Free Trade: why we notice the losses, but ignore the gains

With the U.K. leaving the EU, and U.S. President-Elect Trump trashing trade deals, some commentators have declared an end to the era of free trade deals.

Jared Bernstein, writing in the New York Times, said The Era of Free Trade Might Be Over. That's a Good Thing.

Canadian journalist Gwynne Dyer said "the great free-trading spree of 1990-2008 has already come to an end."

We asked listeners to The 180 for their thoughts on the state of free trade, and whether they thought free trade arrangements had made their lives better. While there is near consensus among academic economists that international trade, and North American trade integration, has benefited Canada overall, the people who emailed us felt a bit different.

Investor-State Dispute Settlement

While some people had broad concerns over free trade, many people had questions over an element of free trade deals called ISDS, or Investor-State Dispute Settlement.

ISDS is now a standard part of trade agreements. The goal is to give foreign investors assurance that they won't be treated unfairly when investing money in the host country. The 180 previously spoke with Laura Dawson, Canadian trade consultant, for an explanation and defence of ISDS arrangements.

In this fun audio factoid, The 180 looks at the history of NAFTA's ISDS arrangement, also known as Chapter 11, with a special look at the case of Ethyl Corporation v. Canada.

Feelings for trade

When it comes to the broader impact of trade deals, many people wrote of a disconnect between what is said about the benefits of free trade, and what they see, and how they feel, in their own lives. This email from Chris in Squamish, B.C., is an example:

We continue to hear from the media that "free trade" agreements are either good or bad for our country depending on who you are listening to. I don't know who to believe.  However I feel that free trade has not benefited a lot of people primarily our blue collar workers. To gain support for free trade agreements there has to be demonstrably more affordable housing, better living conditions and better wages for the whole population.

Martha Hall Findlay is a former Liberal MP, and current President of the Canada West Foundation, a Calgary-based economic policy think tank. While she says that the era of free trade has, without question, made Canada and Canadians better off,  there are winners and losers, and it's easier for people to notice the losses. She says that leads to a disconnect between what people hear about trade, and what they feel about its impact. 

When a factory closes down because of lower labour costs in Mexico, then people point to it and say "see, NAFTA was a bad idea." Those are the heartstring moments.- Martha Hall Findlay, Canada West Foundation

"It comes from the fact that the benefits of trade go to an economy as a whole. But those are widespread. There's no question there are winners, but winners tend to be across the whole economy. Jobs don't get up tied to 'this factory opened up because of a trade agreement' which happens all the time, but you don't hear that narrative. But man when a factory closes down because of lower labour costs in Mexico, then people point to it and say 'see, NAFTA was a bad idea.' Those are the heartstring moments. And those are the things that really hurt and get attention. And so one of the challenges for politicians and politicians is to be able to point to the successes as well, and make sure we do a much better job at addressing the downside. Addressing when people lose their jobs because a factory leaves town."

To Martha Hall Findlay, much more attention is paid to the losses, than the gains.

"We tend to lose the low-cost labour jobs. But there are tons of jobs. I often hear people complaining that we're only getting service jobs. But service jobs include professional services, they include design, they include video game design. Canadians have a lot of jobs in that world and they're well paying." 

We stand to lose a lot. If we lose investment, if entities move south, if foreign entities invest in the States and not here, those are real jobs too.- Martha Hall Findlay, Canada West Foundation

She also agrees that academics and politicians need to do more to communicate the benefits, without dismissing the losses.

"Yes, whether it's greater education, a greater ability to highlight the successes not just the challenges, there's a lot of work to be done. My worry is, if we don't, we stand to lose a lot. If we lose investment, if entities move south, if foreign entities invest in the States and not here, those are real jobs too."