Published on Jul 17, 2017
What exactly is Free Trade and is it always the best policy?
Professor Don Boudreaux of Cafe Hayek discusses the morality of capitalist exchange and its inherent advantages.
July 19, 2017
“The Economics of Trade” | THINK 2017
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June 26, 2017
“Ah, the Comeau case. Schwisberg says it could change everything – knock down all the barriers”
It’s ridiculous that 150 years into Confederation, and we still don’t have free trade within Canada:
If you’re on vacation abroad somewhere this summer and find yourself explaining to people over dinner what makes Canada so unique and special, use the story about Gerard Comeau and his beer run back in 2012. There is no more Canadian story than that.
Comeau is a Canadian who, looking for the best bargain he could, drove to a Canadian town a few miles from his home in Canada, bought 14 cases of beer and three bottles of liquor from Canadian beer and liquor stores, then returned to his home. In Canada.
A squad of plainclothes Mounties with binoculars, it turned out, had him under surveillance, according to his lawyer. On his way home from the Canadian town to his Canadian home, he was intercepted and handed a ticket for $292.50 by uniformed Canadian officers who then seized all the alcohol he’d purchased.
His Canadian crime: his beer run had crossed one of Canada’s internal borders. He’d driven from New Brunswick into Quebec. As far as New Brunswick was concerned, that made him a smuggler.
Sixteen other people were charged that day in the same sting operation, but Comeau had more spine than most and fought the ticket. Some smart lawyers from Ontario and Western Canada got involved, and – my god, I love it when things like this happen – he won.
A New Brunswick judge ruled that the province’s law against importing alcohol from other provinces violated the Constitution Act, Sec. 121, which states: All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.
The ruling shocked New Brunswick and most of the other provinces, which consider Sec. 121 to be one of the most horrible and un-Canadian sentences in the Canadian Constitution, something that should be ignored at all costs.
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May 7, 2017
Canada-US trade relationship, visually
With all the talk (mostly from President Trump) about abandoning existing trade relationships like NAFTA, it’s worth looking at just how closely related the US and Canadian economies are (below the fold, because the graphic is yuuuuuge):
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May 6, 2017
Supreme Court to review Prohibition-era inter-provincial alcohol regulations
Alan White reports that the Supreme Court of Canada has agreed to hearing an appeal of a New Brunswick court decision:
The Supreme Court of Canada has agreed to hear an appeal of a New Brunswick court ruling that declared it unconstitutional to limit the amount of alcohol someone can bring into the province.
At the centre of the case is Gerard Comeau of Tracadie, N.B. He was acquitted by a provincial court judge of exceeding provincial importation limits on beer and liquor that can be brought into New Brunswick.
Comeau was charged in 2012. RCMP had stopped him after he entered New Brunswick from Quebec with 14 cases of beer and three bottles of liquor. New Brunswick’s Liquor Control Act sets a personal importation limit of 12 pints of beer or one bottle of alcohol or wine.
Provincial court Judge Ronald LeBlanc ruled the liquor restriction was unconstitutional because Sec. 121 of the 1867 Constitution states products from any province “shall … be admitted free into each of the other provinces.”
Lawyer Ian Blue, who acted as part of Comeau’s defence team on behalf of the Canadian Constitution Foundation, says the case stands to have major implications.
Blue said the federal and provincial governments are currently discussing trade matters pertaining to NAFTA, milk marketing boards, softwood lumber tariffs, but “they’re not looking at this Comeau case.”
“This Comeau case, with the Supreme Court decision, could have more profound effects on interprovincial trade barriers than President Trump could,” said Blue. “That’s how important this case is.”
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May 3, 2017
Softwood lumber, again
Last week, Megan McArdle provided a quick look at the son of the bride of the revenge of the softwood lumber dispute monster:
According to American lumber producers, this is because of the nefarious subsidies the Canadian government has granted to its timber producers. In America, most softwood timbering takes place on private land, and the lumber is priced to recover the full cost of owning and maintaining many acres of trees. In Canada, forest resources tend to be owned by the government, which sets “stumpage fees” (the cost for cutting down a tree, which used to be assessed per stump and is now usually assessed by board feet or cubic meters [PDF]).
The American producers complain that these fees are set too low, providing an unfair subsidy for Canadian timber, especially because British Columbia (which has a lot of timberland) bans the export of Canadian logs, so that American lumber mills are unable to get in on this sweet, sweet deal.
For variety, American producers occasionally also complain that Canada is “dumping” (basically meaning that a country is selling goods in a foreign market below the price at home. Since this is — except in rare cases such as pharmaceuticals — a stupid business practice, accusations of dumping tend to exceed actual instances by a healthy margin.)
[…]
The history of litigation on this is long, rich and arcane. Since the 1980s, the U.S. and Canada have been locked in a cycle whereby the U.S. complains that Canadian softwood lumber is too darn cheap, complaints are filed with various entities, and eventually both sides decide it’s easier to come to some sort of settlement rather than subject everyone to another endless hearing on the minutiae of the lumber industry. Then an agreement expires, American lumber producers say “Now’s our chance, guys! We’re going over the top!” and the magical cycle of birth and death, conflict and resolution, begins once again in the forest lands.
When trade bodies get around to ruling, those rulings are often mixed: “Yeah, okay, maybe there’s some subsidy in there somewhere, but you Americans are wildly overreacting, so cool it with the huge tariffs.” Which was basically my take on the dispute in 2004, when I last covered it. Research does not reveal any good reason to revise that view, especially because Canadian stumpage has evolved somewhat over the years. British Columbia now uses auctions [PDF] in its coastal forest areas, which should tend to drive the price of stumpage there to par with the world market.
We should also note that any subsidy, however bad for American softwood lumber producers, is actually good for the vast majority of Americans who do not work in forestry. This morning, people were throwing wild numbers around about how much a tariff would increase the price of a house or a box spring. I’d take those numbers with a hefty dose of salt, but undoubtedly, they will drive the price of softwood lumber products up somewhat, which means less money in the pocket of you, The Modern American Consumer. So even if American timber producers were completely right and their tariff were warranted, the American consumer would suffer.
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April 20, 2017
QotD: Free trade versus freer trade
No trade agreement is necessary for a government to adopt this ideal policy [true free trade]. And because real-world trade agreements universally fail to achieve complete free trade, real-world trade agreements are universally less than ideal. Each such agreement can and should be criticized for failing to achieve an ideal that is economically not only possible, but easily economically possible and immensely beneficial.
But political realities being unavoidable – and freer trade being superior to not-freer trade – freer trade is an acceptable real-world outcome. In my assessment (as in the assessment of many others), most so-called free-trade agreements make trade freer. (A more-accurate name for them would be “freer-trade agreements.”) And for this reason such agreements deserve the support of proponents of free markets if the only plausible option is the status quo of not-freer trade.
For free-market proponents to oppose freer trade because it isn’t fully free trade is akin to opposing cuts in marginal tax rates because the proposed cuts don’t eliminate taxes altogether. It’s akin to opposing legalization of marijuana if not all drugs are legalized. Or akin to a refusal to join with, or to support, those who oppose raising the minimum wage on the grounds that those opponents aren’t actively working for a complete abolition of minimum wages.
It is true that NAFTA, WTO agreements, TPP, and other such bilateral and multilateral freer-trade agreements leave in place many trade barriers and specify the always-too-slow timing of tariff reductions. But these arrangements are no more instruments of “managed trade” than are government policies that prohibit the sale of some drugs, sex, and body organs – and impose taxes on the sales of all other goods, – instruments of “managed consumption.” While I argue for eliminating all of these promotions and taxes, if such elimination isn’t politically feasible, then any move to reduce the number of prohibitions and the rate of taxation will make market freer and, hence, worthy of the support of proponents of free markets.
Don Boudreaux, “Bonus Quotation of the Day…”, Café Hayek, 2016-11-22.
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February 15, 2017
CANZUK gets a boost from the Financial Post
Andrew Lilico discusses the potential benefits to Canada, Australia, New Zealand, and the UK if these countries work on forming a four-way free trade deal:
The idea of CANZUK begins with a free-trade agreement, free-movement area (the freedom to live and work in each others’ countries) and defence-partnership agreement. O’Toole favours all three of these main planks, and he’s right that it all makes perfect sense.
The CANZUK countries, working closely together, would make a formidable contribution to world affairs. They would have the largest total landmass of any free-trade zone. They would collectively constitute the fourth-largest market in the world, after the U.S., EU and China.
Their combined military spending would be the world’s third largest, well ahead of Russia, and on European Geostrategy’s geopolitical power index, the CANZUK countries collectively have a strength around 70 per cent of that of the U.S. — and nearly twice that of China or France. With a combined global trade footprint nearly twice as big as Japan’s, the CANZUK countries would have substantial influence in opening up global markets and guiding global regulation across a range of issues from banking to shipping to the environment.
What makes CANZUK a natural union is perhaps self-evident. Canada, the U.K., Australia and New Zealand share a similar culture, similar values, and analogous legal, business and social systems that allow us to get along easily and interchangeably. (The term CANZUK was originally a term diplomats used to refer to these four countries because of how frequently they would vote the same way at the UN.)
Most of the main issues our political parties focus upon are instantly comprehensible to anyone from another CANZUK state. Our laws and constitutions share many features, making trade deals and mutual regulatory recognition a relatively straightforward matter. Our citizens enjoy a roughly similar per capita GDP (which is just not true of the other Commonwealth nations with similar constitutions) and face few hurdles in integrating into another CANZUK country’s labour market. Our societies are peaceful and orderly.
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February 11, 2017
Ici Londres: Protectionism never works
Published on Feb 8, 2017
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February 10, 2017
Gadzooks! It’s CANZUK!
Ted Campbell is touting the benefits of a trade pact among the “other” Anglosphere nations (Canada-Australia-New Zealand-United Kingdom):
First, I am a committed free(er) trader. My reading of history is that free(er) trade always leads to greater peace and prosperity and that, conversely, protectionism usually paves the way for recessions, depressions and wars.
Second, the time seems ripe. Given the global trade situation ~ Brexit, Trump, the demise of the TPP, etc ~ and given that Canada (and Australia and New Zealand, too, I guess) and Britain are interested in a free(er) trade deal it might be an opportune moment to hit the pause button, briefly, and engage in four way negotiation since we are, all four, likely to have very similar aims. Canada has, probably, reached tentative and tentatively acceptable agreements with Australia and New Zealand in the TPP negotiations and we have made equally tentative and acceptable agreements with Britain during the CETA negotiations. It shouldn’t be beyond the wit of men and women of good-will to broaden and deepen those agreement for the mutual benefit of all four partners. (Although Mr O’Toole’s professed support for supply management may be a problem as it is, I think, one of the things we agreed to sacrifice for the TPP and it, ending supply management of the egg and dairy sector, is a long standing Australian/NZ demand.) It might make it easier for all four of us to deal with America, the ASEAN nations, China, the European Union and India, amongst others if we are reasonably united, homogeneous trade block of four friendly nations with a population of (Dr Lilico’s figures) 128 million people, a combined GDP of $(US) 6.5 Trillion, and global trade worth more than US$3.5 Trillion (versus around US$4.8 T for the U.S., US$4.2 T for China, or US$1.7 T for Japan).
Militarily, the four might find some grounds for further and even deeper cooperation ~ ideally, in the long term, on shared defence requirements definition … deciding, in advance, to harmonize operational requirements for “big ticket” items like ships, aircraft, tanks and electronics … and then, whenever politically possible, to enter into combined, multinational procurement exercises to leverage the advantages of the greater size of the combined requirement for lower prices. This is a possibility that is fraught with political difficulty but which could deliver real, measurable financial benefits to all four countries.
Equally, the four nations, acting in concert, perhaps with Singapore added, too, might be able to exert more and better influence on e.g. United Nations peacekeeping operations.
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February 8, 2017
Seeing the elephant (economic edition)
Stephen Gordon says it’s a dangerous fantasy to think that the Canadian economy could cope with a Prime Minister who tries to “get tough” over Il Donalduce‘s trade concerns:
Pierre Trudeau once described the Canadian relationship with the United States as “like sleeping with an elephant. No matter how friendly and even-tempered the beast … one is affected by every twitch and grunt.” It is now Prime Minister Justin Trudeau’s bad luck – and ours – to be bunking down with a surly and irascible elephant.
It’s worth dwelling on just how asymmetric the economic relationship is between Canada and the United States. It’s sometimes pointed out that Canada is the largest market for U.S. exports, and that’s true as far as it goes. But U.S. dependence on the Canadian export market is an order of magnitude smaller than Canadian dependence on exports to the U.S. Exports of goods and services to the U.S. accounted for 22.8 per cent of Canadian GDP in 2015; U.S. exports to Canada were only 1.9 per cent of U.S. GDP.
There’s not much that could or should have been done to reduce this dependence on the U.S. market. All the factors that determine the volume of trade flows — physical proximity, market size, linguistic and cultural ties, similar legal systems and so forth — all point to the U.S. It’s always been a good idea to promote trade links with other countries, but the U.S. would still be our dominant export market even in a world in which the Comprehensive Economic and Trade Agreement and the Trans-Pacific Partnership were already in place.
So it really doesn’t make sense to think that a Canadian Prime Minister can “stand up” and “fight back” against U.S. sanctions, or that Canada’s bargaining position would be somehow strengthened if another person were running the government. The trade numbers would still be the same.
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January 27, 2017
QotD: Greed
Well first of all, tell me: Is there some society you know that doesn’t run on greed? You think Russia doesn’t run on greed? You think China doesn’t run on greed? What is greed? Of course, none of us are greedy, it’s only the other fellow who’s greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history, are where they have had capitalism and largely free trade. If you want to know where the masses are worse off, worst off, it’s exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.
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January 14, 2017
Mad Max for PM!
Conservative leadership candidate Maxime Bernier gets an unusually even-handed profile from the CBC:
Bernier’s life is a moveable banquet of rubber chicken, and shaking grimy, anonymous hands, and pretending great interest in everyone, trying all the while to turn the discussion to Maxime Bernier. And perhaps asking for some money while he’s at it.
Actually, that’s unfair. What Bernier mostly turns the discussion to is his ideas.
He’s libertarian, to the extent that it’s possible to be a libertarian and seek high office in a country that was built on protectionism and entitlement and government being the answer to everything.
He advocates the end of quotas and supply management for dairy, poultry and eggs. Oh, and maple syrup. Most Canadian politicians — let alone MPs representing rural Canada like Bernier — prefer to leave such topics undiscussed.
He wants to abolish interprovincial trade barriers. Stopping companies from growing into other Canadian jurisdictions, or stopping workers from travelling between provinces, he characterizes as “foolish,” “doubly foolish” and “ridiculous.”
Go ahead and argue with that.
Bernier wants an end to what he calls “corporate welfare,” his term for governments using tax money to pick winners, such as Bombardier and General Motors, and letting losers struggle with market forces.
If you’ve been reading the blog for a while, it’ll come as no surprise that Bernier is far and away my preferred choice for Tory leader.
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December 11, 2016
Re-negotiating NAFTA (and the Defence Production Sharing Program, too)
Ted Campbell is in favour of bringing NAFTA up-to-date and reminds us that there’s another diplomatic item that could use modernization at the same time:
In my opinion, if Prime Minister Justin Trudeau, or the next Conservative leader is really interested in restoring Canada to a leading position in real, practical, long term peacekeeping then (s)he will abandon the United Nations and, instead, turn Canada into a free trade powerhouse by dropping our remaining protectionist measures, as Maxime Bernier and Colin Robertson both advocate, and making deals with all comers. And it is important to remember that “deals” involve two sides and both sides must gain something which means that both sides probably “give” something, too, and that produces short term “losers” and it is politically important to try to “soften” the transition for those who are bound to lose in the short term. But, in the mid to long term most losses are “covered” by gains in new products and services and the utilitarian goal of “the greatest good for the greatest number” is achieved … most of the time.
One of the things Colin Robertson mentioned was shipbuilding and it leads me to consider that one of the things we want to renew if or when we must renegotiate NAFTA is the Defence development sharing agreement between Canada and the United States of America. The stated objective of the existing (since 1963) agreement are:
- To assist in maintaining the Defense Production Sharing Program at a high level by making it possible for Canadian firms to perform research and development work undertaken to meet the requirements of U.S. armed forces.
- To utilize better the industrial scientific and technical resources of the United States and Canada in the interest of mutual defense.
- To make possible the standardization and interchangeability of a larger amount of the equipment necessary for the defense of United States and Canada.
The Defence Production Sharing Program is, too often, hamstrung by US (and Canadian) protectionist measures and it needs to be brought more fully into the area of bilateral free trade. I am not suggesting that the Pentagon would ever let, say, a significant shipbuilding contract to a Canadian yard but it must be possible for Canadian shipyards and factories and service providers to bid on US defence contracts on at least a “near equal” basis and vice-versa, of course. This, free(er) trade in defence materiel and services is one area where we, North Americans, can learn from the Europeans. I am not suggesting that Canada should abandon the idea of having a national defence industrial base but, rather, that we should have a base that fits, neatly, into a larger continental base that is, somehow, connected to other allied defence production systems.
So, broadly, when (if) President elect Trump says he wants to renegotiate NAFTA we should, indeed, say “bring it on!” But we should go into negotiations with our eyes wide open, prepared to surrender some “losers,” as good bridge players do, in order to finesse some winners for ourselves.
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November 14, 2016
Trudeau’s corner
Ted Campbell rounds up much of the recent media wisdom on the state of relations between Canada and the US in the wake of Il Donalduce‘s victory in the presidential election, and summarizes what Justin Trudeau may be forced to do:
It would appear that there is an emerging consensus in the mainstream Canadian media, from left, centre and right, that the election of Donal Trump means that Justin Trudeau, and, indeed, Canada, is backed into an unhappy, uncomfortable, even dangerous corner; dangerous, that is, to our national interests.
[…]
In short, in so far as Prime Minister Trudeau’s agenda is concerned, most media commentators seem to agree that it, and by extension Canada, in so far as Canada shares the prime minister’s vision, is:
What
shouldmust Prime Minister Trudeau do?
First: secure the CAN~USA free trade agreement. Everything on his agenda depends upon revenue and revenue depends upon Canadians having jobs and many, many of those Canadian jobs depend upon access to the gigantic US market. If he wants to do anything except bow out, three years from now, as a miserable failure of a prime minister, then he must secure our free trade deal with the USA. And it’s a deal, which means that in order for us to get what we want and need the Americans have to get what they want and need, too.
Second, and likely consequential to the first priority: increase defence spending ~ double it if that’s what it takes, buy the F-35, strengthen the Canadian contribution to NORAD and NATO, and then make UN peacekeeping support US and Western strategic objectives.
Third: cancel the carbon tax; it will only make Canadians companies less competitive.
Fourth: force pipelines through to tidewater on both coasts. Keystone XL is OK for getting Alberta’s oil to Texas, but we really need to get it, readily, to the whole world. That means pipelines to Canadian ports … no matter what the greenies and first nations might say or do.
Fifth: negotiate free(er) trade deals with others. Start by ratifying the TPP, no matter what. Negotiate deals with the UK, with China, with India and with the Philippines, all as matters of urgency.
Finally, Prime Minister, please do not get into this position …
If Trudeau did all or most of this, he might well be able to appease Trump and retain Canada’s advantageous relationship with the US otherwise intact. The problem is that, as Campbell notes, it will offend and outrage so many parts of the Liberal coalition that it would take such a “Nixon goes to China” level of political audaciousness combined with a Jean Chrétien degree of fiscal austerity that I doubt Trudeau could even get his caucus unified enough to pass the legislation, never mind withstand the inevitable protests in Liberal ridings across the country (and in the domestic media).
Cornered indeed.
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October 19, 2016
Economics Made the World Great – and Can Make It Even Better
Published on Sep 23, 2016
A lot of doom and gloom types say we’re living in dark times. But they’re wrong.
While there are real problems, the world has never been healthier, wealthier, and happier than it is today. Over a billion people have been lifted from dire poverty in just the past few decades.
What has contributed to this improvement of our well-being? The answer can be found in the evolution of economic and policy ideas.
But we can still do better. How will we solve today’s challenges and what breakthroughs will spark change tomorrow?
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