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We can’t win the race for trade deals

Ottawa Citizen, Canada

We can’t win the race for trade deals

By Debra P. Steger

Citizen Special

15 June 2007

David Emerson, minister of international trade, announced last week that Canada has successfully concluded a free trade agreement with the members of the European Free Trade Association (EFTA): Iceland, Liechtenstein, Norway and Switzerland. This is Canada’s first FTA in six years, and it took nine years to negotiate.

The government is also pursuing a policy of negotiating a host of regional trade agreements in Latin America and Asia, following the example set by the United States and the European Union. But the best trade policy for Canada, I would argue, is to get our own house in order, and reduce or eliminate internal barriers to trade so that Canadian firms can become more globally competitive.

A multipolar world is emerging, with China and India as major economic and political powers along with the United States and Europe. If a customs union develops in Asia, we could see three major trade blocs in the world soon.

Our trade policy is rooted in the world of the past: the mercantilist world of exports and imports of manufactured and agricultural goods. We need to refocus on investment and services, including the movement of people, which are critical to the knowledge economy. And we need to look inward, to open the Canadian economy up to the world so that our companies can become innovative and globally competitive.

One way of meeting these new challenges is to reinvent Canadian trade policy. There are several things that we should do.

First, take immediate steps to achieve an open economy within Canada. Second, deepen and improve economic integration within North America. Third, remove restrictions on foreign direct investment and reduce rules and regulations that restrict competition. Fourth, cut the applied rates of tariffs and reduce the border measures in place. Fifth, improve domestic customs and port procedures, reducing inspection and other delays, allowing goods to move more freely across the borders. Sixth, harmonize standards and regulatory requirements across the provinces, and with the U.S. and Mexico. Seventh, reduce barriers to the movement of people by overhauling our immigration system and developing more modern approaches to recognizing foreign accreditation of professionals. Eighth, and finally, reduce the taxation burden on Canadian firms so that they have more money to invest, and increase the incentives for companies to invest in research and development.

We must develop a strategic approach to our external trade policy driven by what is in our domestic economic interest. The WTO’s Doha development round, while important, is fundamentally about market access — in agriculture, on manufactured goods and on services. In many ways, this is an old agenda from a different era.

There is currently an impasse in the round caused by the great transformation in the international economic system. It has changed from a "bicycle built for two" driven by the U.S. and Europe to a bus with many drivers, but most WTO members have not yet figured out where they want to go.

Canada has not been a major player in this round unlike in previous ones, in part because of the view that we cannot liberalize any further without incurring significant opposition at home. While it is clear that regionalism is on the rise, particularly in Asia and Africa, it is not in Canada’s interest to try to keep pace with other countries, such as the U.S. and Europe, in negotiating free trade agreements.

We should be pursuing a more strategic approach, after having objectively assessed what is in our own economic interest. Progress should not be measured by how many agreements we have signed in the past few years or how many we are currently negotiating. We must be very careful to ensure that the FTAs we negotiate are comprehensive and open, and do not create greater barriers or trade diversion because of restrictive rules of origin.

The best trade policy for the future would be to open up Canada to the world. Governments can also do more to provide information and tools to Canadian businesses to equip them to take advantage of the opportunities for foreign direct investment and exports of goods and services.

The markets are there. We need to do more to access them before the window of opportunity closes.

Debra P. Steger is a professor of law at the University of Ottawa and director of the Emerging Dynamic Global Economies (EDGE) Network. She is a former senior Canadian trade negotiator.