To hear some people tell it, you would think freer trade with the EU is something to worry about. “Because Europe is so much bigger a market than we are ... if we don’t hit the ground running and we don’t learn as a nation to quickly take advantage of this deal, they could quickly overtake us,” said Joy Nott, president of the Canadian Importers and Exporters Association, in last weekend’s Globe and Mail.
Yet trade is a positive sum game. Two parties will voluntarily engage in trade because they both believe it will make them better off—and they are both generally correct. You trade your labour for money, and both you and your employer benefit. You trade your money for various goods and services, and both you and the sellers are usually happy with the exchange. If you end up regretting a particular trade, you alter your future behaviour accordingly, but by and large, we trade with others because doing so improves our lot.
Our representatives in government, however, often set up barriers that restrict our ability to trade with other people, especially if those people live in other countries. To take just one Canadian example, tariffs and supply management in this country make it more difficult to enjoy what a Dutch friend assures me are a wide variety of delicious European dairy products. These trade barriers are explicitly meant to protect the local dairy industry from competition, allowing it to retain a large part of the domestic market without the bother of having to innovate or be efficient.
Those involved in industries that have been sheltered from competition, like the dairy industry, are literally the only people who have anything to fear from freer trade. But note that their current success is not based on anything real, and comes only at the expense of everyone else in the country. We all pay higher prices and have a narrower selection of dairy products to choose from than we should. With freer trade, some dairy producers would become more innovative and efficient, while others would surely go out of business. This would be temporarily painful for the people involved, but it would free them up to do other, more productive work. It would be the right thing to do even if the Canadian government were not promising to ease the pain of transition.
Okay, the civil servants who run the supply management programs also have something to fear from freer trade. They too should find something more productive to do.
But the idea that “we” need to be afraid of being “overtaken” by the much bigger European market could not be more mistaken. If some Canadian industries shrink as a result of freer trade with the EU, others will grow, and “we” will end up with a better allocation of capital and labour, one that more truly reflects “our” comparative advantages.
Even more fundamentally, though, countries do not trade with one another; people do. Tearing down the artificial barriers that keep me from buying Dutch cheese and butter, and that keep some guy in the Netherlands from buying Canadian pork and beef, will only make us all better off in the long run.
Our representatives in government, however, often set up barriers that restrict our ability to trade with other people, especially if those people live in other countries. To take just one Canadian example, tariffs and supply management in this country make it more difficult to enjoy what a Dutch friend assures me are a wide variety of delicious European dairy products. These trade barriers are explicitly meant to protect the local dairy industry from competition, allowing it to retain a large part of the domestic market without the bother of having to innovate or be efficient.
Those involved in industries that have been sheltered from competition, like the dairy industry, are literally the only people who have anything to fear from freer trade. But note that their current success is not based on anything real, and comes only at the expense of everyone else in the country. We all pay higher prices and have a narrower selection of dairy products to choose from than we should. With freer trade, some dairy producers would become more innovative and efficient, while others would surely go out of business. This would be temporarily painful for the people involved, but it would free them up to do other, more productive work. It would be the right thing to do even if the Canadian government were not promising to ease the pain of transition.
Okay, the civil servants who run the supply management programs also have something to fear from freer trade. They too should find something more productive to do.
But the idea that “we” need to be afraid of being “overtaken” by the much bigger European market could not be more mistaken. If some Canadian industries shrink as a result of freer trade with the EU, others will grow, and “we” will end up with a better allocation of capital and labour, one that more truly reflects “our” comparative advantages.
Even more fundamentally, though, countries do not trade with one another; people do. Tearing down the artificial barriers that keep me from buying Dutch cheese and butter, and that keep some guy in the Netherlands from buying Canadian pork and beef, will only make us all better off in the long run.
