Too Close for Comfort.
Canada and its Economic Sovereignty Under a Free Trade Policy.



























HXE-4A1
Mrs. Bixely
April 22, 1993



     In the past decade, increasing importance has been placed by
world powers, and more recently the Canadian government, on the
freeing of global trade. However, the Canadian government has
failed to realize that free trade as a theoretical policy faces
many problems in the real world. Free trade puts Canada's
economic sovereignty at the mercy of the large trading powers and
their leverage over world trade.

     Free trade thus far has been poorly and unfairly
implemented, making Canada more vulnerable to trade actions.
Thus, the U.S., and other large trading partners, can control
even more of our economy through their trade actions since
exports now represents a greater percentage of GDP. The BFTA has
been proven unfair. In every instance where a dispute has been
brought to the tribunal set up by the Free Trade Agreement Canada
ended up the loser. In the one exception to this the ruling took
so long that when it did come, the American qualm was no longer
an issue. Canada's imports have continued to be harassed
regularly by the U.S. in sectors such as steel, pork, and
fisheries.

     The job growth predicted by the proponents of the FTA did
not occur. Those proponents blamed the losses on the global
recession. However, most of the jobs lost will not return to the
same companies in Canada. Chiefly because the American companies
which have either down-sized or eliminated Canadian operations
will have no future need to operate Canadian facilities. They
will instead expand existing facilities within the U.S., owned by
the American parent company, creating American jobs. The Canadian
manufacturing base will take decades to recover - if it ever
does. The double blow of rapid tariff removal and continued
harassment may prove fatal. Until then, Canadians will buy more
American made products, worsening our balance of trade.

     Free trade has also had an adverse impact on Canadian social
and economic policy which, until 1988, existed independent of
American influence. In the its most recent revision, the Canadian
UIC system was brought more into line with the more deficient
American program, reducing labour market expenditures, and
ultimately lowering aggregate demand in economic downturns. The
GST was required primarily to reduce Canadian corporate taxes
nearer to American levels. The Canadian government is also
looking towards ending the idea of universality of social
programs, instead opting for the American system of "means
tests." Although all this is occurring behind the rallying cry of
"deficit reduction," Canada's deficit could have been trimmed in
other ways. Instead, the matter has been dealt with in a
distinctly American way where entire programs, and not wasteful
spending have been cut.

     Another reason that Canada's economic sovereignty is
threatened is that in the current world trading situation the net
importers, not the exporters, hold the balance of power. Net
importers can cause much greater damage in imposing tariffs and
non-tariff barriers than net exporters simply because they import
such vast amounts and, because of their low exports, are far less
vulnerable to trade barriers.

     Finally, free trade, as the trading world now stands, is a
threat to Canadian economic sovereignty. Canada cannot afford to
offer everything in increasingly large trade agreements while
gaining little of substance in return.












Bibliography:
     Canadian Dimension, September 1990, p6.

     Goldsmith, Alexander, "In GATT's Name," Geographical,
     February 1992, pp16-20.

     "Adjusting to win," The Canadian Advisory Council on
     Adjustment, March 1989.