The case for free trade should not rely on mercantilism

Writing in the Globe and Mail recently, Colin Robertson, vice-president of the Canadian Global Affairs Institute, makes a good case for a bold approach by Canada’s government if NAFTA is to be renegotiated. Unfortunately, he misses a basic fact from economics and this weakens his case. Robertson, perhaps unknowingly, makes the case for trade based on mercantilism.

What fact from economics does he not recognize?

Mutual gains from trade. In any trade, both buyer and seller gain. Robertson writes as if he thinks that only sellers gain. Consider two passages from his op-ed where his mercantilism premise rears its ugly head.

Here’s the first:

The stakes are critical: Three-quarters of our exports head south to the United States. Trade with the United States represents almost a third of our GDP and it sustains close to one in five Canadian jobs.

Those statements are true. But they leave out something just as important: If NAFTA were eliminated, not just U.S. tariffs and restrictions on Canadian exports, but also Canada’s tariffs and restrictions on Canada’s imports would rise. So even if we restrict ourselves to considering the well-being of Canadians, Robertson has left out approximately half the gains from trade—the gains to Canadians from getting U.S. (and Mexican) goods more cheaply. If you don’t understand that consumers gain from more competition, well, you’ve missed a lot.

And in a later passage, Robertson writes:

Reforming supply management is long overdue, but let’s get something in return, such as access to U.S. shipbuilding contracts.

By all means, Canadian access to U.S. shipbuilding contracts would be good for Canada. But even if the Canadian government failed to get that in return for loosening of supply restrictions in Canada, Robertson makes it sound as if Canadians would get nothing in return. That’s false. Loosening supply restrictions would help Canada’s consumers.

It’s not a good idea to make the case for freer trade, a policy that both Colin Robertson and I agree on, by leaving out half the benefits.