Unscrambling the free trade omelette

The evidence that the FTA has failed is compelling and often comes from Canadian government data.

Last Wednesday saw fierce controversy in the labour movement asCanadian Labour Congress (CLC) president Ken Georgetti tried desperately toexplain media (read CanWest) claims that he nowsupported free trade. In an e-mail to CLC union heads Georgetti statedofficial CLC policy: “We continue to oppose NAFTA and other similar tradedeals.” But the speech reported on, and a CLC position paper on the economy,were much more ambiguous. Georgetti talked of a North American economy andhow, regarding NAFTA, it was hard to “unscramble an omelette.” The CLC paper said free trade had not been the “economic disaster” once predicted.

I guess it depends on your definition of disaster. Industrial jobs have, ofcourse, increased in the 15 years since the signing of the Canada-U.S.Free Trade Agreement (FTA). But there is no way of knowing how much morethey might have increased had we not signed. We do know that we lost,permanently, some 280,000 high-salaried manufacturing jobs because of freetrade. And the new jobs are lower-paying, and have fewer benefits attached.

The evidence that the FTA has failed is compelling and often comes fromCanadian government data. According to Industry Canada the increase in tradewith the U.S. had very little to do with the signing of the free trade deal.Their study determined that 91 per cent of the increase in trade in the 1990s wasdue to the cheap Canadian dollar and the sustained economic boom in the U.S.

Canadian workers paid a very high price for the nine per cent of the increaseattributed to the FTA. Federal and provincial governments imposed arelentless “structural adjustment” of the economy in order to create aso-called level playing field with the U.S. One of the policies was called“labour flexibility” a euphemism for driving down both the cost and thebargaining power of labour. It was a key part of finance minister PaulMartin's policy of enhancing trade competitiveness with the U.S.

Martin implemented draconian changes to unemployment insurance so that fewerthan 40 per cent of the insured now qualify, and he repealed the CanadaAssistance Plan, freeing the provinces to gut their welfare programs. Hisextreme low inflation policy deliberately kept unemployment at high levels( eight-nine per cent) for most of the 1990s. This crude strategy for driving downwages was so successful that Canada now has the dubious distinction ofhaving, after the U.S., the second highest percentage of low wage jobs of anycountry in the OECD.

All of this structural adjustment in the name of free trade wasunnecessary — trade would have increased anyway.

And did free trade and structural adjustment bring the promised flood of newforeign investment? Industry Canada says no. Over the whole period of freetrade over 95 per cent of foreign investment in Canada has been devoted to buying upCanadian companies — activity that more often means layoffs, not new jobs.Ironically, this structural adjustment of the country has been done for thebenefit of a surprisingly small part of the economy. Less than 25 per centof what we produce in goods and services is exported, yet we have severelycompromised the domestic economy in order to be trade-competitive with theU.S.

The impact on workers' families has been an unqualified disaster. A HealthCanada study revealed that in 1992, 38 per cent of the workforce was “highlystressed” but by 2002 that number was 55 per cent. One in four Canadianworkers is now working more than 50 hours a week and tens of thousands feelobliged by job insecurity to “voluntarily” work millions of hours of unpaidovertime every year. For the typical worker, “Family life is limited ornon-existent,” says the study. All of this is in addition to the effects of“harmonizing” our social programs downward towards U.S. standards.

Given the aggressive isolationism of the U.S., and the resulting negativeimpact on trade, all of organized labour should unite in a call for athorough reassessment of NAFTA and begin to talk about a call forabrogation — as CAW head Buzz Hargrove has suggested.

In the meantime, allprogressive voices need to demand from the federal government that it endthe policy vacuum regarding the domestic economy by ending “labourflexibility” policies, and promoting a high wage economy supported by robustsocial programs and a strong infrastructure. Only then will we begin toreverse the corrosive effects of free trade.

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