Commentary
Economists generally agree that fewer trade barriers and more foreign trade are the infrequent “win-win” things that make consumers and the economy more prosperous and efficient. Canada’s federal governments, of whatever political persuasion, understanding this, have pursued deals with foreign regimes—to their credit. However, the current way that many sectors in Canada truly operate, rather than economic theory, goes against value-generating trade liberalization.
Recently, the chronic protection of the dairy industry in Canada was fingered as a sticking point in negotiations with the United Kingdom on a potential trade barrier-reduction agreement. The current protections afforded this industry are well known, with quotas for raw milk production by dairy farmers fixed by an industry body, Dairy Farmers of Canada. Prices are also fixed by that body, and output rises only gradually with population and demand growth. This is at odds with nearly all of our closest trading partners: the United States and nations farther afield (Europe and New Zealand).
Tariffs of 300 percent (or even more) are now levied on derivative products, particularly cheese. There are strict quotas on how much cheese can enter Canada before tariffs kick in to protect our high-cost, uncompetitive producers. The tariffs, and the higher costs of dairy products here, add billions of dollars to Canadian families’ food costs. The protection of this industry by Canada is not only endangering but possibly putting the kibosh on other trade deals. This also distorts our bargaining stance, and limits the power of our trade negotiators: Canada must give ground in other areas to keep protections for dairy (and some other industries).
There are some other industries under federal or provincial regulatory control that are not fully open to foreign competition. That list includes banking, telecommunications, insurance, entertainment, broadcasting, utilities, air travel, and health care.
Canadian content requirements increase costs for entertainment companies and broadcasters, precluding open investment and competition with efficient and innovative foreign companies. Ottawa’s largest ‘stipend’ (over $1 billion annually) sustains the Canadian Broadcasting Corporation. It undercuts private-sector competitors, making protection from competition superficially seem necessary.
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Restrictions on foreign bank investment and activities means that our big chartered banks in Canada can charge higher fees and earn higher interest spreads than if they were subject to robust foreign competition. Foreign airlines cannot own any Canadian carriers, and are not allowed to compete within Canada. Also, most electric utilities are provincial Crown corporations, allowed limited competition and no foreign investments.
Yet, foreign nations that allow Canadian companies to operate unimpeded in their own utility sectors, receive other industry protections in return, to Canada’s disadvantage. Foreign telecom operators cannot own any Canadian telecommunications carriers and are themselves not allowed to compete in Canada. The result: Canadians experience close to the highest bills globally. This industry is crucial, not for just consumers but also to information technology companies’ operations.
Protection, restriction, subsidies, and trade barriers—none bring increased prosperity or improve our standard of living. Coddling uncompetitive industries is a high cost to pay to get mediocre trade benefits elsewhere. Canada should open up all industries, to enjoy the benefits of both domestic and foreign competition. This would realize trade liberalization’s full potential. If we do not, we will continue to lose out, and stagnate economically.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
