CETA isn’t so bad

After a tense few days, the small Belgian region of Wallonia finally agreed to sign on to the Comprehensive Economic and Trade Agreement (CETA), allowing Canada and the EU to ink the deal that was 7 years in the making.

As with any trade agreement, there will be people who are worse off. Agreements are a series of compromises. A country has to give something to get something, but on the whole all nations will tend to be better off, with greater productivity, more jobs, and a faster growing economy over the long term. That is certainly the goal with CETA. With the economy stagnating and protectionist sentiments growing among our largest trading partner to the south, this is a very important step forward for Canada.

MyToba.ca contributor Spencer Fernando recently wrote a column critical of CETA, concluding that “CETA sells out our country and is a theft of our national sovereignty”. He strikes fear about “secret corporate tribunals” and suggests that the deal should be put to a referendum.

I’ve gone into the referendum issue before, so I’m not going to do that again other than to say it’s a terrible idea. But anyone who is old enough to remember when Brian Mulroney was pitching the original Free Trade Agreement with the U.S. might remember a great deal of fearfulness about that deal too. Exaggerated claims were being made about America taking all our water and so on. In the end, it turned out pretty well. Both countries grew and prospered with the freer movement of goods and services and America didn’t build pipelines to steal our water.

Spencer bases much of his thesis on an article by Michael Geist, research chair at the University of Ottawa. It can be dangerous to rely heavily on one source, especially when that source has been criticized before for making numerous inaccurate statements about a trade deal. That’s not to say he doesn’t have some valid points, but this one for starters is questionable:

If CETA were limited to tariff reductions, it would be relatively uncontroversial. The discomfort with the agreement lies in the mandated changes to domestic regulations and the creation of dispute settlement mechanisms that may prioritize corporate concerns over local rules.

It may be true that it would be less controversial, but it would also be less effective. Non-tariff barriers to trade have become an increasingly common method of building protectionist walls, and any agreement that didn’t deal with them would be seriously flawed. Indeed, the Conference Board of Canada estimates that greater gains will come from dealing with non-tariff barriers than traditional tariffs.

However, dispute mechanisms are required to resolve challenges related to non-tariff barriers, and those processes must be able to compel countries to change their rules related to regulations that are considered unfair. It is these mechanisms that Geist frowns upon and that Fernando fears are stealing our sovereignty.

This agreement is the product of years of hard work by hundreds of people, and most experts on trade believe it’s a good one. I spoke with one such person two weeks ago at a conference. Dr. Joe Glauber is a former Chief Economist of the U.S. Department of Agriculture and was one of the lead U.S. negotiators in the Doha round of WTO negotiations and an advisor during the Uruguay round of negotiations. In our conversation I made a point of asking Joe what he thought of CETA, as the Wallonia affair was hitting full stride at that point. He had just returned from Brussels where he had witnessed in person anti-CETA protestors, but he too thought it was a very good deal over all.

The thing about trade deals is that it is easy to point out potential risks, and less easy to identify potential gains, because many of the gains will only be made as the markets evolve within the trading bloc. This, plus the general fear of change that is ingrained in most of us, presents a challenge for any leader in signing a trade agreement. It is remarkable that all 29 countries were able to make the compromises necessary make CETA a reality. That itself should tell you something about the importance of this deal.

 

 

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