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Free trade and protectionism don’t mix

Ottawa Citizen | 1 October 2015

Free trade and protectionism don’t mix

Dairy farmers from around Ottawa took their cows and tractors to Parliament Hill this week, to protest the changes they expect in the Trans-Pacific Partnership trade deal.

What has farmers worried is the fact that Canada is unlikely to reach a deal without making some “concessions” in the dairy sector – the “concessions” in question being allowing Canadians to buy more foreign cheese than they can now.

Access to imports is a good thing for the country. It increases domestic productivity by increasing competition and reducing the costs of doing business, including for exporters. Politicians don’t like to talk about it that way, because it makes protected domestic industries nervous. Instead, they act as if imports are the regrettable price we pay for exports. That’s why lower tariffs are called a “concession” – until a government wants to make political hay out of, say, cheaper sports equipment for kids, and then all of a sudden they acknowledge that tariffs raise costs in Canada.

It makes no sense to argue, as every one of our federal leaders effectively does, “I believe in free trade, and I will fight to protect our tariffs on dairy.” These are two mutually exclusive ideas. If free trade is good, tariffs are bad; this is not exactly complicated logic to follow. If you believe domestic industries need to be protected from foreign competition through tariffs, fine! That’s an opinion you’re perfectly entitled to hold, in 2015 as in 1985. But you’re then by definition not a free trader. Lower tariffs are not a price we pay for free trade. Lower tariffs are free trade.

All the nonsensical “water in our wine” rhetoric about trade deals, especially from self-serving politicians who have enough basic economics training that they ought to know better, has the effect of confusing people about what trade deals are for and how they work. The benefits become nebulous and distant (“market access”) while the supposed “costs” are all too concrete and local: milk spilled on the streets of the Parliamentary Precinct.

Meanwhile, dairy farmers have legitimate grievances. They’ve bought in to a system that is slowly being eroded through these trade deals because the government (and all parties) are too gutless to offer fair reform instead. And even many farmers who might defend the general principles behind supply management haven’t been completely happy with the way the quota system works in practice, the barriers it creates to growth and investment.

The TPP is a complicated deal, and not all of it will necessarily be good for Canada. But political rhetoric shouldn’t add to the confusion by implying that imports are evil.

 source: Ottawa Citizen