New CAW Film About the Economics of CETA
The CAW has just released a 20-minute video featuring none other than yours truly giving a short lecture about the economics of the proposed Canada-EU free trade agreement (a.k.a. CETA).
This link takes you to the film, which can be downloaded for free and shown at information meetings or any other organizing events.
The lecture basically covers the same terrain as my study last October published by the CCPA, which considered the likely economic and employment effects of the proposed deal, without the benefit of the usual CGE modeling assumptions that the Walrasian hired guns used in their report for the EU and Canadian governments.
The simple math confirms that the Canada-EU trade deficit (already honking big, both in dollars and in terms of the qualitative mismatch: as usual, Canada exports mostly resources and imports mostly sophisticated high-tech value-added products) will get much bigger under free trade. This is pre-determined given that our imports from Europe are already almost $20 billion larger than our exports, along with the fact that our average bilateral tariff is more than half-again larger than Europe’s (hence tariff elimination can only spur their exports more than ours). The government study confirms that the bilateral trade deficit will widen. Yet with the usual Walrasian alchemy they turn that water into the wine of higher GDP, thanks to assumptions like balanced aggregate trade, full employment, uniform factor pricing, and the infamous “representative household.”
This video attempts to dissect the Walrasian assumptions in layperson’s terms, and provide some more grounded counter-arguments to assist our grass-roots campaigners in the coming battle to stop the deal. It is illustrated with entertaining animations from the wonderful Mike Constable. Special thanks also to Angelo diCaro from the CAW Communications department who conceived, planned, and produced the whole thing, and Bill Moffat and his team at Avard video for the filming and editing.
Canadians should realize that this Country, thanks to a rather Corporate-minded Federal Government, is reverting to its 19th Century colonial status, with its peoples being “haulers of water and cutters of wood”.
Unfortunate as it may be, it is typical of colonial entities to export raw products and import finished products.
This tragedy is made possible by a treasonous government coupled with a deep public apathy that reflects the lack of ownership that people feel in what is supposed to be their Country.
Frankly, I support Mr. Stanford’s desire to create a dialogue on these models and questioning of its assumptions. At the same time, there are some serious flaws with his counter-argument.
1. On the biased nature of an EU funded study. Should we realistically believe that a study funded by the CAW and by their own economist is unbiased?
2. On the resource portfolio of Canadian exports. First, it is not factual to say that all of these resources are not value added. Raw materials pulled from the ground are often very high valued added. Second, the tariff on these products into the EU are already low or at zero and it is unlikely that the CETA would lead to a further shift towards resource exports from Canada to the EU.
3. On Mr. Standford’s model. His paper, while presenting relevant critiques of a CGE model, presents a muddied, unexplained model that is neither transparent nor methodologically sound. Mr. Standford’s model not only takes an antiquated approach to trade relationships (focusing only on tariffs), he completely omits any assessment of the services sector. Because bilateral tariffs are already low (most tariffs are on sensitive agricultural products), non-tariff barriers on trade in goods would likely have a far greater impact on trade. Most barriers, however, are in services and investment and it is really here where the agreement will likely have the largest impact. By omitting NTBs, services and investment from his ‘model’ he has purposefully framed the analysis in a way where its outcome can only be negative. And it is here that it becomes clear that this study is designed for the purpose of lobbying by the auto industry which for some reason is diametrically opposed to this agreement.
Further to the discussion of services, Mr. Standford again fails to excerise understanding of the real world and the way services are traded. He claims that services are not traded extensively between the two sides, but he does not grasp the multi-modal method of trade in services, focusing exclusively on mode 1 (cross-border) trade in services. In fact, trade through establishment (mode 3) is a major component of EU-Canada economic relations and are good for Canadian employment. Allowing a Canadian firm greater access to architecture, engineering, etc. is good for Canadians. Having an EU firm invest in setting up an office in Canada will lead to greater FDI (good) and will lead to local hires (also good).
That Mr. Standford fails to even address these discredits his model and his counter-argument, which is a shame because he does raise many valid concerns over the CGE methodology and the blanket acceptance of the Joint Study’s findings.