"Deep pockets, indeed!"
by David Orchard
David Orchard responds to the Globe and Mail editorial, "Uncle Sam what deep pockets you have," February 24, 1997. (The
full text of this editorial follows below. David Orchard's response
was published as a severely edited letter to the editor.)
The Globe and Mail editorial praising the 1989
Canada-US free trade agreement ("Uncle Sam What Deep Pockets You
Have," February 24, 1997) rests its argument on one pillar -- a
faulty one -- i.e. Canada's increased exports. Canadian exports
are high because of a low dollar, and because the U.S. economy is
expanding faster than Canada's, not because of the FTA. The average
tariff on all our exports to the U.S. prior to the FTA was 1% and
falling. Hardly a barrier to trade.
In the first three years of the FTA, Canada lost 25% of its manufacturing
jobs. The industrial heartland collapsed; commercial real estate
values in Toronto plummeted by two-thirds.
In the six years before the FTA the Canadian GDP grew by $260
billion; in the six years after, by $106 billion -- less than half
the previous rate of growth. In 1988 it grew by $54 billion; in
1991 by $5 billion -- one-tenth as much the direct result of the
free trade induced recession. Prior to 1989, Canada's unemployment
rate was roughly that of the U.S. and sometimes lower.
Today, eight years into the Agreement, 58.5% of Canadian adults
are employed; our official unemployment rate is twice that of the
U.S. Beggars inhabit Toronto streets. Instead of recognizing the
FTA as the cause of reduced revenue, governments of every stripe
are cutting, slashing, downsizing and offloading.
Had Canada continued growing at the rate it had in the half decade
prior to the FTA the budget deficit would have disappeared three
years ago -- without cutting expenditures. And unemployment would
be under 3%.
Instead, the entire national infrastructure is under siege. U.S.
ownership is at an all-time high. Americanization is affecting all
aspects of Canadian society. U.S. grain companies threaten the Canadian
Wheat Board. Walmart knocks Eaton's into bankruptcy court. Canadian
Pacific put the American flag on its logo and sold its Sherbrooke-Saint
John line to a U.S. company. Promotional rights to the RCMP were
sold to Disney Corporation. Canada even issued a stamp bearing the
Disney name and logo. "The national dream is dead," announced Transportation
Minister Doug Young as Canadian National Rail was sold -- for half
its value. 70% of CN's shares are now U.S.-owned. 14,000 jobs cut,
northern Manitoba's rail lines and the Port of Churchill sold to
a Denver company. Conferences on NAFTA's next steps call for a common
North American currency.
NAFTA allows U.S. companies to strip our resources and take over
our industries -- which they are doing at a record pace. Exports
of precious non-renewable resources are rising, while Alberta has
only ten years of drillable oil left in the ground. Selling raw
materials means selling jobs and our future. Meanwhile, thousands
leave -- to the U.S., Europe and Asia -- or stay, battling unemployment
and underemployment. Bankruptcies continue to break records.
Glowing NAFTA promises to Mexico have proven equally false; since
NAFTA took effect, that country's unemployment rate has doubled,
prices have increased by over 100% and the peso has lost over half
The Globe attacks opponents of the FTA as "interest groups"
-- as if the big business lobby which financed and rammed through
the agreement was not an interest group and the biggest one of all.
We opposed the FTA in 1989, and continue to do so, for the same
reason John A. MacDonald did in the 1891 free trade election which
cost him his life. Free trade with the U.S., MacDonald said, was
"sheer insanity" which would have "as its inevitable result, annexation
with the United States."
This does not have to be. Norway voted to stay out of the European
Union (EU); its economy has since performed at twice the EU rate;
its unemployment rate is less than half. There is no talk of downsizing
and cutbacks. Stat Oil, government-owned (as Petro-Canada was),
contributes substantially to the national budget.
Switzerland also stayed out of the EU, seeing it as a threat to
its standard of living and independence. Its unemployment rate is
less than half of Canada's.
Japan, with a fraction of Canada's resources, has built itself
into a rival of the U.S. Foreigners cannot take over its key industries.
Its unemployment rate is 3% (and considered high).
In 1960, South Korea's per capita income was $110. By following
Japan's lead and rejecting the "free trade" model, Korea has built
itself into a major economy with a per capita income over $12,000.
For Canada the key issue of free trade with the U.S. is always
sovereignty, as it was when Canadians rejected it in 1891 and 1911.
Locked into it Canada becomes a satellite. For this reason Canada
must do what John Turner prescribed in 1988. We must get out, and
can do so quite simply. Article 2205 of NAFTA (FTA Article 2106)
states that each country can, at any time, give the others six months'
notice to withdraw, without penalty, from the Agreement.
Canada must trigger this clause to regain its sovereignty, control
over its resources and to develop its potential as a nation.
David Orchard is the author
of The Fight for Canada - Four Centuries of Resistance to American
Expansionism and was runner-up to Joe Clark in the 1998 federal
Progressive Conservative leadership contest. He farms in Borden,
SK and can be reached at tel (306) 664-8443 or by e-mail at email@example.com
The Globe and Mail, February 24, 1997, editorial:
"Uncle Sam, what deep pockets you have"
Remember the free-trade agreement of 1989, whose opponents forecast
that fragile little Canada would be swept away by the brutal, dog-eat-dog
forces of continental capitalism? Some fragility; some dog.
Since 1991, Canada's exports have increased by 90%, and they have
more than doubled to the fearsome United States. Our imports, meanwhile,
have grown by only 71%, creating the biggest trade surplus in Canadian
history last year: $34.1 billion on exports of $267.1 billion. Canadian
employment in export-oriented industries grew from a base of 1.00
to only 1.05. Among the leading export-growth categories were telecommunications
equipment, special equipment and aircraft, along with the staples
of automotive products and natural resources.
Exports have been the prime source of Canada's economic growth
in the 1990s, while the domestic economy has lagged under the weight
of unavoidable deficit reduction, regrettably high taxes and occasional
lapses into general price deflation.
The benefits of free trade apply as well to our imports, whose
value is increasing as the comparative advantage of some foreign
producers becomes apparent and Canadian border tariffs fall. Federal
customs import duties will decline from $3.6 billion in 1994 to
a forecast $1.9 billion in 1996 -- the only category of federal
taxation that is falling in the 1990s.
The only area where Canadian exports flagged in 1996 were to the
stagnant economies of the European Union and Japan, which have yet
to work themselves out of financial and regulatory blockages. Nevertheless,
our overall trade surplus is big enough to almost balance our current
account, including interest payments, tourism and dividends -- a
turnaround of $28.8 billion in four years.
Yes, there were adjustments costs. Some Canadian producers fell
to foreign competition, and some Canadians lost their jobs. But
the net gain was enormous in a very short period of time as we adjusted
to larger markets. The interest of the many was well served at the
expense of the few -- and many of the few will benefit in the longer
term. Certainly their children will.
The success if freer trade is predicted by liberal economic theory.
The threat to its benefits comes not from the theory or practice,
but from the political power of interest groups that stand to lose
in the short run because of change. Our political system and leaders
need to prevail over interest groups in such circumstances if the
broader public is to be served. Parallels exist in many fields that
dominated economic debate in the 1980s:
- There was bitter opposition to foreign
direct investment in Canada, which has now reached record levels
at substantial benefit to employment.
- There was fervent opposition to privatizing
the airlines, railways and aircraft-manufacturing companies, all
of which are now operating at much higher levels of efficiency
and lower public costs.
- There was shrill opposition to battling
inflation, whose credible defeat is now reducing real interest
rates for the first time in decades.
- There was dogged opposition to reforming
unemployment insurance and tightening up welfare programs, the
results of which will reduce both unemployment and welfare rolls.
- And, of course, there was relentless opposition
to deficit reduction, whose benefits will soon allow our governments
to cut taxes even as they find some money for new program spending.
Sound economic principles, reasonably long time horizons and strong
political will supported by a well-informed electorate will deliver
blue-chip dividends to Canada. The 1989 free-trade agreement with
the United States is a talisman in this emerging story of measurable