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NAFTA and free trade do not belong in the same sentence Dear friends and colleagues, Please find below a number of articles on free trade agreements with a bearing on North America, with two of the three items relating to Canada. In the first article, Dean Baker of the Center for Economic and Policy Research (CEPR) illustrates how the proponents of the North American Free Trade Agreement (NATA) have mistakenly identified the agreement as being synonymous with free trade. In three ways, says Baker, NAFTA goes against the aims of free trade by: obstructing the free movement of Mexican professionals into US and thereby preventing billions of dollars in potential saving by US consumers; raising the bar for patents and copyrights and thereby rendering an un-level playing field between US pharmaceutical companies against Mexican pharmaceuticals; and the accruing of ‘net gains’ to the few while workers on the whole get the short end of the deal (Item 1). In the second article, it is reported that a number of cities in Canada seek exemptions from the Canada-EU Comprehensive Economic and Trade Agreement over concerns that provisions in the agreement on government procurement would restrict their decision-making capabilities and hurt their local economies (Item 2). In the last article, it is reported that the Canada-Chile FTA is set to expand. While the original FTA covered trade in goods and services, it did not include provisions on financial services. The amended agreement now includes a financial services chapter that will give Canadian firms preferential access in such areas as the banking, insurance and asset management sub-sectors in Chile (Item 3). With best wishes, Third
World Network -------------------------------------------------------------------------------- Item 1 NAFTA and free trade do not belong in the same sentence http://www.businessinsider.com/nafta-and-free-trade-do-not-belong-in-the-same-sentence-2012-4 April 17 Dean Baker Megan MaCardle turned over her blog to Adam Ozimek to spread some misinformation about NAFTA and trade policy. Ozimek headlines the piece, "4 politically controversial issues where all economists agree." While I’m pretty comfortable with three of the four, the claim that all economists agree that, "the benefits of free trade and NAFTA far outweigh the costs" is highly misleading. First, NAFTA was not about free trade. First and foremost if was about reducing barriers that made U.S, companies reluctant to invest in Mexico. This meant prohibiting Mexico from expropriating factories and outlawing any restrictions on the repatriation of profits to the United States. The agreement did little to loosen the obstacles facing highly-educated professionals in Mexico, like doctors and lawyers, from working in the United States. If the agreement had freed up trade in this area, it could have led to gains to consumers in the tens of billions of dollars a year. In other areas, like patents and copyrights, NAFTA increased protection by extending the length and scope of these government granted monopolies. Mexico was forced to develop a U.S. type patent system for prescription drugs which led to considerably higher drug prices. It is easy to see why someone who might in general support free trade would oppose NAFTA. The winners are the businesses that are in a position to take advantage of access to cheap labor in Mexico. The losers are the manufacturing workers in the United States who will now have to accept lower wages or lose their job. It is entirely possible that an economist could agree that NAFTA did lead to net gains to the country as a whole, even if most people end up as losers (e.g. every worker loses $100 in wages, but Mitt Romney’s clique pocketed an additional $50 billion in profit). In this case, she might say the policy was bad in spite of the net gains. (Several of the economists questioned raised exactly this concern.) The higher costs imposed by higher prices for drugs and other products in Mexico could mean that a full assessment of costs would show Mexico to be a net loser from NAFTA. While tariffs are rarely more than 20-30 percent of a product’s price, patents can raise the price of a drug by several hundred or even several thousand percent. The cost to Mexico’s consumers in the form of higher drug prices can easily outstrip the small gains that showed up elsewhere. Of course this will lead to higher profits to U.S. drug companies. Given the predicted distribution of gains. it is entirely possible that a fully informed economist could believe that the losses from NAFTA to the poor and middle class easily swamp the gains to the rich and for that reason oppose the policy. This is not bad economics as the discussion seems to imply. Or, to put in terms that even an economist could understand, suppose there was a trade deal that completely opened up doctors, lawyers, and economists to international competition, but maintained the protection for everyone else, and hugely increased the protection for autoworkers. It is entirely possible that many economists would oppose this deal. They certainly would not call it a "free trade" agreement. There is one final point worth making about this exercise. The line "all economists agree" carries much less weight these days because almost the entire economics profession somehow failed to see the $8 trillion housing bubble, the collapse of which wrecked the economy. Tens of millions of people continue to suffer with the loss of their jobs, their homes, and/or their savings as a result of this incredible incompetence. In the wake of this momentous failure it is understandable that the public would be reluctant to take the advice of economists on economic policy. (Best question to ask an economist: when did you stop being wrong about the economy?) This is unfortunate, since economists really have learned some things from their studies that may not be apparent to everyone. However economists will have to earn back the public’s trust. As long as economists pay no price in their careers for even the most disastrous failures, this may prove difficult. After all, if there are no consequences to getting things wrong, why would the public believe that economists will get things right? That is a point on which all economists should agree. - Dean Baker is the co-director of the Center for Economic and Policy Research -------------------------------------------------------------------------------- Item 2 Cities seek exemptions from EU-Canada trade deal Postmedia News April 17, 2012 http://www.canada.com/business/Cities+seek+exemptions+from+Canada+trade+deal/6470516/story.html Cities seek exemptions from EU-Canada trade deal As Canada and the European Union negotiate final details on a free-trade deal expected to be completed this year, dozens of communities across the country are voicing major concerns or seeking exemptions from the pact. The Conservative government, however, says the provinces support it and the Federation of Canadian Municipalities recognizes the deal would produce economic benefits across Canada. Yet, dozens of cities and towns - including major centres such as Toronto, Mississauga and Hamilton in Ontario - have passed motions highlighting their concerns with the Canada-EU Comprehensive Economic and Trade Agreement, with many asking for permanent exemptions. Most of the communities are worried that provisions in the agreement on government procurement will restrict their decision-making capabilities and hurt their local economies. They want more details from the federal government and argue the trade deal could limit their abilities to adopt ’buy local’ procurement policies, create jobs and enforce some environmental standards. "There’s some uneasiness that rests with some of them," Berry Vrbanovic, president of the Federation of Canadian Municipalities, said Monday. "Some of the motions are really becoming an expression of urgency from their point of view, in terms of what’s being expected by local governments." On the West Coast, the Union of British Columbia Municipalities has passed motions asking that local governments be exempted from CETA on government procurement, and also called on the provincial government to remove water services from any commitments. "It’s still not filtering into the public awareness that these resolutions are happening," said Stuart Trew, trade campaigner with the Council of Canadians, a citizens group that has been fighting the agreement. "It will be difficult for the provinces to sell this agreement if they have ignored the will of important cities like Toronto and Hamilton." Federal officials say the agreement will either immediately eliminate all trade tariffs or phase them out over time, ultimately lowering the prices of goods and services for consumers, while also creating new and better jobs for Canadians. -------------------------------------------------------------------------------- Item 3 Canada, Chile expand FTA http://www.tax-news.com/news/Canada_Chile_Expand_FTA____55029.htmlTax News | 18 April 2012 Mike Godfrey, Tax-news.com, Washington Canada and Chile have signed a modernized and expanded free trade agreement (FTA), designed to deepen commercial ties between the two countries. The new agreement was inked during a visit of Canadian Prime Minister Stephen Harper to Chile. The original FTA came into force in 1997, and bilateral merchandise trade has more than tripled since then, reaching more than CAD2.7bn (USD2.7bn) last year. Canada has also been the largest source of new direct investment in Chile over the last decade. The original FTA covered trade in goods and services, but did not include provisions on financial services. The amended agreement now includes a financial services chapter. This will ensure that Canadian financial institutions enjoy preferential access to the Chilean market and can compete on a level playing field in relation to their competitors. According to the Canadian government, the changes will help institutions develop new markets in the banking, insurance and asset management sub-sectors in Chile. Commenting on the signing, Harper said: “The Canada-Chile Free Trade Agreement has been the cornerstone of our commercial relationship with Chile for the past 15 years. The enhancements announced today will generate further economic growth and job creation in Canada by increasing commercial opportunities for our businesses.”
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