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Jim Stanford on reducing exposure to Europe and the flaws of the free trade model

If you haven’t seen CAW economist Jim Stanford’s new video on CETA, do it as soon as you can. It’s an easily digestible version of his report for the CCPA, Out of Equilibrium: The Impact of EU-Canada Free Trade on the Real Economy, which shows the deal will almost certainly worsen Canada’s trade deficit with Europe and kill between 28,000 and 150,000 jobs. Stanford was on CBC The National this week talking about the EU and U.S. debt crises, and why they suggest a free trade deal is the worst thing for Canada right now. He was on CBC’s Power and Politics yesterday on the same topic, around minute 51 of this link. And he explains it in more detail in a Progressive Economics Forum posting this week, which I’ve summarized here.

“I was interested to hear both Patricia Croft (ex-RBC) and Preet Bannerji (Pro-Financial Asset Management) suggest that investors should reduce their exposure to Europe,” writes Stanford in his post. “This is ironic, because the other big news this week is that the Canadian government is now very close (after another round of talks in Brussels last week) to quickly inking a free trade deal with the EU. Details of the talks (and, in particular, what Canada sacrificed in order to get so close to a resolution) were not released. But the reality is that the Harper government is about to substantially increase Canada’s national economic ‘exposure’ to Europe, at the very moment when financial advisors recommend we head in the other direction.”

Stanford offers three key reasons why free trade with the EU is an especially bad idea right now:

1. As Canada’s dollar appreciates against the Euro, Canadian exports take a hit. Trade-weighted average tariff on Canadian products entering Europe is a low 2 per cent. So, “Whatever ‘access’ we gain to European markets through an FTA will be quickly clawed back, and then some, by the euro’s inevitable depreciation,” writes Stanford.

2. Europe will be in worse shape than Canada for a while thanks to government austerity measures. “Our market is growing, theirs is not. Guess who’ll get more new business from the deal?”

3. Export-led growth works for net exporters such as Germany, South Korea, etc, but net importers take a loss. “We’re already a big loser in this beggar-thy-neighbour competition, by virtue of our record current account deficit,” writes Stanford. “Expect the Europeans to push their exports out in coming years by hook and by crook, using every trick in their export-led book. An FTA at this time hands Canada’s market to them on a platter.”

Stanford says Harper and gang are charging ahead with an EU deal to pretend they have a plan for the worsening global economic crisis. He concludes, “I throw my lot in with the financial experts. I’d say it’s time to reduce, not increase, our national economic exposure to Europe.”

To watch the Stanford video on CETA, click here.

To read his latest Progressive Economics Forum article, click here.