Is the Trans-Pacific Partnership a good deal for Canada?

The economic logic behind free trade is that ‘a rising tide lifts all boats’

Is the Trans-Pacific Partnership a bulwark of freedom as proponents claim, or is Canada about to be shoehorned into another free trade deal that will continue the hollowing out of our economy?

It depends on your perspective.

The TPP, championed by U.S. President Barack Obama as an important addition to the world’s free trade zone and as a means of extending U.S. influence in Asia, is nothing if not ambitious. It’s being negotiated between 12 countries with Pacific Ocean connections, including the United States, Canada and a notoriously protectionist Japan.

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Canada’s position on TPP seems to swing between hot and cold. At the same time Prime Minister Stephen Harper was calling TPP “the biggest game on the planet,” our own trade negotiators were balking, holding their ground on provisions for free access to Canada’s tightly controlled dairy, poultry and egg markets.

It should be pointed out the U.S. president is facing considerable domestic opposition to the deal. The Republicans in Congress oppose TPP because it’s an Obama initiative, but the president is also facing opposition from within his own party.

Senator Elizabeth Warren has pointed out that, while she’s in favour of trade, all of the free trade deals since the 1970s, including NAFTA, have contributed to the erosion of middle-class wages and standards of living. She insists free trade deals are poorly constructed, biased toward corporate interests and against the best interests of workers and the public.

There appears to be some truth to this assertion. Consider wages. While workers’ wages in the U.S. tracked productivity gains for three decades after the Second World War, from 1973 onward wages have basically straight-lined while productivity has almost tripled.

Something is obviously wrong.

The economic logic behind free trade is that “a rising tide lifts all boats.” But many also see free trade as a vital necessity for world peace. That idea was evident at the 1944 Bretton Woods Conference, where the victorious allies made their plans for a freer postwar world.

However, despite committing to freer trade, Bretton Woods also attempted “to reconcile liberal international trade policies with high levels of domestic employment and growth.”

The problem is that ensuring this balance is maintained requires political oversight of market forces and the supremacy of state sovereignty. Regrettably, both of these principles have been sacrificed in recent free trade negotiations.

Consider the chilling impact of NAFTA on public policy-making in Canada. A few years ago, it came to light that New Brunswick drivers were paying some of the highest auto insurance rates in the country. The provincial government convened a committee to study the matter and it concluded that a public insurance plan could reduce premiums by 20 per cent across the board.

Obviously, this was popular with the driving public. However, enter the Insurance Bureau of Canada. It reminded the government that if it went ahead with its plan, under NAFTA, foreign insurers could sue the province for “lost profits” from the expropriation of their market share. Bottom line, it never came to that. Even the threat of litigation was enough to kill the plan. As a result, New Brunswick continues to pay some of the highest auto insurance rates in the country.

There is also the notorious case of tobacco giant Philip Morris suing the government of Australia for attempting to regulate cigarette packaging. Philip Morris argued that Australia’s tobacco Plain Packaging Act would discourage smoking; therefore the act constitutes an expropriation of its investments. Philip Morris maintains the act was an “unreasonable and discriminatory measure” in violation of the company’s rights under a “free” trade deal Australia signed with Hong Kong.

You can hardly blame critics of free trade when there is such an alarming gulf between free trade theory and practice; it reminds me of “free” market theory, which only seems to work in economic textbooks.

Popular support for free trade has declined precipitously over the past few decades. But, in theory, the TPP is a good thing for Canada; it could increase the economic pie for all Canadians and create opportunities for Canadian business.

The difficulty lies in making TPP work for average Canadians. That means negotiating terms in the partnership that put the public horse back in front of the trade cart. This ensures businesses serve the communities in which they operate and not the other way around.

Robert McGarvey is an economic historian and co-founder of the Genuine Wealth Institute, an Alberta-based think-tank dedicated to helping businesses, communities and nations develop flourishing economies of well-being.

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