It has become accepted economic wisdom in Ottawa, spoken with great certainty by government officials, that the signing of numerous free trade deals is the best avenue to ensure we continue to enjoy prosperity in Canada. On that continuing initiative, the Senate recently passed the Canada Panama Free Trade Agreement, the latest in a series of such agreements that the Harper Government has signed with minor trading partners.
But is the accepted wisdom wrong?
No one disputes the importance of trade to Canada’s prosperity: one in five jobs and almost a third of our GDP is dependent upon exports. What is open to debate, however, is the impact of free trade agreements with minor trading partners, and a simple look at the most recent statistics is eye opening as to whether or not these deals are having a positive impact on our economy.
Canada is currently involved in trade deal negotiations with 67 countries. Conventional wisdom suggests that these agreements would lead to increased exports. However, a careful review of the statistics available from Industry Canada for the countries with which Canada has signed trade agreements with in the past shows that is not always the case.
For example, in 1996, the year before our free trade agreement with Israel, we had a trade deficit of just under $27 million. In 2011, our trade deficit with Israel had grown to over $580 million. Our trade with Chile went from a surplus of $73 million in 1996 to a deficit of $1 Billion in 2011. It goes on: the year free trade with Costa Rica began in 2003, our trade deficit was almost $226 million. In 2011, it was over $315 million. In the two years since we entered into free trade with Peru, our trade deficit went from under $2.5 billion dollars to almost $3.9 billion.
Statistics show that since 2006, the Harper government has presided over a 7 ½ percent decline in the value of goods and services exported to other countries, while our trade deficit increased from $37.8 billion in 2006 to $143.8 billion in 2011. More recently, a January 2013 report from Statistics Canada put Canada’s trade deficit at $2 billion for November 2012; almost four times what it was the previous month, $552 million. The numbers speak for themselves.
The downside of this, as discussed in a June 2012 report by the Organization for Economic Cooperation and Development, is a decline in the manufacturing sector, which for years has provided stable employment for Canadians. Why have Canadian businesses – and Canadians in general – not benefited more from these trade agreements?
Put simply, if exports are vital to our economy, and exports are declining, then this country is facing some major problems. My concern is that this government is placing undue emphasis on free trade agreements with minor trading partners at a time when the attention and resources of our national government should be directed toward our priority markets. As the figures show, these problems are not necessarily solved with free trade agreements, and certainly not with countries the size of Panama, Canada’s 75th most important trading partner.
Indeed, in testimony before the Senate Standing Committee on Foreign Affairs and International Trade, a representative of the Department of Foreign Affairs and International Trade admitted that the Government did not even perform a detailed cost benefit analysis of the impact of the free trade agreement because Canada-Panama trade is so minor that it would make such an exercise pointless.
Trade negotiations with our major trading partners – current and future – should take priority over a worldwide quest for free trade agreements for their own sake. As former Prime Minister Brian Mulroney stated in his speech at the Free Trade @ 25 Tribute Dinner in Toronto on October 3, 2012:
“From government, we need a sharper focus on which markets should command priority for trade negotiations and why.”
Percy Downe is a Senator from Charlottetown and Vice-Chair of the Senate Standing Committee on Foreign Affairs and International Trade.