The dark side of free trade

The dark side of free trade

The COVID-19 pandemic has highlighted the extent to which Québec depends on overseas manufacturing plants to supply even the simplest of products, like masks. With protectionism on the rise in many countries, have we been relying too heavily on globalization and free trade?

But first, what is free trade and how does it affect us?

A free trade agreement is a treaty between several countries to reduce or eliminate trade tariffs. Free trade agreements are complex because they aim to apply similar rules to companies in the various member countries to prevent the latter from favouring their own domestic businesses. But these rules are often controversial. For example, Canada and the United States had a lengthy dispute over softwood lumber1 because the United States considered Canada’s low stumpage fees to be a form of unfair subsidization.

Similar problems can occur in health care. For example, under its most recent free trade agreement with the European Union, Canada agreed to new rules for procuring materials and equipment for public services. The purpose of these rules was, among other things, to level the playing field for European and Canadian companies bidding on medical equipment supply contracts. However, in order to meet the free trade agreement’s requirements, Canada had to sacrifice some of our decision-making autonomy in managing our public system.

The APTS joined the Réseau québécois sur l’intégration continentale (RQIC) in order to monitor these negotiations. Free trade agreements are often negotiated behind closed doors and the immediate ramifications of these complex legal documents can be hard to grasp. Yet things can easily go off the rails.

In the private sector, free trade not only forces businesses to compete at the international level, it pits workers against other workers. In fact, a number of industries have left Québec in recent decades to set up in countries where union rights are non-existent and wages are lower. International competition also results in a race to the bottom where environmental standards and corporate taxes are concerned, as governments vie to attract investors. Ultimately, those who benefit most from these agreements are multinational corporations.

The APTS believes that the push to privatize public services is an immediate threat tied to free trade.

While none of the agreements signed to date have required Québec to privatize public services, clauses to that effect have been put forward on several occasions during negotiations. Thanks to the vigilance of citizens’ groups, we’ve managed to duck these clauses, but we can’t let our guard down because health-sector multinationals are actively lobbying to open the door to privatization.

The other major problem is that relocating production abroad has made Québec and Canada reliant on foreign factories. As we’ve seen with the coronavirus pandemic, a crisis can disrupt international supply chains and create shortages of essential medical equipment. Free trade agreements limit governments’ ability to intervene to maintain local manufacturing capacity because doing so would constitute unfair competition.

It’s in our best interest to keep a close eye on high-level discussions, act as a watchdog to protect the public interest and ensure that right-wing lobbyists aren’t given free rein. This is precisely why the APTS supports the RQIC and promotes its work.

1 Softwood lumber is used to make house framing and other related residential construction and renovation products. Canadian lumber is almost entirely sourced (98%) from softwood trees, which include spruce, pine, cedar and fir.

By Élisabeth Circé-Côté | illustration by Steve Adams | June 18, 2020