Walkom: Canada-EU trade deal would help Harper, but hurt Ontario
A new study predicts Ontario could lose up to 31,000 jobs if a Canada-Europe trade deal is inked.
The proposed Canada-European Union free trade agreement remains one of the most underreported stories in the media.
At one level, that’s odd given that the proposed pact — usually referred to as CETA — promises to be more far-reaching than Canada’s better known and far more controversial trade deals with the U.S. and Mexico.
At another, I suppose it’s understandable. Free trade was not the accepted orthodoxy when Canada negotiated its first deal with the U.S. back in 1984. But today, in both business and media circles, it is.
So it’s refreshing when someone bothers to ask the obvious but rarely answered question: Why exactly is Prime Minister Stephen Harper’s government so intent on doing this?
John Jacobs, a researcher with the leftish Canadian Centre for Policy Alternatives, is the latest to raise this question.
His just-released study estimating the effects of such a deal on Ontario is far from definitive. But it does address issues that the Harper government has simply tried to finesse — such as what this deal would do to jobs.
Jacob’s answer is that Ontario is doomed to suffer. By his calculations, the removal of tariffs on goods imported from Europe will cost the province between 13,000 and 31,000 jobs, particularly in manufacturing.
On the face of it, this makes sense since Ontario buys mainly manufactured goods from Europe and under free trade would buy more.
Conversely, most of the province’s exports to the EU consist of raw materials, which (with one significant exception) the Europeans are already admitting tariff-free.
We won’t see much of an effect on mining employment, for instance, because Europe already welcomes all the minerals Ontario is willing to sell.
The significant exception is agriculture. Jacobs estimates that this sector will gain about 900 more workers if the EU allows more Canadian foodstuffs into its highly protected market. But by his calculation, employment increases here won’t begin to compensate for the manufacturing jobs lost elsewhere.
As the Council of Canadians has pointed out, CETA also promises to go far beyond tariff reduction. The Europeans want to prevent provinces and municipalities from favouring local business.
If as expected they get their way, this would wipe out Ontario’s remaining bus and train manufacturing capacity — and play havoc with Premier Dalton McGuinty’s green-industry strategy.
As well, Europe’s demand for greater patent protection is sure to raise the price of drugs. One study cited by Jacobs calculates the annual extra cost to Ontarians at $1.2 billion.
Why then has Canada chosen to take this path? The federal government’s answers are not convincing.
Ottawa cites a 2008 study it helped finance, which calculates the usual gains to trade predicted by economic theory. But such gains won’t be massive. In this case, the federal study says, they would amount to less than one percentage point of Canada’s gross domestic product, or about $12 billion.
If, as the Harper government assumes, all of this extra money were used to hire Canadians, then the deal would create 80,000 new jobs nationwide — which would help, if not solve, the problems faced by the 1.4 million who are currently out of work.
But Canadians know from grim experience that in the real world businesses don’t always spend their extra profits on domestic job creation.
The North American Free Trade Agreement had a certain logic. Three neighbouring countries agreed to rationalize their production so that manufactured goods could cross borders easily.
What resulted was a system of integrated production in which components moved among Canada, the U.S. and Mexico.
A European trade deal, on the other hand, promises none of this. Parts and components won’t move back and forth across the Atlantic. Instead, we’ll lose even more good manufacturing jobs.
A completed Canada-Europe free trade deal will, however, ensure Harper’s place in the history books. Maybe that’s the point.