"Deep pockets, indeed!"

by David Orchard

David Orchard responds to the Globe and Mail editorial, "Uncle Sam what deep pockets you have," February 24, 1997. (The full text of this editorial follows below. David Orchard's response was published as a severely edited letter to the editor.)

The Globe and Mail editorial praising the 1989 Canada-US free trade agreement ("Uncle Sam What Deep Pockets You Have," February 24, 1997) rests its argument on one pillar -- a faulty one -- i.e. Canada's increased exports. Canadian exports are high because of a low dollar, and because the U.S. economy is expanding faster than Canada's, not because of the FTA. The average tariff on all our exports to the U.S. prior to the FTA was 1% and falling. Hardly a barrier to trade.

In the first three years of the FTA, Canada lost 25% of its manufacturing jobs. The industrial heartland collapsed; commercial real estate values in Toronto plummeted by two-thirds.

In the six years before the FTA the Canadian GDP grew by $260 billion; in the six years after, by $106 billion -- less than half the previous rate of growth. In 1988 it grew by $54 billion; in 1991 by $5 billion -- one-tenth as much ­ the direct result of the free trade induced recession. Prior to 1989, Canada's unemployment rate was roughly that of the U.S. and sometimes lower.

Today, eight years into the Agreement, 58.5% of Canadian adults are employed; our official unemployment rate is twice that of the U.S. Beggars inhabit Toronto streets. Instead of recognizing the FTA as the cause of reduced revenue, governments of every stripe are cutting, slashing, downsizing and offloading.

Had Canada continued growing at the rate it had in the half decade prior to the FTA the budget deficit would have disappeared three years ago -- without cutting expenditures. And unemployment would be under 3%.

Instead, the entire national infrastructure is under siege. U.S. ownership is at an all-time high. Americanization is affecting all aspects of Canadian society. U.S. grain companies threaten the Canadian Wheat Board. Walmart knocks Eaton's into bankruptcy court. Canadian Pacific put the American flag on its logo and sold its Sherbrooke-Saint John line to a U.S. company. Promotional rights to the RCMP were sold to Disney Corporation. Canada even issued a stamp bearing the Disney name and logo. "The national dream is dead," announced Transportation Minister Doug Young as Canadian National Rail was sold -- for half its value. 70% of CN's shares are now U.S.-owned. 14,000 jobs cut, northern Manitoba's rail lines and the Port of Churchill sold to a Denver company. Conferences on NAFTA's next steps call for a common North American currency.

NAFTA allows U.S. companies to strip our resources and take over our industries -- which they are doing at a record pace. Exports of precious non-renewable resources are rising, while Alberta has only ten years of drillable oil left in the ground. Selling raw materials means selling jobs and our future. Meanwhile, thousands leave -- to the U.S., Europe and Asia -- or stay, battling unemployment and underemployment. Bankruptcies continue to break records.

Glowing NAFTA promises to Mexico have proven equally false; since NAFTA took effect, that country's unemployment rate has doubled, prices have increased by over 100% and the peso has lost over half its value.

The Globe attacks opponents of the FTA as "interest groups" -- as if the big business lobby which financed and rammed through the agreement was not an interest group and the biggest one of all.

We opposed the FTA in 1989, and continue to do so, for the same reason John A. MacDonald did in the 1891 free trade election which cost him his life. Free trade with the U.S., MacDonald said, was "sheer insanity" which would have "as its inevitable result, annexation with the United States."

This does not have to be. Norway voted to stay out of the European Union (EU); its economy has since performed at twice the EU rate; its unemployment rate is less than half. There is no talk of downsizing and cutbacks. Stat Oil, government-owned (as Petro-Canada was), contributes substantially to the national budget.

Switzerland also stayed out of the EU, seeing it as a threat to its standard of living and independence. Its unemployment rate is less than half of Canada's.

Japan, with a fraction of Canada's resources, has built itself into a rival of the U.S. Foreigners cannot take over its key industries. Its unemployment rate is 3% (and considered high).

In 1960, South Korea's per capita income was $110. By following Japan's lead and rejecting the "free trade" model, Korea has built itself into a major economy with a per capita income over $12,000.

For Canada the key issue of free trade with the U.S. is always sovereignty, as it was when Canadians rejected it in 1891 and 1911. Locked into it Canada becomes a satellite. For this reason Canada must do what John Turner prescribed in 1988. We must get out, and can do so quite simply. Article 2205 of NAFTA (FTA Article 2106) states that each country can, at any time, give the others six months' notice to withdraw, without penalty, from the Agreement.

Canada must trigger this clause to regain its sovereignty, control over its resources and to develop its potential as a nation.

David Orchard is the author of The Fight for Canada - Four Centuries of Resistance to American Expansionism and was runner-up to Joe Clark in the 1998 federal Progressive Conservative leadership contest. He farms in Borden, SK and can be reached at tel (306) 664-8443 or by e-mail at davidorchard@sasktel.net

The Globe and Mail, February 24, 1997, editorial:

"Uncle Sam, what deep pockets you have"

Remember the free-trade agreement of 1989, whose opponents forecast that fragile little Canada would be swept away by the brutal, dog-eat-dog forces of continental capitalism? Some fragility; some dog.

Since 1991, Canada's exports have increased by 90%, and they have more than doubled to the fearsome United States. Our imports, meanwhile, have grown by only 71%, creating the biggest trade surplus in Canadian history last year: $34.1 billion on exports of $267.1 billion. Canadian employment in export-oriented industries grew from a base of 1.00 to only 1.05. Among the leading export-growth categories were telecommunications equipment, special equipment and aircraft, along with the staples of automotive products and natural resources.

Exports have been the prime source of Canada's economic growth in the 1990s, while the domestic economy has lagged under the weight of unavoidable deficit reduction, regrettably high taxes and occasional lapses into general price deflation.

The benefits of free trade apply as well to our imports, whose value is increasing as the comparative advantage of some foreign producers becomes apparent and Canadian border tariffs fall. Federal customs import duties will decline from $3.6 billion in 1994 to a forecast $1.9 billion in 1996 -- the only category of federal taxation that is falling in the 1990s.

The only area where Canadian exports flagged in 1996 were to the stagnant economies of the European Union and Japan, which have yet to work themselves out of financial and regulatory blockages. Nevertheless, our overall trade surplus is big enough to almost balance our current account, including interest payments, tourism and dividends -- a turnaround of $28.8 billion in four years.

Yes, there were adjustments costs. Some Canadian producers fell to foreign competition, and some Canadians lost their jobs. But the net gain was enormous in a very short period of time as we adjusted to larger markets. The interest of the many was well served at the expense of the few -- and many of the few will benefit in the longer term. Certainly their children will.

The success if freer trade is predicted by liberal economic theory. The threat to its benefits comes not from the theory or practice, but from the political power of interest groups that stand to lose in the short run because of change. Our political system and leaders need to prevail over interest groups in such circumstances if the broader public is to be served. Parallels exist in many fields that dominated economic debate in the 1980s:

• There was bitter opposition to foreign direct investment in Canada, which has now reached record levels at substantial benefit to employment.
  
• There was fervent opposition to privatizing the airlines, railways and aircraft-manufacturing companies, all of which are now operating at much higher levels of efficiency and lower public costs.
  
• There was shrill opposition to battling inflation, whose credible defeat is now reducing real interest rates for the first time in decades.
  
• There was dogged opposition to reforming unemployment insurance and tightening up welfare programs, the results of which will reduce both unemployment and welfare rolls.
  
• And, of course, there was relentless opposition to deficit reduction, whose benefits will soon allow our governments to cut taxes even as they find some money for new program spending.

Sound economic principles, reasonably long time horizons and strong political will supported by a well-informed electorate will deliver blue-chip dividends to Canada. The 1989 free-trade agreement with the United States is a talisman in this emerging story of measurable national progress.

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