Talking Trade

In the past 2 days the Globe and Mail has had a couple articles touching on 2 different potential free trade agreements; a bi-lateral deal between Canada and the EU as well as a the ongoing discussions around creating a trans-pacific free trade zone.

 

The articles, while very diverse in their take home message had some interesting tidbits in concern to agriculture.  Greg Keenan’s article was summarizing a study put forth by a Canadian Auto Workers economist that predicted massive job loss in the manufacturing industry, arguing that we stand to lose more then we could gain through such an agreement.  On the flip side, Barry McKenna’s article was lamenting the fact that Canada has been told that they can’t join the trans-pacific discussions because of their unwillingness to put agricultural market access on the table and as such, Canadian industries would miss out on an opportunity for access to a potentially lucrative free trade zone.

 

The CAW study asserted that the majority of gains would be incurred by the agriculture and fisheries industries, however they failed to try and quantify the actual impact, (I have a feeling the benefits from increased access for agri-food products alone would outstrip manufacturing losses).  In regard to the pacific deal, there is a touch of irony, given that it is agricultural industries that would incur the greatest benefit from the deal but our policy makers continue to sacrifice non-supply managed farmers (pig, beef, grain, etc.) to protect our domestic dairy and poultry markets.

 

So what is the take home message?  At the end of the day, trade policy should attempt to open markets for industries that have a comparative advantage over global competitors.  In the case of Ontario, the simple fact is that we can produce pork and beef cheaper then almost anywhere in the world and if we were given fair access to markets we would be able to compete with any other country around the globe. You also need to remember that it is not only the farmer that benefits from increased trade (we don’t send pigs straight from my farm to another country).  Jobs in urban areas are created and sustained by these trade deals because it takes more then just the farmer to make high quality Canadian pork and beef.

 

Link for Pacific Trade Article:

http://bit.ly/bTcE6Z

 

Link for EU Article:

http://bit.ly/aPEkBd

 

If you’re interested, here is another article from the Globe about Supply Management:

http://bit.ly/cucSnq

 

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3 thoughts on “Talking Trade

  1. Blain K says:

    Interesting article Stew, I especially enjoyed your point about the irony of supply-managed industries being the biggest hurdle to some of these trade agreements when the agricultural industry potentially has the most to gain if the deals actually went through. The one thing I question is your take home message; Isn’t the primary purpose of trade policy to improve the quality and decrease the cost of the goods and services provided to the consumer? Trade should be a two-way street, we shouldn’t try and trade only in areas where we have a comparative advantage and block trade in others, as ultimately that has a negative effect on consumers. Trade should be as open as possible, then over time countries will specialize in areas where they have a competitive advantage, and leave other industries for other countries. If, as you say, the pork and beef industries are competitive on the world stage then this trade policy will allow them to expand hugely into the international market. The tougher part is the realization that some industries may not be so lucky, and ultimately don’t belong in the Canadian marketplace. In my opinion, trade is the reason we enjoy an incredibly high standard of living compared to even 50 years ago. We need to continue to develop our trade relationships with other countries, and continue to improve on what we as Canadians do well. If that turns out to be pork and beef, then Stew I think you will become a very wealthy man indeed.

    • modernfarmer says:

      Blain…..why can’t you just take what I say and accept it as truth, lol. Here is my attempt at responding; If we assume that we are never in the perfect balance between supply and demand then there is always a certain amount of deadweight loss that detracts from the levels of consumer and producer surpluses that would exist in a perfect market. The role of trade is to lower the amount of dwl. The CWA economist makes it sound to me like we have a comparative advantage over the EU in terms of ag and fisheries products while certain European auto manufacturers have the edge over Canadian. Therefore, in the case of the EU deal, increased exports of beef and pork should increase producer surplus while the cheaper imported cars will increase consumer surplus. At the end of the day, we are going to have a scenario with less dwl if we are able to achieve a deal with the EU

  2. Blain K says:

    Sounds good to me. I’ll get to eat Canadian steak while driving my BMW. I only probe for more information because I’m interested, not all of us have a Masters in Economics. I figure I might as well take advantage of your education as much as possible.

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