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From: peterr@utcsri.UUCP (Peter Rowley)
Newsgroups: can.politics
Subject: Free trade
Message-ID: <1355@utcsri.UUCP>
Date: Wed, 28-Aug-85 10:34:16 EDT
Article-I.D.: utcsri.1355
Posted: Wed Aug 28 10:34:16 1985
Date-Received: Wed, 28-Aug-85 13:08:13 EDT
Distribution: can
Organization: CSRI, University of Toronto
Lines: 62

Free trade is a hot topic these days.  Brad Templeton just sent me a letter
advocating it, and as I started replying, I thought I should post the reply.

*IF* everyone were rational and had perfect knowledge of the things they
were considering buying, one could see that, in the long run, free trade
would increase competition and, presumably, quality and affordability of goods 
& services.  It would also, if past patterns are any guide, lead to increased
monopolization of the Canadian economy, but some people think that's OK
as long as it leads to reduced costs (whether it does or not is a question
for another time).

But to implement free trade, all at once (say, a week from next Tuesday)
would be a big change in the economy and economies do not react well to
big changes.  It's the people that suffer when this happens and so if
free trade is to be implemented, it should be phased-in so as to not cause
massive hardship.

*BUT* would this wonderful "idol in the sky" of free trade (even the
phrase sounds wonderful-- "free" as in "strong and free" and "trade" as
in "I'll trade you an Expos for a Blue Jays") really help Canadian
manufacturing to be more competitive?  I think there's a good chance that
it wouldn't.

Consider Japan.  They have had high trade barriers for a long time, to
the detriment of the US.  Now, the barriers are coming down.  But there's
a problem: The Japanese simply do not want to buy US durable goods.  They
are used to thinking of them as being of inferior quality.  Perhaps there
are other reasons also, but, for whatever reasons, they prefer to buy
Japanese.

Back to Canada and the US.  Imagine, it's December 1990, and free trade
exists between Canada and the US.  It's time to buy toys in a US
department store-- and the market is open to Canadian toys.  And because
one Cdn company worked particularly hard all summer, they have a new toy in
the store, and it's even a bit of a better value than the US-made toys
there.  But all the customers want to buy American.  At home in Canada,
though, the department stores carry both the US and Canadian toys.  With
free trade, the prices are very close, and the children have seen ads for
the US toys on US televion, so they want those toys, not the Canadian ones.
By February, the Canadian company with the better idea is out of business.

But, you say, most people are smarter than children when it comes to these
things.  They will buy the best product, for the best price.  Not so.
Many businesses buy their PC's from IBM, when clearly superior products
can be bought from others for less.  And so often, the buying decision
comes down to an emotional one-- and Americans are quite emotional about
supporting American industry (apart from the fact that it's in their
general best interests to buy American as it creates jobs in the US).
That's 1 reason why Cdn companies run ads in US magazines listing only their US
offices, to give the impression that they are a US company.

Some US companies do know a good deal when they see one, though, and Canada
certainly has good deals on natural resources.  It would be a real boon
to the lumber companies to have free trade, for example.  But do you want Canada
to be a nation of hewers of wood and drawers of water?

"Free trade" just *sounds* so good, so wholesome.  But I don't think it
stands up to scrutiny given Canadians' all-too-often perverse desire to
NOT buy Canadian, and the American "Buy US" attitude.

p. rowley, U. Toronto
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