Canada’s free trade with Japan a good sign
Just recently, Canada and Japan announced that they will be holding free trade talks with each other. This is not the first time this government has discussed free trade. They also have received free trade with countries like Honduras, Colombia, Jordan, Panama, Peru and the European Free Trade Association. Currently they are in the process of negotiating free trade with India and the European Union. When it comes to free trade the Conservatives are on the right track. Trade needs to be free, not just here in Canada, but around the globe, because it would decrease the cost of products and promote peace.
Let me first start with arguments against free trade: the infant industry argument and the argument that tariffs protect jobs. The first argument is that if there is a tariff, a Canadian industry might develop and create jobs here. This argument is severely flawed. First, when does this industry become ready for the tariff to be lifted?
If the tariff is left on, a monopoly could easily develop with very little competition. This would harm consumers. Frankly, it is very rare that an “infant” industry has enough political clout to be able to lobby effectively for a tariff wall, and it tends to be larger industries working to protect a monopoly, which is able to exploit consumers because of a lax in competition. Canada’s telecommunications industry is an example.
They can also claim that it would prevent larger industries from failing. Let’s assume that there is a tariff of $50 on all boat rudders to protect that section of the boating industry. Assuming the worst, the tariff is removed and the industry fails. People lose jobs.
That is the initial effect. In the long run though, manufacturers of boats in Canada are more competitive, because they have reduced production costs and are better able to compete with competitors. They are now able to expand their industry and hire new employees. Let’s look at what happens overseas. Let’s say we are now using rudders produced in Colombia.
This furnishes the Colombians with money to purchase Canadian exports. It is beyond me why some Colombians having a few extra dollars would be so offensive to protectionists. It is tempting to claim that this attack against free trade, this claim that foreigners might take our jobs if free trade is allowed, is laced with xenophobia. I will give them the benefit of the doubt.
The simple result is that goods from other counties are cheaper in Canada. This means for industries in Canada production costs are down. They can be more competitive globally, especially as trade barriers are lowered. Those hurt disproportionately by tariffs though are not manufacturers but the poor. Tariffs drive up the costs of living by adding on costs to goods that they have trouble affording in the first place.
One significant thing that trade does is promote peace between two nations. If there are no trade barriers then countries would become inter-dependent on one another commercially. There would be no benefit to attacking the producers of metals your country’s manufacturing sector needs.
All it would do is significantly damage the economy. Trade also brings ideas and cultures from one country to another which works to promote understanding. The more the people of a country interact with another country, the more they understand that they have a lot in common. If protectionists are right that a country can have an economy of its own with no interaction with another country the incentive towards maintaining peace would not be as great and war would not be seen as destructive to the economy. As Frederic Bastiat once wrote “If goods can’t cross boarders armies will.”
The free flow of goods and capital is essential to bettering our world. Our ability to co-operate with whomever we please regardless of where they live or what passport they hold can enable us to better readjust our resources to better serve one another. The freedom of trade will lead this world to peace and prosperity.