July 4, 1999
This July 1, I felt particularly unenthusiastic toward Canada’s birthday. The reason is simple—each year there is less of Canada to celebrate. The conservative democracy the Fathers of Confederation established in 1867 is unrecognizable, yet ostensibly this is what we commemorate.
The best way to describe Canada is to compare it to a Hollywood movie lot. From a distance and from the right angle all is peaceful and prosperous, just like our leaders tell us. Some people are content with this belief and care to look no further. Those who prefer to make up their own minds will want a closer look, perhaps even a peek inside.
As soon as this happens, the official “Pleasantville illusion” is exploded, and the prosperity is shown to be a series of façades. You’d think that pointing this out would be good thing, but uncomfortable truths have a way of getting little or no respect, especially from those who need to hear them the most.
One of the most pervasive of these façades is the absolute, religious virtue of free trade, brought to you by the McDonald Commission, the Fraser Institute and other apologists for economic determinism. By putting their own spin on the Orwellian equation “Slavery is Freedom” these voices of reason tell us that free trade will benefit us by reducing the cost of doing business and providing more jobs for Canadians. In other words, what’s good for corporate America is good for US—er, I mean “us.”
In a June 26 column, the Globe and Mail’s John Barber deftly knocked down this façade: “Every day, it seems, another long-established Canadian firm or tasty startup disappears down the gullet of the insatiable U.S. economy. Wild growth there and a cheap dollar here have turned the banquet into a binge… For surely Canada in the eyes of an economic nationalist is a lost cause.”
The tragedy is that corporate Canada cares less about political Canada. Profits are all that matter, so whether a Canadian company sets up shop in America or anywhere else is of little importance. Money knows no nationality, yet nationality of economy does matter.
Canada regularly shows a monthly trade surplus, but this is more than offset by the southern flow of profits and dividends to the American parent companies. Though some degree of foreign ownership is certainly tolerable, Canada is dominated by the United States to the point that the idea of a “Canadian economy” is an oxymoron. To borrow a French-Canadian expression, Canadians are not masters in their own house.
Given this economic reality, any Canadian advocating free trade with the U.S. would have to be either stupid or treasonous. There was no incentive for the U.S., since it already had pretty much unfettered access to Canada, and for its part, Canada had little else of economic value to offer. As professor Duncan Cameron has noted, 85 percent of Canada–U.S. trade was tariff-free, and 95 per cent carried tariffs of less than five per cent.
There had to be another reason—politics. The U.S. Congress was becoming more protectionist, so the Mulroney Conservatives thought they’d do an end run by entrenching free trade. It took a lot of wheedling, cajoling and pestering, but the U.S. agreed, and on Jan. 2, 1988, the agreement was signed. (It took effect the following Jan. 1).
For the sake of five per cent of cross-border trade and a possibly quiescent Congress, Canada surrendered the right to regulate its own industries, set national environmental standards and promote a domestic economy. At least the beans Jack got were magic.
What happened in the intervening 10 years could have been predicted. Canada still finds itself fighting a protectionist and grasping U.S., but now has nothing left to bargain away, except the flag and national anthem, and that is only a matter of time.
To take one instance of U.S. bullying, Canada had banned the importation of the gasoline additive MMT for environmental reasons, but after MMT’s U.S. maker, Ethyl Corp., threatened a legal challenge under the North American Free Trade Agreement, Canada ignominiously reversed itself rather than wage a costly legal battle, and paid Ethyl Corp. $20 million in compensation. Under free trade, U.S. companies now wield more control over national policy than Parliament does.
The most egregious example of the façade of free trade is the prolonged harassment of Canada’s (read: B.C.’s) softwood lumber industry. At least since the mid-’80s the U.S. has lodged complaint after complaint over Canada’s stumpage rate policy. It doesn’t matter that the U.S. kept losing. Even though U.S. mills are less efficient and cannot meet local demand, political gamesmanship comes first. Wasn’t free trade supposed to do away with this?
In the latest wrinkle, the U.S. has had certain value-added Canadian wood products reclassified as lumber so that they will be restricted by quota. To make sure it got its way, U.S. Customs withheld a document that showed its case to be unsound.
Free trade may have increased cross-border commerce, but Canada is worse off, especially Western Canada. The conspicuous commemoration of a decade of free trade last month was as ironic as it was nauseating. It served only to help the likes of Conrad Black to burnish Brian Mulroney’s irreparable reputation and to celebrate the façade of mutual economic prosperity.
The tragedy is that free trade was our idea. Our leaders sold us out in the name of the public good. Now, certain addle-pated business-types are babbling about a common currency. First, though we have to convince the U.S. to go along.
At this rate, July 1 won’t mean anything at all.