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The Progressive Economics Forum

Ivison’s Non Sequiturs on Internal Trade

The Council of Canadians organized a set of news conferences across Canada on March 31, the day before TILMA came into force for local governments in Alberta and BC. I was one of four speakers at the Toronto event.

There are obviously larger and more important economic issues facing Canada today than interprovincial “free trade” deals. However, the free-market approach that these deals aim to enforce contradicts the need for government intervention to address the bigger economic issues.

To the extent that there has been any public debate on TILMA, we won it. Now, federal and provincial governments are implementing some of TILMA’s objectionable features under the radar screen by amending the existing Agreement on Internal Trade and by negotiating new bilateral deals. Kudos to the Council of Canadians for trying to stop the losers of the TILMA debate from instituting this agenda by stealth.

Aside from some regional coverage, the only national press we garnered was a rather obnoxious John Ivison column. He (incorrectly) claims that Steven Shrybman “doesn’t provide examples” of how a TILMA-style enforcement mechanism could threaten government services and public-interest regulation.

So what examples does Ivison provide of “internal barriers” that TILMA is supposedly needed to address?

Consumers are hardly aware of its malign influence but they encounter it daily – from the Ontario tippler who fancies a bottle of B. C. merlot but can’t find it in the provincially owned store that gives preference to local wines; to the cheese lover who will have to pay more since the dairy industry successfully drove through an amendment to the Food and Drug Act (sic) that requires all producers to use more fluid milk.

The Food and Drugs Act is a federal law. It is not a provincial attempt to disrupt trade and cannot be altered by interprovincial deals.

On wine, there is obviously some conflict between the LCBO’s mandate to provide a reasonably wide range of booze to Ontario drinkers and its mandate to support Ontario’s wine industry. BC wine may get caught in the crossfire.

Perhaps provinces with public liquor stores should agree to promote all Canadian wines rather than emphasizing their own provincial wines. But such an arrangement would hardly require a sweeping regime like TILMA.

Ivison goes on to argue, “The greatest impact of TILMA will be felt in the area of labour mobility.” Given that there are almost no examples of interprovincial trade barriers, I tend to agree that labour mobility is a more relevant issue. The question is whether TILMA’s approach would improve or worsen matters.

Ivison repeats Robert Knox’s claim that, because TILMA does not explicitly mandate lower standards, it would not have the effect of lowering standards. In response, I wrote the following letter to the editor:

Re: Beware Of Medieval Economics, John Ivison, April 1.

John Ivison argues that the Trade, Investment and Labour Mobility Agreement (TILMA) between British Columbia and Alberta will “ensure that people deemed to be qualified in one jurisdiction are qualified in both.” He dismisses concerns that this approach will weaken provincial standards: “Nowhere in TILMA does it say that the lowest standards have to be adopted – it’s up to the provinces to agree on a common standard.”

Of course, federal and provincial governments should negotiate common standards where it is practical to do so. In most skilled trades and regulated professions, common standards already exist and TILMA’s legalistic approach is unnecessary.

TILMA and recent amendments to the Agreement on Internal Trade affect occupational certification only in areas where governments cannot agree on a common standard, or when particular provinces choose to train workers to a lower standard. In such cases, governments must now accept certification from all other provinces, including those with lower standards.

The lowest standard in any province becomes the minimum standard accepted by every province. This system clearly prevents governments from enforcing higher standards, even if it does not require them to formally adopt lower standards.

Erin Weir, Economist, United Steelworkers, Toronto

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Comments

Comment from Stephen Gordon
Time: April 5, 2009, 3:28 pm

Could you explain how opposing TILMA reduces poverty and inequality?

I can see how opposing TILMA advances the interests of those who have political connections and the media access. But historically, those who have political connections and media access use it to advance their own interests, and not to advance those of the marginalised elements of society.

Comment from Travis Fast
Time: April 5, 2009, 6:58 pm

“But historically, those who have political connections and media access use it to advance their own interests, and not to advance those of the marginalised elements of society.”

Like vanilla economists?

Comment from Erin Weir
Time: April 5, 2009, 7:56 pm

Stephen, if one aspires to use provincial or local policy to reduce poverty and inequality, then one should oppose regimes that empower private investors to directly challenge such policy and hence have a chilling effect upon it.

Do you believe that TILMA reduces poverty or inequality?

Comment from Stephen Gordon
Time: April 6, 2009, 2:43 pm

Yes.

Because this is the old, old game of rent-seeking where the only winners are the well-connected. I challenge you to name a single anti-poverty measure that TILMA might outlaw.

In the standard offshoring/outsourcing game, soi-disant progressives lament the losses of rich-country workers and – for some unfathomable reason- ignore the gains made by poor-country workers. At the crudest, realpolitik level, this can be a winning strategy, because poor-country workers don’t vote in rich-country elections.

But even that bizarro-world analysis doesn’t make sense in the context of TILMA. Are you really willing to claim that low-wage Canadian workers are your enemy? If not, then just what is your objection to TILMA-type initiatives?

Comment from Erin Weir
Time: April 6, 2009, 3:59 pm

Shrybman’s paper argues that TILMA could be used to challenge medicare, which I think must be considered an anti-poverty measure in terms of its distributional effect.

Provincial governments currently maintain different standards for social workers. Some require university degrees while others do not. If education improves performance, forcing provinces to accept less qualified applicants from other jurisdictions would reduce the quality of service provided to the poor.

Having answered your challenge, I note that you have not really explained how you think TILMA might help the poor. You seem to assume that enabling employers to lower wages is good for low-wage workers and that efforts to uphold high wages are somehow bad for low-wage workers.

You also seem to assume that all of the policy tools banned by TILMA could only ever have been available to “the well-connected,” but that the policy tools needed to help the poor will be immune from both TILMA and the well-connected. If the well-connected have too much influence on government policy, then the solution is surely to make governments more widely accountable rather than to deprive them of certain policy tools.

Finally, the well-connected would almost certainly enjoy a greater advantage before TILMA’s behind-closed-doors tribunals than in existing policy-making processes. And if you are concerned about rent-seeking, consider the ability of these tribunals to award financial penalties at public expense.

Comment from Stephen Gordon
Time: April 6, 2009, 5:07 pm

Heh. I’m old enough to remember the FTA/NAFTA debates, in which the health care booga-wooga stick was shaken repeatedly. Yet 20 years later, our health care system is still with us. Free trade agreements are not a threat to health care. They may threaten local monopolies who find it profitable to charge high prices for medical supplies, but that is most emphatically not the same thing.

And if the best you can come up with is the possibility that social workers’ qualifications may be revisited, then you might want to do a bit more digging. AFAICT, if provinces want to provide low-income households with more money and services, then there’s nothing in TILMA to stop them. At worst, TILMA might force them to find the lowest cost provider.

Which brings us to the advantages of TILMA: they make it possible to provide public services more cheaply.

Comment from Travis Fast
Time: April 6, 2009, 7:51 pm

“if provinces want to provide low-income households with more money and services, then there’s nothing in TILMA to stop them.”

Krugman once made a similar argument about free trade. to paraphrase: ‘sure it benefits certain sectors more than others but we can cover that with a non-economy distorting program of redistribution.’

How did that work out?

Let me concede the economic argument: all things being equal any measure that increases the social division of labour thereby augments the wealth of nations.

The political reality is that whatever gains from trade that are realized are not up for redistribution unless of course we want to characterize tax cuts (salary increases) for the middle and upper classes as redistribution.

It is the same blind spot you have when it comes to your dogged advocacy for VAT increases. You just naturally assume that the augmentation in state revenue will be benevolently redistributed to the poor. The political reality is that once the tax space is reduced for corporate and capital gains tax decreases (which you want) the rest will be sucked up by the Canadian tax payer federation in the form of PITs for the middle and upper classes.

So even if I thought your economic fundamentals were good your political savvy is tone deaf.

Comment from thwap
Time: April 6, 2009, 8:05 pm

Stephen,

I didn’t like Ivison’s column and I was immediately suspicious of his tortured logic about how labour standards could not fall because this wasn’t specifically mandated by the agreement.

But your comment:

Heh. I’m old enough to remember the FTA/NAFTA debates, in which the health care booga-wooga stick was shaken repeatedly. Yet 20 years later, our health care system is still with us.

typifies what I find irritating about mainstream neoliberalism. 20 years later, our health care system might still be with us, but isn’t that the sort of thing we say about old people when we wonder if they’re dead or not?

Our health care system is under grave threat and there are now agreements in place that threaten to give private insurers and healthcare management organizations access to our market (to fix the “crisis” caused by deliberate under-funding).

I remember the free trade debates too. I remember how the unions said we’d lose manufacturing jobs and our quality of life would go down. And now Ontario is a have-not province thanks to massive losses in manufacturing jobs.

Go figure.

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