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5 economic reasons to diss the Trans-Pacific Partnership

TPP protest Vancouver

People who support free trade agreements usually make one frequent argument: these agreements will help our bottom line. Without them, they warn, Canada will be left out like a social loser in the world economic cocktail party circuit. And we all know what happens to social outcasts: they get battered, figuratively, by low growth and missed economic opportunities.

We hear often that Canada is a trading nation and that, without trade agreements such as the Trans Pacific Partnership (TPP) and the Comprehensive Economic and Trade Agreement (CETA) with Europe, we will lose access to 800 million consumers and 40 per cent of the world economy. But joining trade agreements with the “in” crowd may amount to submitting to peer pressure. Here are five reasons why the TPP and CETA will not make you and me wealthier.

1) There is no serious independent economic study of either the TPP or CETA.

In CETA’s case, there is one outdated study from 2008. And even that says the deal would exacerbate Canada’s trade deficit and produce minimal growth. Worse, the Harper government’s prediction of 80,000 new jobs turns out to be a work of fiction. TPP has not been studied independently either. 

Studies on the TPP are not hopeful. A Tufts University Study predicted 58,000 job losses in Canada, dismal economic growth and rising inequality.

Here are figures from some who do back the agreement. These studies fail to take account of aspects such as investor state dispute settlements, or they assume full employment

With friends like these…

Jim Balsillie, former head of BlackBerry maker RIM, told a Parliamentary Committee:

“It is like buying a house or buying a business or entering into a marriage with absolutely no facts whatsoever about what you’re getting into, because houses are good and businesses are good and marriages are good. No, they’re not good any way, any time, anyhow. It’s a function of understanding what somebody is looking for and making sure that it works.”

2) Signing agreements doesn’t guarantee more trade. Canada has an unprecedented number of free trade agreements, but export growth has been higher with countries not covered by these agreements.

Aren’t trade agreements meant to increase trade?  Jim Stanford, an economist and special advisor at the Unifor trade union, demonstrates that Canada’s export growth has been faster with countries not covered by free trade agreements. As regards our free trade agreement with South Korea, Canada’s exports actually declined after the agreement came into force.

The reality is that we still mostly trade with the U.S. Seventy-five per cent of our exports still go to the U.S. And agreements haven’t made things better: Whereas five per cent of our exports are with other free trade agreement (FTA) countries, close to 30 per cent of bilateral trade occurs with non-FTA partners. Added to this, Canada’s exports to non-FTA countries grew faster than imports.

3) With free trade agreements, other than with the U.S., our trade is less balanced.

Current account balances are a sign of economic health. Strong exports mean economic value and jobs are kept in the country.

Since 2001, Canada’s imports have grown faster than sluggish exports, and our trade balances have deteriorated significantly, according to Stanford.  He writes, “Canada’s export performance since the turn of century has been the worst of any industrial country.”

In fact, he says, our current account deficit is the third worst of all OECD countries.

4) Many business leaders are questioning the use of free trade agreements as magic bullets to increase trade, when they do not.

Matthew Wilson of Canadian Manufacturers and Exporters told a Senate Committee:

“To be blunt, Canada has a poor history of success in free trade agreements. Aside from the NAFTA and specifically the Canada-U.S. trade relationship, very few, if any, free trade agreements have led to an increase in exports in any goods, let alone from Canada’s advanced manufacturing sector.”

The fact that free trade agreements, without underlying infrastructure, don’t advance trade has been echoed by others.

5) Trade agreements are making us more dependent on exports of raw materials and resources, and hampering our manufacturing and high-value industries.

Balsillie doesn’t mince his words. He says, “I guarantee you there will never be another Canadian tech company like RIM under the framework of TPP.”

He adds, “Canada has the most superficial innovation discourse that I’ve seen in the world. We take these articles of faith that more intellectual property enforcement is good. Free trade is always good. We have these false myths and orthodoxies that we just take on, unchallenged.”

To have a vibrant economy, a country needs to have industries that are differentiated. This is where the market is willing to pay more for distinctive products, as opposed to raw materials, where there is often nothing that makes the product different, and so countries merely compete on price.

Canada, despite, its free trade agreements, has locked itself into dependency on raw materials. Under NAFTA, Canada accepted a proportionality clause, forcing us to ensure equal proportions of oil production for the U.S. market and for domestic consumption. 

In 1999, if you took a basket of the high-value-added industries (transportation equipment, aerospace, consumer goods, automotive), they represented 60 per cent of Canada’s exports, while the resource sector (agriculture, mining, forestry and oil and gas) represented only one-quarter of our exports. In 2014, the export sector had grown to 40 per cent of the economy. As Carleton University trade researcher John Jacobs writes, high-value industries employ more people and are under threat by free trade agreements.

Our decline into a resource economy was so bad, that, in 2013, according to the Observatory of Economic Complexity, we had the least technically complex economy in the OECD. 

And then there are the non-economic costs: UN rapporteurs on human rights and indigenous peoples have condemned these agreements. There are also concerns about effects on labour rights, the environment, public policy and equality.

Other countries may be doing it, but the TPP and CETA are not worth the cover charge to this popular club.