In today’s Globe and Mail, Jim Stanford is upset with plans to liberalise trade between Canada and South Korea. He thinks it’s a bad idea because Canada has a trade deficit with South Korea:
Mr. Harper, the double-double set thinks your idea tanks:
…There’s one federal initiative elbowing its way onto the political
radar screen, however, that badly flunks the Tim Hortons sniff test.
Ottawa is negotiating a free-trade deal with South Korea, one that
would likely serve as a template for subsequent deals with Japan and
China. Despite increasingly agitated opposition from some of Canada’s
most important industries, federal negotiators have fast-tracked the
talks — meeting the Koreans every six weeks, seeking a deal by year’s
end.
This represents the reincarnation of the good, old-fashioned, elitist
approach to policy-making. Only a true policy wonk, armed with ethereal
printouts from a computable, general-equilibrium economic model, could
seriously claim the average Canadian will receive any measurable
benefit whatsoever from a deal with far-off Korea.
Canada and Korea have a modest, oddly unbalanced, trading relationship.
Canada exports less than $3-billion worth of products to Korea each
year, mostly resources (coal, wood pulp, and aluminum are the biggest).
We import twice that much from Korea, mostly high-tech manufactures:
motor vehicles, computers, and electronics. The result is a $3-billion
deficit, equivalent to the loss of about 15,000 Canadian jobs.
This imbalance got much worse following Korea’s 1997 financial crisis.
Korea’s exports to Canada are up 90 per cent since 1997, while our
sales to Korea are actually 10 per cent lower. Korea has relied on
export-led growth, while tightly capping imports (through various
tools, including macroeconomic levers, taxation policy, and creative
non-tariff barriers). A NAFTA-style trade deal would have even less
luck undoing these Korean practices than it had with the Americans.
Two-thirds of our deficit with Korea reflects one-way trade in autos.
Korea exports 130,000 vehicles to Canada per year, versus all of 400
going back the other way. Sales by Korean producers in Canada are
already surging, and a trade agreement will make it worse.
There isn’t a single industrial sector in Canada whose leaders have
identified exports to Korea as a significant opportunity for future
growth. (When pressed on this question, federal officials cite
fisheries, forestry, and agriculture — but even in these sectors,
industry associations are silent.) Many sectors have spoken against the
deal, most notably auto.
Pathetic.
Worthwhile Canadian Initiative 
The more time goes by I am starting to think that bilateral and multilateral free trade agreements area a bad idea. Canada, and any other economically enlightened country, should simply drop all of its trade restrictions with everybody, and should either end import tariffs or maintain a uniform (very) low rate of such tariffs.
It will be win/win for Canada and her trade partners.
I am beginning to think the game theory idea of “you stop hurting yourself and I’ll stop hurting myself to in return” idea is just about played out. DOHA looks dead. But if Canada tries and reasonably thinks it can sign bilateral agreements with most of the world’s biggest economies regardless of per capita GDP, and most of the “local” foreign economies, then the game theory approach is the way to go. But if only a tepid or nonexistent effort is made to make a plethora of such agreements then unilateral sanity is the way to go.
Why and which of his statements were wrong? what angle would you use to attack his position?
Peace
DD
The gains from trade go to both countries, not just the one that happens to be running a trade surplus.