Date: Tue, 1 Jun 1999 15:58:47 -0700 From: angela w <[EMAIL PROTECTED]> To: mai-not <[EMAIL PROTECTED]> Subject: Free Trade a qualified success Free trade a qualified success: Royal study GORD MCINTOSH OTTAWA (CP) - Free trade can take credit for an explosion in Canadian exports to the United States, but the 10-year-old treaty has done nothing to stop disputes, the Royal Bank says in a study. The document, obtained by The Canadian Press, says there's been only failure on a top goal of the pact signed by the Conservative government of Brian Mulroney - continued access to the U.S. market without trade disputes. But there's no question about the success of Canadian exports, said the study, to be made public this weekend at a Montreal conference. Exports to the United States in the first decade of free trade have jumped 169 per cent and imports have grown 149 per cent. "I would conclude that (Canada-U.S. free trade) has made a positive contribution to the Canadian economy, but a contribution meriting only two cheers rather than three," said John McCallum, the Royal's chief economist. The bank said it was not been able to determine if free trade has been a job-killer or a job-maker. Nor can the Royal tell if free trade has had much impact on direct investment in Canada. But the fact that U.S. imports to Canada grew almost as much as Canadian exports south shows that trade success fortune cannot just be attributed to a cheaper dollar, McCallum said. A depreciated currency makes goods cheaper on world markets. Canada's dollar has fallen to 69 cents US from 89 cents in 1989. As well, that traffic in goods where tariffs were removed under free trade showed faster growth than those unaffected by the agreement. "It would be quite a coincidence if the explosion of Canada-U.S. trade after 1989 had nothing to do with the implementation of the Canada-U.S. free trade agreement in that year," McCallum said. Free trade was sold to Canadians on the basis of improved productivity but McCallum concludes free trade appears to have under-delivered in this area. Although there is some argument about how best to measure productivity, there is enough evidence to show manufacturing productivity in Canada is below the United States and the gap has been widening since 1989, McCallum said. On jobs, there is no question that export growth in industries affected by free trade created employment, just as some jobs were lost along with protective tariffs. But McCallum said any credit for job creation must be shared with a 22 per cent depreciation in the Canadian dollar over 10 years, just as the recession in the early 1990s accounted for lost jobs. "Overall I don't think we know whether (free trade) led to a rise or a fall in total jobs," he added. The Royal study is one of a handful on the impact of free trade, even though it was an extremely divisive debate for Canadians. Jim Stanford, chief economist at the Canadian Auto Workers, said there it's difficult to separate the free trade phenomenon from general economic numbers. "Here we've had this gut-wrenching restructuring of our whole economy and we can't find free trade in the productivity numbers." Free trade has turned out to be neither the promised panacea nor the predicted disaster, Stanford noted. McCallum noted one thing is clear: when free trade was introduced there were rumours Canada had a secret deal to keep its currency close to its 89-cent value at the time. The drop in value over 10 years shows the conspiracy theory was nonsense. © The Canadian Press, 1999 -- For MAI-not (un)subscription information, posting guidelines and links to other MAI sites please see http://mai.flora.org/