Freeland, Trudeau are true believers, but free trade mantra blows up

Chrystia Freeland says free trade raises all boats, but does it really?
Chrystia Freeland, Foreign Affairs Minister. Creative Commons photo.

Canada’s new minister of foreign affairs, Chrystia Freeland, was recruited into politics by Prime Minister Justin Trudeau and is influential in his inner circle. They share a belief common amongst international bankers, industrialists and many politicians that free trade and globalization are automatically good for us and that it would be dangerous to tamper with them.

Still, it hasn’t been a good season for trade internationalists. Freeland was Canada’s point person on a free trade agreement with the European Union. That deal almost died late last year and is now awaiting ratification by individual European states. Then, in 2016, the British voted narrowly to leave the EU. Finally, negotiations for the Trans-Pacific Partnership, an agreement including Canada and a dozen Asian and Pacific countries, were completed a year ago. But the pact has now been torpedoed by incoming American President Donald Trump, who says it would be a bad deal for the U.S.

Whither NAFTA?

Trump says also that he will reopen the North American Free Trade Agreement (NAFTA) which includes the U.S., Canada and Mexico. He is at the same time scapegoating Mexico in the ugliest way, including his insistence that the U.S. will build a wall to keep Mexicans out and that they will pay for it.

Some Canadians, including trade lawyers and the C.D. Howe Institute seem prepared to ditch NAFTA, to throw Mexico under the bus, and to fall back instead on the earlier bilateral Free Trade Agreement with the U.S. But King Kong is on the march and Canada will likely be bullied and trampled as well as Mexico.

There’s an irony here, of course. Trump is a wealthy right-wing populist with authoritarian tendencies, and yet he’s the one challenging the international trade regime. In Canada, it was progressives, such as labour leader Bob White and Maude Barlow, chairperson of the Council of Canadians, who fought against such agreements in the 1980s and early 1990s. They said the NAFTA was more about the rules for investment than about trade; that it removed power from democratically elected governments and placed it into the hands of corporations — all at the expense of ordinary people.

For example, the investor-state dispute settlement provisions in all of these trade deals allow corporations to sue governments over actions they take in the public interest. Most often those suits have revolved around environmental legislation or regulations that companies claim will harm their profits.

Lifting all boats?

Freeland, Trudeau and others claim that everyone benefits from increased trade. It’s true that when companies migrate to lower-wage countries, jobs are created. But, far too often, they are poorly paid and leave workers without even basic protections. For example, in Bangladesh, the Rana Plaza textile factory collapsed in 2013, killing 180 employees and injuring 1,000. The building codes had been ignored, and workers were forced to remain in a setting that they knew was unsafe. They were earning between $10 and $12 per week at the time.

For three decades, the predominant narrative has been about trade lifting all boats. If that is so, how do we explain that in Canada median earnings after inflation have remained flat for decades? Or that 5 million people (500,000 of them children) continue to live in poverty? The wealth created by globalization has been trapped mainly by the elites. In fact, the Canadian Centre for Policy Alternatives reports that in 2015, Canada’s highest paid CEOs were paid 193 times more than someone earning an average wage.

A delicate position

Trump has prevailed by stoking the anger of Americans who feel that they have been left behind. Unfortunately, he did that by attacking Latino immigrants, African-Americans and Muslim refugees, who really aren’t the cause of the hard times that some Americans are experiencing. And despite his posturing, it’s unlikely that if Trump reopens NAFTA, he’ll do so with the interests of working-class Americans uppermost in mind. But he has proven, as one commentator noted, that trade agreements are about politics, and not immutable economic laws.

Canada is left in a delicate position. Do we support the continuation of trade deals that help to concentrate wealth among high income earners while leaving others behind? Or do we agree to renegotiate badly flawed deals only to be bullied by Donald Trump into further concessions?

Whatever we choose to do, our focus should be on benefiting workers, protecting the environment and improving the distribution of income altogether.

A shorter version of this piece appeared with the United Church Observer on January 26, 2017. 


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