Trade openness is an indispensable tool to improving Canada’s economic prospects
By Brian Lee Crowley and Jason Langrish : OTTAWA, ON – Negotiations on the wide-ranging free trade agreement between Canada and the 27-member European Union – the largest market in the world – are expected to conclude this year. This is a vital development, as Canada’s trade policy agenda has largely been stalled for a generation, putting the country’s prosperity at risk.
We need a bold trade agenda. Of all the sources of improvements in Canada’s economy, one of the most important has been the rising value of our exports. Yet the country has become uncompetitive in several areas and effectively shut out of markets in areas where we have a competitive advantage. For example, agricultural exports have lost global market share in every area except for pulses. Imagine – a country as qualified as Canada to be an agricultural powerhouse for a rapidly growing global population, yet its prospects languish.
Productivity growth should be another major contributor to Canada’s prosperity; instead our performance has been lamentable. One of the reasons Canada has not tapped into productivity-enhancing innovations is because we throw many obstacles in the path of Canadians trying to do business in their own country, fragmenting our domestic market, undermining economies of scale and limiting export opportunities for Canadian producers.
This is exacerbated by domestic markets that are effectively closed to real competition, preventing innovations from abroad from entering our market. Telecommunications is an obvious example. According to the OECD, Canada has one of the slowest Internet services and most expensive mobile phone bills in the industrialized world. And while Korea and Japan are now moving to 5TH generation mobile and internet technology, Canada remains 3G. We can do better, and free trade can help.
To reinforce this point, a recent Statistics Canada paper found that those Canadian businesses that entered new markets between 1990 and 2006 became more productive than those which maintained the status quo.
Trade, in effect, allows Canadian companies to use other countries’ workers when they cannot find the workers they need at home. This becomes more important in the face of an aging population and the pension and health costs that they present.
Finally, tearing down barriers to investment in foreign markets and increased protection for investors improves the opportunities for better returns to Canadian investors, including pension funds and individuals.
The Canada-EU Trade Agreement (CETA) will allow Canada to make progress on all these fronts and more with the world’s single largest market. The agreement won’t merely improve access for Canadian exporters to a market of 500 million. It will also have myriad other beneficial effects, including a need to upgrade our intellectual property provisions to a standard consistent with other advanced economies, such as in pharmaceuticals which is likely to result in increased investments in the sector, leading to more innovation and jobs.
CETA would ensure that government procurement is open, fair and reciprocal: not only will Canadian governments (and their taxpayers) have access to better quality goods and services at more competitive prices, but Canadian suppliers will be able to freely bid on government contracts in the European Union – a procurement market worth $2.4 trillion.
The agreement would also make it easier for Canada to bring in skilled European workers, a key benefit as population aging causes our own pool of workers to stop growing in coming years.
These advances are essential if Canada is to successfully negotiate access to the markets of Asia, as well as strengthening its influence with the U.S. and at the World Trade Organization. And because the U.S. has not yet negotiated free trade with Europe, an early deal with the EU will confer first mover advantage on Canadian companies, which will enjoy privileged access to both the U.S. and Europe – a position enjoyed by few other countries in the world.
Protectionism’s day is over. Around the world, the value of trade consistently rises faster than national economies grow, meaning that trade openness is an indispensable tool in improving the economic prospects of our people. Canada has a lot of what the world wants, but we also have a lot to learn from others. That makes successfully negotiating trade deals like CETA a matter of vital national interest.
Brian Lee Crowley is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca. Jason Langrish is Executive Director of the Canada Europe Roundtable for Business: www.canada-europe.org