A Road Map for More Inclusive Canadian Trade Policy (Conclusion)

[conclusion] in Redesigning Canadian Trade Policies for New Global Realities (Montreal: Institute for Research on Public Policy), 593-633.

44 Pages Posted: 16 Jun 2017

See all articles by Stephen Tapp

Stephen Tapp


Ari Van Assche

HEC Montreal; Center for Interuniversity Research and Analysis on Organization (CIRANO)

Robert Wolfe

Queen's University - School of Policy Studies

Date Written: May 13, 2017


Canada sits at a risky crossroads. Our economic prosperity depends on international trade and investment, but new global realities are calling into question long-standing policy goals and approaches in these critical areas. A big existential threat to the global trading system lies on our southern border, with President Trump intent on fundamentally altering US trade policy. The noisy signals of negotiating tactics may change from day-to-day, but even if the Americans’ exact position remains unclear, the broader stated objectives are known, and the ripple effects of any significant retreat from a rules-based trading system could bring considerable collateral damage for Canada. Unfortunately, but somewhat understandably at this critical time, much of the recent talk in Canada is based on short-term calculations, essentially trying to predict what Trump might do on the topic of interest that day. What Canada desperately needs now is a calm, evidence-based discussion that seeks to better understand recent developments — including the factors that are driving anti-trade sentiment — to explore potential responses, and to think hard to define our longer-term policy priorities, which as part of a global view, can help guide us through the current turmoil. The global economy is complex and changing rapidly. Productivity, innovation and growth at home depend on both exports and imports. Instead of producing goods and services within a single country, businesses collaborate in global supply chains, and use foreign affiliates to serve foreign consumers directly in their markets. Small firms and big firms face different trading opportunities and constraints, and use different channels to internationalize. Emerging markets, such as China and India, have fast become important players in the global economy, leading to a shift in global economic power that is one reason multilateral trade negotiations under the World Trade Organization have stalled. Diminished growth prospects, especially since the financial crisis of 2008-09, have led to economic anxiety in many developed countries, including Canada. This changing context calls for a renewed, deliberate approach to Canada’s global commerce policies. The broad-based weakness in our international economic performance over the past 15 years suggests that a concerted, comprehensive and long-term approach is required. To help Canadians keep their focus on these key objectives, even as they attempt to manage the risks in the short term, we propose four key areas for attention and action. First and foremost, we must develop more inclusive policies that helps more Canadians share in the benefits of globalization and technological progress. An inclusive trade agenda — as a key contributor to broader efforts to deliver more inclusive growth — is vital to maintain public support for trade and trade agreements. If Canadians believe that the benefits are too narrowly concentrated at the top, then efforts to use more open trade to promote economic prosperity will face resistance. An important part of this package of reforms is strengthening the social safety net to better protect workers whose jobs are negatively affected by a variety of economic dislocations (not only those that are trade-related), by emphasizing skill development and retraining. Second, we must focus on how new trade growth can be unlocked and productivity improved by facilitating, rather than hindering, resource reallocation. Our policies need to allow capital and labour to flow to their best uses, and do so flexibly and quickly in response to changing circumstances in the global economy. Third, we need to enable international connectivity by enhancing the ability of Canadian firms and workers to engage with foreign partners and markets. The productivity of our firms and workers reflects not only their own actions, but also their connections, networks and ability to collaborate with the strongest partners, regardless of where they are located. Fourth, Canada must play a leading role in building a more robust, rules-based global trade and investment system. Given the global nature of production, trade and investment, we need to think “multilateral first”, one of the best ways to deepen our links to fast-rising emerging markets, and thereby diversify Canada’s trade and investment. Middle powers such as Canada will not become stronger by going it alone. As we shape our strategy for renegotiating NAFTA, and for bilateral negotiations aimed at learning how to further integrate China into the global trading system, we should keep these longer-term priorities in view. Canadians need an inclusive trade policy agenda that facilitates resource reallocation and enables international connectivity. At this critical juncture we should keep our eyes on the forest not the trees.

Suggested Citation

Tapp, Stephen and Van Assche, Ari and Wolfe, Robert, A Road Map for More Inclusive Canadian Trade Policy (Conclusion) (May 13, 2017). [conclusion] in Redesigning Canadian Trade Policies for New Global Realities (Montreal: Institute for Research on Public Policy), 593-633., Available at SSRN: https://ssrn.com/abstract=2985485 or http://dx.doi.org/10.2139/ssrn.2985485

Stephen Tapp

Independent ( email )

Ari Van Assche

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3

Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec

Robert Wolfe (Contact Author)

Queen's University - School of Policy Studies ( email )

Ontario K7L 3N6

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