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RBC and Capital Economics challenge Harper’s CETA claims

Harper’s slam-dunk argument for the Canada-European Union ‘free trade’ agreement, often uncritically reported in the media, is that the ‘Comprehensive Economic and Trade Agreement’ is key to Canada’s economic prosperity. The Canadian Press reports, “The government continues to quote a joint study on the impact, conducted five years ago, projecting a possible $12 billion boost to economic activity in Canada – $16 billion for the EU – and the creation of about 80,000 jobs. …Trade Minister Ed Fast said that, if anything, the joint study underestimated the gains.”

While we’ve challenged these numbers for years, they are also now being questioned by the Royal Bank of Canada and the private-sector research firm Capital Economics.

RBC economist Laura Cooper says, “There will be little noticeable economic impact for Canada over the short-term.” Capital Economics chief economist David Madani says, “It’s political so there’s lots of hype around the deal. …Most people understand that Canada’s trade with the EU is small so it’s not going to have a huge benefit. Assuming it is ratified, it’ll benefit Canada but the benefit will be very small.”

This news article also notes that Erin Weir with the United Steelworkers and Jim Stanford from Unifor have also challenged the figures. “Weir points out that the five-year-old study did not estimate a number for additional jobs. Given that Canada has a trade deficit with Europe, CETA has the potential to displace more jobs than it creates…” In October 2010, Stanford said that under CETA Canada would lose 28,000 jobs – most of them in manufacturing – if tariffs were eliminated, but that the worse-case scenario was closer to 152,000 jobs lost. Stanford has also pointed out that with the five previous free-trade agreements Canada signed with the United States, Mexico, Israel, Chile and Costa Rica,, exports grew by an average of just 4.77 per cent.

Trade campaigner Stuart Trew has stated, “The magic $12 billion figure has been seriously discredited since it made a first appearance in 2008. An independent assessment of CETA done for the European Commission estimates a GDP boost of between ¼ and ½ that amount, or between $3 and $6 billion. But even the lower estimate needs to be taken with a grain of salt since the economic modelling used to calculate all these numbers assumes full employment, total reinvestment of trade gains into new production, and other conditions that don’t exist in the real world. In fact, studies have shown that CETA will lead to job losses by increasing Canada’s existing trade deficit with EU countries and reinforcing an imbalanced trade relationship where we export raw resources to the EU and import high-value manufactured goods.”

Over the weekend, the Canadian Press noted, “A report by two university researchers this week estimated the cost to Canadians from (the CETA provision of) delaying introduction of cheaper generic medicines will likely range between $800-million and $1.65-billion, once the patents on new drugs expire starting in 2023. …(Harper has) said the government will consider compensation for the cheese makers (who now face more European imports) and the provinces, which would bear the brunt of higher drug costs.”

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