The Columbia Journal
P.O. Box 2633 MPO,
Vancouver, British Columbia,
Canada V6B 3W8
Fifteen Years Of Free Trade: Has it Worked, and if
so, for Whom
CPP News Service
As another federal election looms, and many activists again try to make
the economy an issue, a recent report shows that things have not gone
as well for people as current economic policies have predicted.
Free trade's promises of a significant boost to productivity growth and
positive restructuring of Canadian industry have been largely
unrealized, according to a report by the Canadian Centre for Policy
From Leaps of Faith to Hard Landings: Fifteen Years of "Free Trade by
economist Andrew Jackson, evaluates the impacts of the Canada-U.S. Free
Trade Agreement and the North American Free Trade Agreement in the
context of the great "free trade debate" of the late 1980s.
According to Jackson, "It is hard to sustain the argument that workers
have fully shared in the relatively modest productivity gains that some
have attributed to the FTA, and hard to deny that economic integration
has tended to tilt the bargaining scales against workers."
The report examines the impacts of closer economic integration on
wages, income distribution, and social programs, and argues that fears
of "downward harmonization" were amply justified:
Over the last 15 years, there has been a significant increase in income
inequality among working-age Canadian families caused primarily by
stronger wage growth for high-income earners and cuts in social
transfers, which have reduced the income-equalizing effects of social
The FTA and NAFTA have exerted downward pressures on wages in sectors
most exposed to the threat of relocation of production or new
investment to the U.S. and Mexico.
The very sharp decline in the unionization rate in Canadian
manufacturing (and the more modest decline in the private sector)
reflects the disproportionate closures of unionized plants, and the
disproportionate concentration of new hiring in non-union plants.
During the post-FTA era real wages have not kept pace with increases in
productivity, and corporate profitability has increased.
"The striking fact of the matter is that getting the so-called
'fundamentals' right -- free trade, balanced budgets, low interest
rates, lower corporate and personal taxes -- has failed to build a much
more sophisticated industrial economy," Jackson concludes. "Leaving it
all to the market has not worked, and debate over appropriate
industrial and energy policies to actively shape comparative advantage
should resume. This does not necessarily mean a return to pre-FTA
policies, though there is a role for the state in leading the
transition to a knowledge-based and environmentally sustainable economy
through public investment, regulation, and subsidies."
But other economic think tanks, such as the corporate-funded Fraser
Institute have objected to the report, claiming that is jumping to
conclusions too quickly as the long-term impact of such policies is not