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Richmans' Trade and Taxes Blog
Trade pacifism killing Canada's Economy, not just the U.S. economy
Howard Richman, 10/3/2010
On September 23, Jim Stanford in the Canadian Globe and Mail (The New Protectionism is Shutting us Out) the current status of world mercantilism. He regrets Canada's trade pacifism, just as we regret America's trade pacifism. He writes:
Where does Canada fit into this game? As usual, we don our Boy Scout’s uniform and pledge to play fair. While China, Japan and others actively manage their currencies, we allow ours to soar unfettered. As Germany and Korea subsidize and direct technological advances, we eschew “picking winners” and leave it up to business. As countries everywhere leverage government spending into domestic jobs, we pursue trade agreements that would undermine our already-weak domestic-sourcing policies.
Our passivity in the face of others’ pro-activity has taken us from trade feast to famine. A $55-billion trade surplus in 2004 melted away to a $27-billion deficit last year, knocking a whopping 6 percentage points off Canadian GDP. By that standard, we’ve registered by far the worst trade performance of any OECD country. As deteriorating trade undermines domestic growth and employment, Ottawa’s only response is to chase more free trade pacts – whether with Panama (economically irrelevant) or Korea and the European Union (potentially explosive).
He also points out, just as we have, that John Maynard Keynes proposed a world system built upon balanced trade, writing:
John Maynard Keynes was ahead of his time in recognizing the dangers of trade imbalances for worldwide demand. After the Second World War, he lobbied for a new global payments system, forcing both surplus and deficit countries to address chronic trade imbalances and share the burden of adjustment. He was overruled by free-marketeers who accepted the logic of dog-eat-dog global competition. And it’s that logic, regardless of politicians’ lip service, that’s deepening the global malaise.
Perhaps he has been reading our writing. Perhaps he has independently reached the same conclusions that we have.