our trade agenda is still written by and for producer interests.

We’re stuck with a system in which producer interests — most notoriously the dairy cartel that operates under the name of “supply management” — hold the rest of us hostage. Dismantling the dairy cartel is an act that would significantly increase consumers’ buying power, but this is a measure that the  Conservatives have all but ruled out under any circumstances, and the NDP has made maintaining the cartel a condition for supporting any sort of trade agreement.

Why would the two major parties (a Liberal Party of Canada under Justin Trudeau will likely join them) stubbornly insist on sticking to a policy that makes consumers worse off at the expense of producers? Because it’s a popular position. It’s one of the marvels of the Canadian electorate. Show Canadians a special interest group that uses its government-granted privileges to fleece consumers, and they’ll embrace it as a “national champion,” a “uniquely Canadian way of life” or some equally vapid catch-phrase.

This is from the Wikipedia entry for Stockholm Syndrome:

Stockholm syndrome, or capture–bonding, is a psychological phenomenon in which hostages express empathy and sympathy and have positive feelings toward their captors, sometimes to the point of defending them.

What we suffer from is the economic policy equivalent. Call it “Canada Syndrome”: a tendency for consumers to identify with the producer interests that are holding them hostage.

Listening to Brian Mulroney: trade, tactics, environment, and more

By John Geddes - Thursday, January 17, 2013 at 12:06 PM - 0 Comments

Peter Bregg

In this week’s Maclean’s I write about Brian Mulroney’s surprising return to prominence in Canadian public life. The story was mostly prompted by a spate of major speeches the former prime minister, now 73, delivered last year. Mulroney’s 2012 road show seemed remarkably unhampered by the controversy that plagued him in office and dogged him long into retirement from active politics.

The larger-than-life performance style he brings to these events is something to behold—and he can barely contain his disdain for the timid, tentative speechmaking of the generation of Canadian politicians who came after him. But Mulroney also delivers content. So much, in fact, that I had space to barely touch on much of it in the story.

For a flavour of the subjects Mulroney tackles, and how he comes at them, here are four excerpts from key speeches.

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The new NDP?

By Aaron Wherry - Friday, November 16, 2012 at 8:00 AM - 0 Comments

The NDP would like you to know that it doesn’t oppose trade.

The NDP has already backed one free trade agreement, with Jordan, and is pushing for expedited negotiations on a deal with Japan. And it’s arguing that Canada should give priority to negotiating similar pacts with India, Brazil and South Africa. Moreover, the party has dropped all talk of rescinding or reopening the North American Free Trade Agreement, a deal the NDP has stridently opposed in the past. And it’s urging the World Trade Organization to re-start global trade talks, which the NDP used to protest against.

“The NDP have always been and are very vigorously pro-trade,” NDP trade critic Don Davies insisted in an interview. Still, he conceded there’s some truth to the Tory charge that — until recently — New Democrats haven’t seen a single free trade deal they could bring themselves to support. ”I think our position in the past on trade deals has been to look at a trade deal, find three or four things we don’t like and then vote against it,” Davies said. ”I’m not sure that that’s the proper way to proceed because any trade deal has pros and cons to it … There’s going to be costs to our economy and benefits to our economy.” But all that has changed under Mulcair. Now, Davies said the party’s policy is to weigh the pluses and minuses of each deal and determine if “overall it’s a net benefit” to Canada.

Meanwhile, Stephen Gordon pans Mr. Mulcair’s refinery talk.

Ed Fast on Canada’s shift toward Asia, FTAs and exports of expertise

By Luiza Ch. Savage - Wednesday, October 10, 2012 at 11:20 AM - 0 Comments

Photography by Blair Gable

Ed Fast, the minister for international trade, is overseeing the Conservative government’s aggressive trade agenda that is opening new markets to Canadian exporters, and raising questions about everything from drug patents to environmental regulations. As Canada and the U.S. mark the 25th anniversary of the bilateral Free Trade Agreement, Ottawa’s strategic focus is shifting to the high-growth countries of Asia and Latin America, and to a new generation of trade agreements that cover services as well as goods.

Q: When I came into the room, I didn’t realize that it was you playing the grand piano. Do you play often?

A: I don’t play as much as I used to because of my schedule. Music has been a part of my life since I was a toddler. There were eight kids in my family and my mother made sure we each played at least two instruments. I play piano, violin and guitar, but piano is the instrument I love. I learned to play it from age 6, and when I became a teenager I learned to improvise. It’s something that’s really freeing. It’s a great stress reliever.

Q: This week marks the 25th anniversary of free trade with the U.S., but you’ve been travelling everywhere from Brazil to Burma. Are our trade patterns shifting? What does the future look like 10 years from now?

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NDP MP Pat Martin, ‘economic treason’ and anti-foreign bias

By Stephen Gordon - Thursday, October 4, 2012 at 9:01 AM - 0 Comments

(Adrian Wyld/CP)

The conflict among nations that so many policy intellectuals imagine prevails is an illusion; but it is an illusion that can destroy the reality of mutual gains from trade. (Paul Krugman)

In The Myth of the Rational Voter, Bryan Caplan argues that the most important obstacles to implementing sound economic policies are not lobby groups or the ability of other special interests to influence politicians, but certain systemic, irrational beliefs of the electorate. This is hardly an encouraging conclusion, but if we needed any more evidence for at least one aspect of his thesis, the CNOOC-Nexen takeover is providing it.

One of the prejudices identified by Caplan is what he calls anti-foreign bias: “a tendency to underestimate the economic benefits of interaction with foreigners.” According to popular (mis)perception, dealing with foreigners is to be mistrusted: if they want something from us, then they must perceive some benefit from the exchange. And if foreigners are gaining, then Canadians must be losing.

This is nonsense, of course: the gains from trade are not zero-sum. But once you’re locked into anti-foreign bias, a Canadian who sees nothing wrong when foreigners benefit from trade is the same thing as a Canadian who wants Canadians to lose from trade. And so words such as “disloyal” (apparently a favourite epithet among those opposing reciprocity in 1911), “betrayal”, “traitor” and “treason” tend to get thrown around like so much confetti. NDP MP Pat Martin’s accusation of “economic treason” on the part of those who don’t see why the government should forbid a freely negotiated exchange of an asset is simply the latest in a long line of similarly overblown rhetoric.

Now, blocking the deal might well prove popular: anti-foreign bias is widespread, and understanding why it’s wrong sometimes requires a significant intellectual investment. It’s hard to shake the notion that another country’s gain must be Canada’s loss.

Politics on TV: Sunday, Sept. 23 edition

By Dale Smith - Sunday, September 23, 2012 at 3:42 PM - 0 Comments

Message of the day: “Canada’s trade future lies in the Asia-Pacific”

Questions not answered: 

• Is free trade with a state-controlled economy possible?
• What is the line the NDP wants drawn around foreign takeovers?

Free trade with China:

With news that the Chinese smbassador is saying a free trade deal with Canada should be a short-term goal to be reached within 10 years, the West Block spoke with foreign affairs minister John Baird. Baird pointed to the signing of the Canada-China Foreign Investment Promotion and Protection Agreement two weeks ago, a deal that was 17 years in the making, as a first step, though he noted that a free trade agreement with China would be different than your usual deal of this kind because of the nature of the Chinese economy. Baird said Canada’s trade future lies in the Asia-Pacific, and that our relationship with Beijing is mature enough to handle challenges like the latest CSIS report. Baird also noted that though the Nexen deal is worth $15 billion, the company only has $2 or $3 billion in Canadian assets.

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Canada can’t crack inner circle of the Trans-Pacific Partnership Free Trade Agreement

By macleans.ca - Tuesday, July 3, 2012 at 1:57 PM - 0 Comments

When it comes to the Trans-Pacific Partnership Free Trade Agreement (TPP), Canada may have been invited to the party, but we are not yet part of the club.

After considerable government lobbying during the recent G20 summit in Mexico, Canada was extended an invitation to a recent San Diego meeting. Canada’s admission, however, has not yet been approved by the U.S or the other member countries, which include Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam. Mexico and Japan have also expressed an interest in being included.

While the value of joining another free trade zone may be questioned by some, Canadian delegates have explained that they are less interested in gaining access to new markets, as they are in holding onto old ones.

Former trade minister John Manley, told the Canadian Press that Canada could not sit out of a trade deal that includes the U.S. and Mexico without affecting existing trade.

So the lobbying will likely continue, even if we’re starting to look a little desperate.

On free trade, Harper needs to show some true grit

By From the editors - Tuesday, April 3, 2012 at 11:43 AM - 0 Comments

Sean Kilpatrick/CP

Listen to his critics and you’d think a blinding “neo-conservative ideology” is what motivates Prime Minister Stephen Harper these days. Yet in sifting through his six years in power it’s much easier to find evidence of opportunistic pragmatism than any specific ideology.

Regardless of this week’s budget, the Harper government has already proven itself to be the biggest spending government in Canadian history. And while it talks a lot about taxes, Ottawa is actually creating a more complicated and less efficient tax system through its creation of myriad tax credits aimed at tiny slices of the population for such things as children’s dance lessons, team sports, work tools or public transit.

The federal government has also been quick to remove the right to strike from unionized workers—the widespread animosity of the current Air Canada labour dispute is directly attributable to this instinct for control over letting negotiations take their course. It has, as well, interposed itself into deals between interested buyers and sellers, such as with the Potash Corp. decision. None of this is the stuff of standard economics textbooks.

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Is free trade with Europe an ill-timed diversion from Asia?

By Kathleen Harris - Tuesday, December 20, 2011 at 11:10 AM - 0 Comments

Sean Kilpatrick/CP

After nearly three years of measured, cordial talks, negotiators on both sides of the Atlantic are privately hunkering down to deal with the finer points of a high-stakes international trade game.

Most details remain under wraps after the recent completion of the ninth formal round of negotiations, but the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is already being hailed as the landmark deal of a generation. For Canada, it represents the biggest, most significant bilateral initiative since the North American Free Trade Agreement (NAFTA) in 1994, and in the words of International Trade Minister Ed Fast, it is, “by far, Canada’s most ambitious trade agreement.”

“It offers huge opportunities,” Fast says. “It’s an expansive agreement that is not only restricted to goods. It will include services, it will include procurement, it will include investment provisions. We expect it will also include provisions on the environment and on labour. This may become the gold standard agreement if we do this right.” Fast insists the Canadian government won’t be boxed in by any set deadline, but officials are quietly eyeing a mid-2012 completion date.

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About that border deal between Canada and the U.S.

By Luiza Ch. Savage - Thursday, December 8, 2011 at 12:02 AM - 3 Comments

Amid the pageantry of a joint appearance at the White House alongside President Obama, the prime minister on Wednesday touted the new border security agreement in grandiose terms: the “most significant steps forward in Canada-U.S. cooperation since the North American Free Trade Agreement.” The agreement, though, is less a single leap than a series of many incremental gains, say the technocrats who labored in the shadows to put the multifaceted deal together. One Canadian official likened border negotiations to the cliché about football—it’s a “game of inches.” And this agreement covers a lot of inches—including myriad new ways in which the two nations will share data about travelers and cargo, the promise of a single on-line portal for importers and exporters who today have to schlep paper documents to a variety of government agencies, and pilot projects that will allow certain kinds of pre-inspected cargo to cross the border without stopping. It also includes a border wait-time measurement system and an inventory of border fees to help citizens and policy makers understand how well things are working—or not.

There is no doubt that Canadian officials have learned their lesson from years of trilateral “Three Amigos” summitry that resulted in lengthy bureaucratic to-do lists and more controversy than results. This time, they cut out Mexico, instead running a bilateral process focused on a limited number concrete high-impact results that could be implemented in a short period of time. Rather than endlessly negotiating over grand policy changes, they agreed to more modest pilot projects in complicated areas such as land border-preclearance in order to “build confidence” and demonstrate tangible results on the ground. Continue…

‘No good purpose is served’

By Aaron Wherry - Thursday, August 11, 2011 at 11:33 AM - 26 Comments

In Colombia yesterday, the Prime Minister attacked critics of free trade with the country.

“No good purpose is served in this country or in the United States by anybody who is standing in the way of the development of the prosperity of Colombia,” said Harper. ”Colombia is a wonderful country with great possibility and great ambition. And we need to be encouraging that every step of the way. That’s why we have made this a priority to get this deal done. We can’t block the progress of a country like this for protectionist reasons.”

… Opposition to the trade deal has come from critics such as the federal NDP in Canada. Similarly, U.S. lawmakers have dragged their feet on approving a similar free-trade deal with Colombia, citing concerns over human rights. But Harper scoffed at those concerns, calling them a phony excuse. ”I think there are protectionist forces in our country and in the United States that don’t care about development and prosperity in this part of the world. And that’s unfortunate.”

The free trade deal with Colombia was the subject of extensive debate in the House: see here, here, here, here, here, here and here.

When I was reporting this piece on the House of Commons, MPs were debating a deal with Panama. The discussion I sat in on then—including debate between Scott Brison and Peter Julian and later Joe Comartin and Brad Trost—dealt with many of the same points of contention.

Canada set to seal EU free trade deal

By macleans.ca - Friday, July 15, 2011 at 12:22 PM - 15 Comments

International Trade Minister Ed Fast says Canada is headed toward closing a free trade deal with the European Union by 2012. Fast says “important progress” was made during eighth-round negotiations with the EU in Brussels this week. A ninth round of talks will take place in October. Fast suggested Canada is willing to offer the EU significant compromises on goods and government purchasing. The Harper government has focused on increasing non-U.S. trade so Canada isn’t so dependent on a single market.

The Globe and Mail

The U.S. and Canada—singing in harmony?

By Luiza Ch. Savage - Monday, May 2, 2011 at 9:30 AM - 4 Comments

Mark Wilson/Getty Images

As Target Corp., the mass retailer of trendy housewares and clothing, prepares to open hundreds of stores across Canada in its first non-U.S. expansion, it has started to grapple with the realities of doing business across the border. In a letter to U.S. Commerce Secretary Gary Locke, dated April 18, two Target executives bemoan conflicting regulations between the U.S. and Canada in areas such as product standards, testing facilities, customs procedures and documentation. “For example, the safety requirements and test methods applicable to camping tents are markedly different between the U.S. and Canada, making it difficult and cost prohibitive to provide the same product in each country,” wrote the vice-president for government affairs, Matt Zabel, and vice-president for compliance, Canada, Anthony Heredia. “These differences may result in higher consumer costs, or reduced selection.” They called on the Obama administration to focus on “greater regulatory coherence” with Canada that would “increase cross-border investment.”

The Target letter was one of 30 submissions the Commerce Department received after asking for public comments on “regulatory co-operation that would help eliminate or reduce unnecessary regulatory divergences in North America that disrupt U.S. exports.” The request for comments came after a February meeting in Washington at which President Barack Obama and Prime Minister Stephen Harper launched two joint initiatives to ease cross-border trade and travel: an overhaul of border management aimed at creating a system of “perimeter security”, and an attempt to harmonize some regulations between the two countries to help ease trade. The leaders created two working groups, one on border management and the other on regulatory co-operation, led by senior government officials, whom they instructed to hold public consultations and produce detailed action plans for each government.

The stakes are high. Canada and the U.S. have the world’s largest two-way trade relationship, worth $645 billion a year. Three-quarters of all of Canada’s exports go to the United States, and border delays cost the economy billions each year. As well, Canada is America’s largest market, accounting for one fifth of all exports, and Obama is also searching for ways to boost that trade. In his state of the union speech last year, he set a goal of doubling overall U.S. exports in five years in order to spur job creation in the struggling American economy.

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Canada threatens to scrap trade talks with EU

By macleans.ca - Tuesday, February 22, 2011 at 12:10 PM - 48 Comments

Canadian officials are threatening to pull out of trade talks with the European Union if the EU presses ahead with environmental regulations that would block imports of fuel produced from Canada’s oil sands. According to EU documents and sources, Canada has actively lobbied the commission and member states to scrap a plan that would differentiate the carbon footprint of oil sands fuel compared to fuel obtained by more conventional means. Canadian officials, meanwhile, have denied threatening to scrap the trade talks.

Reuters

Canada-EU trade deal will increase drug costs for Canadians

By macleans.ca - Monday, February 7, 2011 at 1:04 PM - 20 Comments

A new trade deal between Canada and the EU could add about $2.8-billion in annual costs to Canadian drug plans, according to a report commissioned by the Canadian Generic Pharmaceutical Association. The EU has asked for significant changes to patent laws for generic drugs, which regulate the amount of time before a generic drug company can reproduce a patented brand name drug. Patented drugs are generally more expensive than their generic counterparts. The changes include extending patent protection by up to 5 years, lengthening data exclusivity, and strengthening notice of compliance regulations. Aiden Hollis, professor of economics at the University of Calgary and the co-author of the report, said “the reasonable inference is that these changes are designed to allow innovating pharmaceutical firms to charge monopoly prices for a longer period.” Brand name drugs manufactured in the EU are a leading export to Canada, with $5.3-billion in pharmaceutical products imported by Canada from the EU in 2009.

The Globe and Mail

Border announcement to focus on trade

By Luiza Ch. Savage - Friday, February 4, 2011 at 2:30 PM - 0 Comments

The border announcement today will include the creation of a Council to review regulations with an eye to streamlining and helping facilitate trade. I’m told this is in part an extension of Obama’s domestic initiative to review regulations. He talked about it in the State of the Union.

A good deal, but what about the drugs?

By Cameron Ainsworth-Vincze - Thursday, October 14, 2010 at 2:00 PM - 0 Comments

Paolo Pellegrin/Magnum Photos

India’s dream of becoming an economic powerhouse will take a giant leap forward later this year with the scheduled signing of a bilateral free trade agreement with the European Union. The goal of the agreement is to triple the existing $74-billion trade flow between the two regions over the course of the next five years. Yet one outstanding issue is drawing considerable backlash, at home and abroad.

The agreement, according to a new study in the Journal of the International AIDS Society, could significantly harm India’s generic drug industry, which supplies 80 per cent of the cheap, anti-retroviral drugs (ARVs) that are sold to low- and middle-income countries. The study, which contains data from more than 17,000 donor-funded purchases of ARVs by 115 countries, suggests that negotiations between India and the EU have included measures that could delay, or in some cases restrict, generic medicines from reaching certain regions due to product patent restrictions, data requirements and tighter border rules. Such a move could significantly increase the cost of India’s ARVs, in addition to limiting dosage availability and delaying access to newer and more advanced drugs, the study argued.

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Wanted: free trade activists

By Thomas Watson - Thursday, July 1, 2010 at 11:40 AM - 11 Comments

Virginia Mayo/AP

Canadian Trade Minister Peter Van Loan wishes the mainstream media would pay more attention to the anti-globalization crowd. After all, if trade naysayers made the front page of national papers more often, then more people might realize Canadian trade negotiators are well on their way to making history with an ambitious plan to better integrate our national economy with the European Union. As Van Loan points out, the Council of Canadians, which claims a deal with the EU could threaten Canadian access to safe drinking water, recently held “a wonderful news conference” to voice its concerns—but it got virtually no media pickup. “I was actually disappointed,” Canada’s trade minister says, “because there should be more of a spotlight on these negotiations.”

True enough. If all goes as planned, Canada will become the first developed nation to land a free trade agreement with the economic grouping of 27 European nations sometime next year. The EU—the world’s largest market, not to mention home to the wealthiest pool of investment capital and some of the largest and most important companies on the planet—is already Canada’s second-largest source of trade and foreign direct investment. In 2008, Canadian exports to the EU totalled $52 billion. Imports amounted to $62 billion. But there appears to be plenty of room for growth. After all, the Canadian economy is 150 per cent larger than the Indian economy, which has similar trade levels with the EU. Furthermore, Europe trades about 25 per cent more with South Korea, which has a smaller GDP than Canada.

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The Conservative-Liberal coalition

By Aaron Wherry - Wednesday, June 2, 2010 at 10:55 AM - 16 Comments

Two months ago, the International Trade Minister happily watched as Scott Brison negotiated directly with Colombia to complete a free trade deal. This week, the Immigration Minister happily accepts Maurizio Bevilacqua’s amendments to the immigration reform bill.

Conservatives, Liberals, and the Colombian free trade deal

By John Geddes - Thursday, March 25, 2010 at 12:26 PM - 22 Comments

The government’s decision yesterday to accept a Liberal amendment to its free trade agreement with Colombia is being touted by the main architect of the side deal as a case study in how a minority Parliament should work.

Liberal MP Scott Brison, his party’s international trade critic, proposed the amendment to that would see Colombia produce an annual report, with Canadian input, on how the free trade agreement affects human rights.

Trade Minister Peter Van Loan accepted Brison’s proposal, and no wonder, since it guarantees that the Conservative minority in the House will now be backed by Liberal votes on this issue, enough to get legislation enacting the trade pact passed.

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Maybe not the whole nine yards, but a few

By Andrew Coyne - Thursday, March 4, 2010 at 10:43 AM - 19 Comments

That was one of the more economically literate Speeches from the Throne in recent memory, even at the cost of saying rather little (and taking rather too long to say it). But what was there was at least mostly in the right direction.

Throne Speeches are tricky things. Lines that seem innocuous turn out to be freighted with meaning. Momentous-sounding announcements turn out to mean not much at all, or never make it into legislation. A pledge to “reform and strengthen education,” for example — meaningless boilerplate, or the beginnings of a national education strategy? An “aggressive” plan to “close unfair loopholes” — a couple of technicalities of interest only to accountants, or wholesale tax reform?

Still, the general tendency of the Speech, at least in its economic chapters, was clear: smaller government, freer trade, less intervention in markets. If hardly a major change in direction — did anyone think that’s what “recalibration” meant? — it does signal the government is turning up the volume on some conservative economic themes that had hitherto been buried in the mix. The government can read the opposition’s body language as well as anyone, and can see they are not spoiling for an election. So it has taken the opportunity to steal a few yards for conservativism, without being unduly provocative.

Indeed, it’s an achievement of sorts that so much of the reaction to the Speech seemed to be in the ho-hum, is-that-all-there-is vein. For it contains at least a couple of potentially important policy initiatives. Opening the doors to foreign investment “in key sectors,” including — but not limited to — telecoms and satellites, is the most startling, even if it was telegraphed in advance. Not long ago this would have been considered a political third rail, and yet it seemed to occasion very little response from the opposition. Good: aside from offering greater choice and competition for consumers, foreign investment will be a vital source of the capital needed if Canada is to improve its dismal productivity performance — as it must, to pay for the coming wave of baby-boom retirees.

The other potentially significant development was the pledge to freeze departmental operating budgets. Again, this seemed to escape notice, with most commentary focused on the symbolic but fiscally insignificant salary freezes imposed on ministers and MPs. But a freeze on departmental budgets, depending how long it is in force, could mean quite sharp cuts in spending in real terms — not enough, certainly, to balance the budget on their own, but perhaps a sign of what is to come in the budget.

It had better. Despite the nod to restraint, the Throne Speech maintains the government’s official line that the budget can be balanced without either raising taxes or cutting transfers to the provinces and elderly. It’s true that you can grow your way out of a deficit, if you don’t care how long it takes: give it 10 straight years of growth, and even the worst profligate can balance its books. But the more leisurely the schedule, the greater the chances of a recession or other unexpected event wrecking all those pleasing fiscal forecasts. And of course, the longer you take to stop adding to the debt, the higher it climbs.

What we need is a serious plan to balance the budget in three or four years, that is within the usual economic or political cycle, coupled with a strategy to tackle the longer-term demographic challenge. That will certainly require either significant cuts in spending or substantial tax increases. I’ve argued it can and should be done by cutting spending. But whether it’s one or the other (or both), it can’t be neither.

A couple of other important omissions from the speech. On the plus side, there were almost none of the usual giveaways to politically powerful industries. To be sure, there was the expected list of shout outs to the forestry, fishing, and farming sectors. But rather than shower them with subsidies and special treatment, the speech proposed to help them by cutting red tape and opening new markets: what might be called “small government activism.” (The glaring exceptions: shipbuilding and supply management.)

More distressing was the absence of any mention of the economic union. To be sure, there is a pledge to press ahead with the creation of a national securities regulator, in place of the current provincial hodgepodge. But until lately the government had much more ambitious plans. A previous Throne Speech, in 2007, vowed to take aggressive action to dismantle provincial trade barriers if they did not do so themselves, if necessary by use of the federal “trade and commerce” power under the Constitution. The Conservative election platform in 2008 added a deadline to this commitment: 2010. Well, here it is 2010, and in a document devoted to competition, productivity and free trade there is no mention of the economic union.

Fine words, as they say, butter no supply-managed parsnips.

FOR THE RECORD: Here’s what the October 2007 Throne Speech had to say about the economic union:

Our government will also pursue the federal government’s rightful leadership
in strengthening Canada’s economic union. Despite the globalization of
markets, Canada still has a long way to go to establish free trade among our
provinces. It is often harder to move goods and services across provincial
boundaries than across our international borders. This hurts our competitive
position but, more importantly, it is just not the way a country should
work. Our government will consider how to use the federal trade and commerce
power to make our economic union work better for Canadians.

And here’s that 2008 platform commitment:

A re-elected Conservative Government led by Stephen Harper will work to eliminate barriers that restrict or impair trade, investment or labour mobility between provinces and territories by 2010. In 2007, the government announced that it was prepared to use the federal trade and commerce power to strengthen the Canadian economic union. Since that time, we have seen progress among the provinces and territories in strengthening the existing Agreement on Internal Trade. We hope to see further progress, but are prepared to intervene by exercising federal authority if barriers to trade, investment and mobility remain by 2010.

Ask Andrew transcript

By Andrew Coyne - Tuesday, November 3, 2009 at 12:56 PM - 12 Comments

• Andrew Coyne:
  Hello, everybody. Coyne here. Fire when ready.
• Crusk:
  Hi Andrew. In the past you have argued for a decrease in personal income tax, but why would a decrease in corporate taxes while maintaining high income taxes not be a better answer to productivity and equality concerns?
• Andrew Coyne:
  Well, of course, we could do both. Ultimately, all taxes are paid by people, so whether you cut corporate or personal income taxes is not hugely important — either way, what you want to do is make sure that the tax burden is spread fairly, and spread evenly, with as few exceptions or preferences as possible.
  What I’d really like to see is a rebalancing away from income taxes altogether, in favour of consumption taxes, which are far less damaging to economic activity.
• Critical Reasoning:
  Andrew, what are your thoughts on the Charles and Camilla visit? Do you think there is still a broad base of support for the monarchy in Canada?

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