OPINION: The Trouble With CETA and Faith-based 'Reality'
“Sweep away the community of honest brokers in America [and] we’ll be left with a culture and public dialogue based on assertion rather than authenticity, on claim rather than fact.”
While you were going about your daily routines this week, the Trudeau Sunny Ways government was rushing Bill C-30 (the act to implement the Canada-EU Comprehensive Economic and Trade Agreement — CETA) through the House. Thirty of its 140 pages are devoted to amending The Patent Act, amendments which will increase annual drug costs for Canadians by up to 13 per cent. We already pay more for drugs than any other country except the U.S. Unless the rewards of CETA are very impressive, this “free trade” zealotry qualifies as a special kind of madness.
Faith over fact
In observing the Trudeau government and its media cheerleaders regarding CETA, I am reminded of U.S. journalist Ronald Suskind’s revelations about how the George W. Bush administration justified their decisions. One of Bush’s senior aides chastised Suskind for being part of the “reality-based community” in contrast to Bush’s “faith-based community.” He told Suskind:
“[You] believe that solutions emerge from your judicious study of discernible reality. That’s not the way the world really works anymore. … when we act, we create our own reality. And while you’re studying that reality …we’ll act again, creating other new realities.”
If those contrasting realities ring a bell, they should, because we have lived for 10 years with such thinking under Stephen Harper and there has been an almost seamless transition to the Trudeau government’s dissembling on international treaties. When it comes to trade and investment deals, the facts mean nothing. Chrystia Freeland simply refuses to answer questions and calls the deal “the gold standard” of trade agreements — full stop.
As in the U.S., we have assertion rather than authenticity, claim rather than fact.
The federal government makes its own “reality” by crafting “facts” to fit its policy objectives — no matter how outrageous they are when put to the test. Three numbers stand out in the talking points of federal governments under both Harper and Trudeau: that CETA will increase GDP by $12 billion, that it will create 80,000 jobs and that the newly created wealth will boost income by $1,000 per family.
But economist Jim Stanford debunked these numbers long ago — pointing out in 2012 that the federal trade department simply took the $12-billion figure (itself a highly dubious figure) “[a]nd divided it by the number of families in Canada. That assumes that every additional dollar of GDP translates directly into family income. In fact, higher GDP never fully trickles down into income…” The money that does find its way into income goes mostly to the wealthy.
The $12-billion figure came from a study commissioned by Canada and carried out by three EU economists. Stanford pointed out that the model used made some outrageous assumptions:
“[c]onstant full employment (so no one can be unemployed due to imports), balanced trade (so a country’s total output cannot be undermined by a trade deficit), no international capital flows (so companies cannot shift investment abroad), and no impact from fluctuating exchange rates.”
Stanford called the study “outrageous.” He was being far too polite. It was outright fraud. Anyone paying even cursory attention to the Canadian economy knows that not one of these assumptions holds. We haven’t had full employment for decades, we have been experiencing trade deficits for years, NAFTA resulted in the shifting of billions of investment dollars to Mexico and China, and our exchange rate has been all over the map.
But while the Harper/Trudeau axis trots out its faith-based “reality” others are thankfully stuck in the “fact-based” one. The latest are researchers from Tufts University’s Global Development and Environment Institute (GDEI) who in September produced the aptly named study “CETA Without Blinders.” The Tufts researchers used the Global Policy Model developed by the United Nations. That model, unlike the one commissioned by Ottawa, examined the likely impact of CETA on jobs, wages and inequality. It’s not a pretty picture:
· “CETA will lead to a reduction of the labour income share. Competitive pressures exerted by CETA on firms and transferred onto workers will raise the share of national income accruing to capital and symmetrically reduce the share of national income accruing to labour.
· By 2023, workers will have foregone average annual earnings increases of €1776 in Canada and between €316 and €1331 in the EU depending on the country.
· CETA will lead to net losses of government revenue. Competitive pressures exerted by CETA on governments by international investors and shrinking policy space for supporting domestic … production and investment will reduce government revenue and expenditure.
· CETA will lead to job losses. By 2023, about 230,000 jobs will be lost in CETA countries, 200,000 of them in the EU, and 80,000 more in the rest of the world [the study projects a loss of 23,000 Canadian jobs due to CETA in the first seven years].
· CETA will lead to net losses in terms of GDP. [D]emand shortfalls nurtured by higher unemployment will also hurt productivity and cause cumulative losses amounting to 0.96 per cent of national income in Canada…”
As if to highlight the predictions of the Tufts University’s report, a recent Canadian study underlined just how grim things are already getting for Canadian workers and their families. Researchers at the University of Waterloo just released a national index of well-being which shows economic growth has not resulted in an improved quality of life since the 2008-2009 recession:
“The index shows the Canadian economy expanded 38 per cent between 1994 and 2014, while improvements in Canadians’ well-being grew just 9.9 per cent. …The biggest decline in that time is in leisure and culture — areas that can enrich lives, alleviate stress and build connections with others, such as socializing with others or taking a holiday.”
The start of this two-decade period coincides precisely with federal governments’ (starting with the Chretien/Martin regime) complete abandonment of enormously successful post-war industrial policies aimed at high wages and value-added manufacturing, and putting literally all their economic policy eggs in the external trade basket.
Why any reputable economist would expect a different result from signing CETA is inexplicable — unless you remember that it’s all about faith. Beginning with the original Canada-U.S. Free Trade Agreement (FTA), its promoters saw it as a leap of faith. Peter Nicholson, a former Scotiabank vice-president and later a personal adviser to Paul Martin, was one of free trade’s gurus. He acknowledged that supporters of the free-trade agreement thought it would “cause Canadian firms to pull up their socks … and compete in the North American market.” Instead, bemoaned Mr. Nicholson years later, many companies adjusted to the FTA “by simply moving across the border… taking the path of least resistance.”
Welcome to CETA, back to the future.