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Trade minister Ed Fast solicits TPP support in Australia, New Zealand

According to reports this week on Trade Minister Ed Fast’s trip down under, Canada is confident it can win the backing of Trans-Pacific Partnership countries for a seat at the negotiating table.

“We’re still in ongoing consultations with Australia but I am confident that, based on the merits of the case, which we believe is quite compelling, we will have a positive result,” said Fast, quoted in The Australian. “We’ve been very encouraged by the support we’ve been receiving.”

The article mentions that Fast spoke in language the Australian government is using around the importance of increased trade to offset the effect of exchange rates on Canadian exports.

“Given the fact that the sale of commodities is driving a significant part of our economic activity, our industries are going to have to adapt to a higher value (Canadian) dollar and are going to have to become more productive and competitive,” said Fast this week. “For many years, Canada had the benefit of the low (Canadian) dollar . . . today we are doing business on a level playing field; it’s been a wake-up call for Canadian business that we are going to have to get more competitive.”

Here we go again – another wake up call for Canadian exporters. The same language was used before the Canada-U.S. free trade deal was signed and again prior to NAFTA. Using it now after Canada’s experience with manufacturing job losses is akin to throwing the sector under the proverbial bus. Even Central Bank chief Mark Carney has been cautioning about the effect of a high dollar on exports and predicting they won’t contribute much to the Canadian economy before 2014.

Simply signing more free trade deals will have little effect of Canadian exports are too expensive. It’s an especially strange strategy in the case of the TPP where Canada has free trade deals in place with half of the nine negotiating countries (the most important half, with less than 1 per cent of trade done with the rest).

CAW economist Jim Stanford points out how bad Canada’s trade balance is in a primer on exchange rates and the Canadian dollar for Relay magazine. He suggests the Bank of Canada had options at its disposal to halt the rapid rise of the value of the Canadian dollar, which has made Canadian exports less competitive, investment in Canadian manufacturing less attractive, and can reduce tourism as Canada becomes a more expensive destination. Those tools include selling (printing) more Canadian dollars or fixing our exchange rate at around 70 cents to the U.S. dollar.

A more progressive approach, suggests Stanford, would be to tackle the root causes of Canada’s overvalued currency. He writes:

The loonie’s rise reflects the interest of investors – foreign as well as domestic – in highly profitable business opportunities (especially in petroleum and other resources) in Canada. That chain of influence could be easily broken, by pro-active measures which targeted the resource super-profits and associated financial side-effects. Impose higher taxes or royalties on the extraction of non-renewable resources (for environmental reasons, as well as economic ones). Severely restrict foreign takeovers of Canadian resource companies and assets. That in turn would reduce share prices for resource companies on the Canadian stock market. All of this would quickly reduce the relative appeal of owning Canadian wealth, both financial and real. The dollar would depreciate immediately and rapidly. (Indeed, this is the same reason why exchange rates typically fall when left-wing governments are elected.)

The CAW recently released a strategy paper calling for a revitalized auto policy in Canada. As reported by CBC, “The union pointed to unbalanced trade policies, which it says have made it a ‘one-way street’ of imports over exports with practically every country except the United States… It called on Canada to cease free trade negotiations with automaking countries including those in the European Union as well as Japan, Korea, and Thailand.”

The CAW report notes that 6,000 vehicles are built each day in Canada for a yearly total of 2,135,121, employing 112,000 people in Canada and comprising 12 per cent of Canadian exports.

“Germany has not closed an assembly plant since World War II,” said Stanford at the launch of the report. “So the idea that you have to accept this wholesale destruction of an industry simply isn’t true.”

Dairy farmers could also see the wholesale destruction of their sector from the TPP since Canada is being asked to commit to dismantling functioning and fair supply management systems that don’t cost taxpayers a penny in subsidies, unlike in the United States and other dairy exporting countries. Once again it appears the Harper government is fighting into the TPP for the benefit of a few export-based agricultural sectors like pork, beef and grains but at the expense of possibly hundreds of thousands of good paying jobs in other parts of the country.