Thursday, August 09, 2007

Obama's Gaffe and Free Trade

So Barack Obama called Prime Minister Harper the "President of Canada" in a recent debate. The interesting thing to me is not Obama's ignorance of our parliamentary system but what he was saying when he made the gaffe. He was talking about renegotiating NAFTA to provide more protections for American workers. The Dems apparently can't get away from their isolationist trade policies (same goes for the NDP here). NAFTA, contrary to popular belief, has had very little impact on Canada. The pre-existing FTA has had a dramatic impact and I would argue it has been for the better. While the Canadian economy hit the skids with the rest of the world in the early 1990's, Canada has had unrivaled prosperity since the mid-1990's. The FTA has allowed Albertans to sell their oil and Ontarians to build cars and parts (yes, the cars were part of the auto pact a couple years earlier, but you get the point) to a larger degree than existed in a tariff bound system. Free trade is not the enemy of the poor. Free trade is merely a means of levelling the global playing field. Some, like Mr. Obama may argue for so-called "fair" trade but to me that is an attempt by the global north to have it both ways. The economies of the Western world are reliant on cheap manufactured goods. The resulting manufacturing boom has created jobs for millions of people in the global south.

The world will never achieve any sort of competitive balance if we jam it with tariff walls. A good example of this is Africa. Opponents of free trade often cite poverty-stricken sub-Saharan Africa as a region which has had no benefit from free trade. This is not an accurate statement. The economies of sub-Saharan Africa are largely dependent on agriculture something that is not freely traded. African products do not have a chance when forced to compete internationally and domestically with heavily subsidized Western products. The answer to alleviating global poverty is not to put up more tariff walls like the ones that hold Africa back but to tear down the remaining obstructions. Western governments are reluctant to give up any domestic industry, and when domestic industries are uncompetitive the kind of knee-jerk reaction like Barack Obama displayed during the debate are common. Governments should spend less time trying to stop the inevitable (you can't produce competitively priced clothing in the Carolinas) and more time on retraining the workforce and creating the conditions for a competitive economy: a minimum of taxes with a maximum of social services. Globalization is here to stay. We would be wise to try to exploit it not get in its way.

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