OPINION: Canada should unilaterally create free trade with the world
As Canada's trade deals with Asia and Europe continue to draw criticism, a former government economist says he has a better idea.
Instead of negotiating FIPAs and FTAs and CETAs region by region, Dan Ciuriak, now with the C.D. Howe Institute, says Canada should declare itself a free trade zone with no tariffs or barriers for any country that wants to do business with us.
Critics, however, say that would just lead consumers to pass over Canadian-made products.
"I'm proposing that Canada go unilaterally free trade," Ciuriak tells Jim Brown this week.
"Our study shows that going unilateral means that you can have a lot of the benefits (of bilateral free trade agreements) now, and you can have them without the bother of negotiations, and also without the costs that these agreements impose on companies that try to make use of these agreements."
Ciuriak was commissioned to write a report for the Canadian Council of Chief Executives on the subject, and cites a number of benefits to eliminating tariffs and other trade restrictions. He says the idea of protecting "Made in Canada" products is outdated.
"We used to have products made in Canada, where all the parts were made here too. At that time tariffs protected the product and the whole supply chain. The WTO (World Trade Organization) uses this term 'Made in the world.'" he explains.
Tariffs are an industrial policy tool, and they are very much an industrial policy tool of a past generation. Today the paradigm has changed.Dan Ciuriak, Research Fellow, C.D. Howe Institute
Not everyone has such a rosy outlook of Canada's future in a post-tariff world.
Jim Stanford, an economist with Unifor, Canada's largest private sector union, says getting rid of import taxes would mean demand for Canadian products would suffer.
"If we said 'no more tariffs on any of the goods we import,' then those goods would be come cheaper. And what that means is that any Canadian who might be looking at a Canadian made version or an imported version will now be more likely to choose the imported version. There will be less demand for things that are made in Canada.
He cautions the result would be job losses, and a reduction of Canada's GDP overall.
"At least in a bilateral situation where the other country also reduced its tariffs, then you might be hopeful that they're going to buy more Canadian stuff, just as we're buying more imported stuff," he says.
If it's just us being the 'boy scouts' of the world and unilaterally eliminating all our tariffs, there's no reason to think that those international purchasers are going to buy anything extra from us.Jim Stanford, Unifor economist
But C.D. Howe's Dan Cuiriak says it's worth it to give up the leverage of bilateral tariffs.
"(Jim Stanford) makes the first round case that if you lower your tariffs you make imports cheaper, and in the first instance, yes, imports come in and compete more effectively with your domestic product. He doesn't make the second round case, which is what happens afterwards," he says.
"When you liberalize, the least competitive companies are driven out of business, but that market share goes to the stronger firms, and those stronger firms become more competitive. The entire industry becomes more competitive and becomes more export-capable."
When asked about job losses in the manufacturing industry that would result from that, Ciuriak says "There wouldn't be that many at all in that regard. We've already eliminated most of our tariffs on industrial inputs." He points to the auto, textiles, dairy and poultry sectors as some of the industries that would be negatively affected, but still sticks by his plan as having long term benefits.
"On the other hand, if you were to look at the most competitive dairy farms, and if you were to look at the downstream sales of cheese manufacturers, you would find that we'd still have a restructured industry that would still be very much viable."