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Canada-EU trade deal turns off small business

A new Leger poll commissioned by the UPS shipping company found that the vast majority of small- and medium-sized companies “would not closely tie Canada’s economy to Europe despite ongoing efforts by the federal government to establish a Canada-European Union (EU) free trade agreement by 2011.” One in two, on the other hand, feel the U.S. should remain Canada’s preferred trading partner. What does this tell us?

First, there is the obvious problem for the federal and provincial governments currently negotiating the EU deal: Canadian businesses are not behind it. This is clearly why Trade Minister Van Loan has been rah-rahing the EU deal to local and regional chambers of commerce for the past few months. Sources at a recent Ontario CETA session for businesses put on by the province’s economic development minister, Sandra Pupatello, say even the major automakers were scratching their heads wondering why they should care.

Sure, the Canada Europe Roundtable for Business, an elite paid club of multinationals from the North Atlantic region, has been making an impassioned case for CETA for a decade. But its member companies are already established in both markets and do good business. Their goal is to deregulate in Canada and the EU so they can reap more profit. It is also to create private wealth where value is currently caught up in the public system (ex. water, energy and transit utilities). The gains in terms of jobs are minimal and probably negative for Canada.

The more interesting reality within the Leger poll is that Harper, Van Loan and many prominent economists and free trade advocates mislead Canadians when they say our economy is fundamentally dependent on international trade — and that this is why we sign FTAs with other countries. Of course trade is important, but when “only 10 per cent of Canadian SMEs claim to do business with countries in the EU while almost 30 per cent say they conduct trade with the U.S.,” the sustained importance of local, regional and interprovincial trade comes to light.

According to a study by Erin Weir, who now works as an economist with the United Steelworkers, the Government of Canada typically ignores the import content of Canadian exports when issuing trade statistics, which will exaggerate the importance of exports to the Canadian economy in relation to global competitors. The government does this to justify policies designed to increase the “competitiveness” of Canadian industry — policies that typically involve corporate tax cuts and cuts to social programs.

Weir states:

The most powerful argument for free-trade agreements, tax cuts, and constricted government is Margaret Thatcher’s TINA: There Is No Alternative. In Canada, this argument has largely been sustained by claims that nearly half the country’s income comes from global markets. The revelation that this fraction is closer to a quarter makes alternative policies seem more plausible and suggests that governments may have more “room to manoeuver” than is commonly thought.

CETA is clearly about removing that “room to manoeuver” in a number of areas, notably provincial procurement, regulatory and investment policies. Not obvious in the Leger poll is how these policies can be used to support small- and medium-sized businesses, to build up local economies, to make communities less vulnerable to the violent ups and downs of global trade flows.

If Canadian businesses can’t even see the benefits of a trade deal with Europe, the Harper government is in for a big fight against CETA from several directions. There is little to no economic case for a new trade deal with Canada but much to lose in the sense of policy options. Our federal and provincial governments need to answer for this discrepancy.