by Pierre-Marc Johnson, 24th Premier of Quebec and Lead Negotiator for the Comprehensive Economic and Trade Agreement (CETA) for the Government of Quebec
Trade among nations has come under attack recently by various opinion currents in populist settings, and the partaking in this movement by governments in the USA, Italy, and other countries. Measures have been initiated by the USA that could lead to long-standing impacts of a “trade war”. Criticism of Trade is concentrated, depending on their origins, from the left or the right- on a few assertions such as:
-Trade that leads to deficits in the trade exchanges for a given country is bad
-Trade is the cause of impoverishment and unemployment
-Trade through some investment provisions in trade treaties allows corporations to check and disband social or environmental legislation and regulations.
It seems useful at this point to address some of the fundamentals about trade before coming back to these criticisms. International trade is about free movement of goods, people and capital according to the capitalist credo that such circulation will bring about more prosperity, innovation and better choices and prices for consumers through competition. Of course free trade agreements do not provide for 100% of freedom to circulate for goods, people, and capital. As nations negotiate free trade agreements and treaties, and agree on the principles of free circulation, they also agree on the so-called disciplines of free trade i.e. amending legislation, regulations and administrative processes. This is all in order not to discriminate against economic actors coming from parties to the agreement. And finally, they agree to hundreds of pages of exceptions to the principles and disciplines so that government interventions in certain cases will continue to prevail on free circulation of goods, people, and capital.
So, in fact free while trade is about a diminution of tariffs and of technical obstacles encountered at the borders, it is also about facilitating the movement of business persons and giving some guarantees to investors from countries bound by the agreements that they will be treated in a way that will be non-discriminatory and fair.
The instruments that provide for that are multilateral, such as the World Trade Organization (WTO), plurilateral and regional such as the European Union, Mercosur or even NAFTA, or they are simply bilateral (e.g. the USA’s 20bilateral free-trade agreements and/or investment agreements with Israel, Australia, etc.). These instruments support a view of non-discrimination of treatment given to the private businesses from partner countries to the agreements. They thus provide a framework of rule of law, certainty and predictability to businesses when they are active in a country or territory with whom their national government has entered in a free trade agreement.
These provide a strong basis for increased prosperity, more competition and better choices and prices for consumers. Criticism of free trade must take into account that it is not the role of free trade agreements to provide for distribution of wealth that comes with the increased prosperity: it is indeed for governments to attend to this through training systems, social policies, fiscal and economic development policies and programs, and through the support of the private sector where necessary.
Should workers be adversely affected by increased competition, then government policies are the answer in coordination with the private sector. Should the trade deficit increase, then innovation is the answer and aggressiveness on new markets is the answer. And when investors attack public policies, adequate rights for all parties involved must be elaborated to protect the capacity of government to protect public health, safety, consumer rights, and the environment.
The Comprehensive Economic and Trade Agreement between the European Unions and Canada is precisely a modern, innovative and progressive model of agreements of this sort.As trade agreements become scapegoats for other issues such as the impacts of technology (digitized production and robotics), or the existing mobility of capital domestically when competitive advantages fail, it is important to remind ourselves that closing markets in trade wars by establishing or increasing tariffs can thwart prosperity, slow innovation, and increase prices for consumers.