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  • 2019 Federal Budget Analysis February 27, 2019
    Watch this space for response and analysis of the federal budget from CCPA staff and our Alternative Federal Budget partners. More information will be added as it is available. Commentary and Analysis  Aim high, spend low: Federal budget 2019 by David MacDonald (CCPA) Budget 2019 fiddles while climate crisis looms by Hadrian Mertins-Kirkwood (CCPA) Organizational Responses Canadian Centre for Policy […]
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  • CCPA-BC welcomes Emira Mears as new Associate Director February 11, 2019
    This week the Canadian Centre for Policy Alternatives – BC Office is pleased to welcome Emira Mears to our staff team as our newly appointed Associate Director. Emira is an accomplished communications professional, digital strategist and entrepreneur. Through her former company Raised Eyebrow, she has had the opportunity to work with many organizations in the […]
    Canadian Centre for Policy Alternatives
  • Study explores media coverage of pipeline controversies December 14, 2018
    Supporters of fossil fuel infrastructure projects position themselves as friends of working people, framing climate action as antithetical to the more immediately pressing need to protect oil and gas workers’ livelihoods. And as the latest report from the CCPA-BC and Corporate Mapping Project confirms, this framing has become dominant across the media landscape. Focusing on pipeline […]
    Canadian Centre for Policy Alternatives
  • Study highlights ‘uncomfortable truth’ about racism in the job market December 12, 2018
    "Racialized workers in Ontario are significantly more likely to be concentrated in low-wage jobs and face persistent unemployment and earnings gaps compared to white employees — pointing to the “uncomfortable truth” about racism in the job market, according to a new study." Read the Toronto Star's coverage of our updated colour-coded labour market report, released […]
    Canadian Centre for Policy Alternatives
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The Progressive Economics Forum

Trading on Thin Ice

It is amazing to see the charged responses to the idea of a made-in-Canada policy for procurement related to infrastructure stimulus spending. Perhaps it is just that all economists are supposed to accept free trade as the One True Policy. But what I am seeing are largely moral arguments for free trade in the abstract rather than an examination of a particular policy proposal in light of current events. So let’s put aside our inner Ricardos and drop the knee-jerk defense of free trade.

In James Galbraith’s new book, The Predator State, one interesting point he makes is around Adam Smith’s “invisible hand”, now widely taken as THE metaphor of free markets and trade. The full quotation, however is actually a guide against free trade between England and France:

“By preferring the support of domestic to that of foreign industry [every individual] intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention…. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.” [I grabbed this quote here]

The reality of the development of advanced countries is that all of them have used some forms of active industrial policies, including preferential procurement; none has gotten rich by blithely pursuing free trade (one exception might be Hong Kong but it has some unique circumstances). Even economic theory suggests that free trade is not always a win-win for everyone, all the time (Krugman’s Nobel prize speaks directly to these sort of dynamics).

Don’t get me wrong. I generally support open trade and there are many large industrial sectors where the economies of scale are such that trade is a necessity for an efficient level of production. But there are democratic limits, too. Countries need to be able to carve out certain sectors from trade (most public services), regulate consistent with their own circumstances (environmental protection, labour standards, etc) and engage in industrial policies. The latter is even more important given the trend for Canada to revert back to its traditional role of resource exporter to the rest of the world, most of whom are more pragmatic and have developed strategies to take leading positions in high value added industries.

The only valid argument in all this is that protectionist measures beget protectionist measures and thus set of a cascading trade barriers. But let’s keep perspective on what is being proposed and its total magnitude. Furthermore, what is being proposed is legal under existing trade rules.

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