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Old 10-28-2016, 02:30 AM   #1
agouderia
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Default Dear Canadians - how do you feel about CETA?

Dear many great Canadians at Dims,

normally this should be a Hyde Park discussion - but since non-US politics don't go over well there, I'll give it a shot here on your country board.

Current political question for you: What's your opinion on CETA - the Canada-EU free trade agreement? Content? The way it's being negotiated? The fuss the Walloons are putting up with the ratification (sorry about that - really bad diplomatic manners ) ? Expectations?

I've discussed this issue with many on the EU side (pro as well as con) and would be interested in some Canadian perspectives.

Thank you & Merci
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Old 10-28-2016, 09:01 AM   #2
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I think that it says alot about our position with/opnion of the US. Canadian citizens and the government tend to wait and watch, rather than act and threaten. Trade with the US has both stablized and destabilized our economy and dollar; for us to be seeking another trade "partner" throws off some measure of control the US has on our finances by being a huge partner in trade.

I think that the idea of "borders" has begun to dissolve with the internet and international shipping. So I think many people see free trade as part of the natural progression of the new age of communication.

In terms of how most citizens view it, the majority probably ask; does it affect my day to day? No? Ok. Canadians are very much like hobbits, and I think what is going on in the US election has eaten up most of their attention.

Environmentally, most of our trade is exporting of raw goods...so my fear is long term an overall weakening of our sustainable resources due to too many consumers.
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Old 10-28-2016, 09:08 AM   #3
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Quote:
Originally Posted by agouderia View Post
Dear many great Canadians at Dims,

normally this should be a Hyde Park discussion - but since non-US politics don't go over well there, I'll give it a shot here on your country board.

Current political question for you: What's your opinion on CETA - the Canada-EU free trade agreement? Content? The way it's being negotiated? The fuss the Walloons are putting up with the ratification (sorry about that - really bad diplomatic manners ) ? Expectations?

I've discussed this issue with many on the EU side (pro as well as con) and would be interested in some Canadian perspectives.

Thank you & Merci

All the below is from my POV (aka living in the middle of the capital city, middle-aged, middle-classed, university educated white guy working in the technology sector). And sorry that this is so long and rambly; I’ve not talked about the issue enough to have formulated crisp talking points.

Short version: I don’t think that many people here are especially fussed one way or another, perhaps more amused by what is going on with Wallonia than anything?

First up, the amusement: Canada is a Federal system. Our provinces have a lot of power, per our constitution and before that the British North America act (the act of the UK parliament which served in place of a constitution for the first 116 years of the country’s life). So for us, one region blocking something that the federal government supports is just kind of normal – but normally a bit embarrassing when it comes to international affairs. So on the one hand what is going on in Belgium seems normal enough to us, while on the other it is nice to see this be someone else’s fault for a change, hence the bit of amusement.

On top of which, here it is Quebec, our french speaking region which used to have more heavy industry and has a strong agricultural sector, that often raises the loudest fusses, so what Wallonia did seems even more familiar

As to not so fussed … see, this deal feels more like ‘one more brick in the wall’ than laying a foundation. We had two trade deals which had really big impacts, everything else is somewhat incremental.

Canada signed our Free Trade deal with the US back in the late 80s, and that forced/catalyzed some structural changes in the country (we replaced a regressive manufacturing tax with a value added tax, the GST, which removed much of the incentive for vertical integration in the manufacturing sector, leading to large companies outsourcing a lot to improve flexibility and reduce costs, which in turn weakened unions quite dramatically, etc.). This combined with more open borders to mean a much more integrated market in many areas. The US was already the destination for a substantial majority of our exports (and source of our imports), and this just aligned us all the more.

But shortly after, the US wanted the NAAFTA deal, extending the free trade zone to Mexico. This was for more political than economic reasons, as I understood it – that is, at the time Mexico was not closely aligned with the US, and the US had major problems with both illegal immigration and with drugs flowing through Mexico. Helping Mexico become better off economically and leading it to care more what the US thought was intended to help deal with both of those issues. (at the same time, many large companies probably were eager to have access to lower cost labour). Canada kind of held its nose and signed that deal – I don’t recall anyone here figuring that it was going to be anything especially good for our manufacturing sector, but it was accepted as part of our duty as a friend and neighbour of the US.

Between those two deals, a lot of our manufacturing has headed south, be it to low cost, non-unionized American states, or to Mexico – and like the rest of the world, much of our manufactured goods now come from China or other Asian nations, despite what tariffs remain in place.

Since NAAFTA we’ve signed free trade deals with nine other countries (mostly small; most significant was with South Korea just recently), are part of the Trans-Pacific Partnership deal (if that ever gets ratified by enough countries to enter into force), and have several more negotiations ongoing. You can see the details here, should you care.

And we are generally more of a trading country than a self-sufficiency country. Being a fairly small country in population/economy terms, but a large country in geographic terms, we’ve always done a lot of trade with others (we obviously have a lot of natural resources, while it just doesn’t make a lot of economic sense to do all of our own manufacturing, while successful manufacturers need larger markets to really thrive), so in many ways all of these deals are in response to others negotiating deals, and we don’t want to find ourselves shut out by having less open access.

The EU is the largest population/economy that we’ve signed a deal with (or was, not sure if that is the case anymore once the UK leaves), but it accounts for a much smaller percentage of our trade than the US does. So the impact on Canada will likely be smaller in general.

The one thing that is in the CETA deal that has raised some fuss here, as we’ve mostly avoided doing anything about it in previous deals, is agriculture. In the North American deals both sides avoided that, and the other deals we’ve had enough leverage and low enough trade levels to avoid having to commit much. The TPP will force some of this if it ever comes into effect, but it looks like it will at the least run well behind CETA in getting implemented.

The issue that has raised some concern at our end is that in a few agricultural commodities (most prominently milk and eggs) we have ‘marketing boards,’ which restrict competition. Basically the marketing boards issue quota for producing their particular commodity, and to sell in those markets a farmer has to buy quota.

When the system was introduced, the existing farmers were given quota based on their size, but by now quota is very expensive. So if you want to get into the dairy business you have to spend a lot of money on quota (I’m not certain, but I think it is more than they spend on machinery and animals, but I’m not positive on that), and you can’t just invest in your business to grow it, you have to get your hands on more quota. This has been paired with high tariffs and non-tariff restrictions to limit or eliminate imports. The result being things like dairy fat selling for two to three times more in Canada than on the world market.

The marketing boards are especially strong in Quebec, which has a lot of smaller scale farmers who do OK because of this system. Were it to be fully scrapped, their most valuable and liquid investment would become worthless, while the most capitalized producers could ramp up production and sell at prices that the smaller producers would be hard pressed to match.

It happens that Quebec has lots of things it is unhappy about in the federation, and even spent a couple of decades largely sitting out federal politics (electing protest party MPs) in recent times. Over a fifth of the members of our house of parliament are elected from Quebec, making it very challenging to get a majority government without some support from Quebec … so governments are generally pretty leery about really ticking the province off, so they balance how much offense to give versus the priority of whatever it is that isn’t popular in Quebec. I think compensation has been promised to farmers for whatever disruption this deal brings, although I’m not clear on the details.

Beyond the marketing board bit, the deal has created very few waves here. Despite that it breaks new ground in terms of opening ups services, ability of companies to sue governments, and some other areas. I think most people here just don’t view trade with the EU as a big enough portion of our economy to be too concerned about the impact, while having some vague sense that having more access to the European market might be a good thing.

Personally I worry that some of the few higher skill/technology manufacturing industries that are still doing well may find they are not equipped to deal with the German Mittelstand companies, which are usually world beaters in their niche, while we may find that the sophistication and complexity of the European services market is its own barrier to Canadian companies who aren’t used to dealing with more than two languages or two countries. We’ll always export high grade wheat and what-not, but the wealth of the country has to come more from value added industries and services than from just extraction and harvesting.

I often feel that most of the rest of the world would prefer Canada just sell them resources and buy their goods and services. So while we need the open markets to allow our value added firms to achieve economy of scale, the risk is always that invisible barriers and biases will still block them out of the new markets, while the existing economies of scale of our trading partner may let them overwhelm the incumbent companies here.

Certainly in the technology sector we’ve not seen a large Canadian company emerge and survive for long in a quite some time; most either eventually lose out to larger firms (i.e. Blackberry to Apple and Samsung), or more commonly are bought up before they become all that large, because competitors are either larger and can afford to buy up the competition or even if similarly sized are working in better capitalized markets.

Ottawa is full of offices from companies like Samsung, Huawei, Apple, Ericson, etc., that all started as local companies that were bought, and some workers were kept here as a design centre. But the corporate decisions aren’t made here, marketing isn’t here, major investments in new facilities are not generally made here. A branch plant economy is never as thriving as a head-office economy. I have some worry that CETA might just strengthen this trend. But it is already there from our integration with the US, the existence of the highly concentrated Asian conglomerates, etc, so it will be again one more brick in the wall rather than anything transformational, I think.
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Old 10-28-2016, 12:35 PM   #4
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My cell phone response is so insufficient! Damn i can't rep you!
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Old 10-28-2016, 01:15 PM   #5
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Quote:
Originally Posted by Xyantha Reborn View Post
My cell phone response is so insufficient! Damn i can't rep you!
Actually I was just envying the amount of points you put into a much shorter post (Yours wasn't up when I started writing mine, so I hadn't read it until now).

I especially want to nod a vigorous agreement to the feeling people have that this hopefully helps balance things with the US a bit. They'll still and always be our biggest trading partner, our only border, and the elephant that we are sharing a bed with -- but it is nice to have at least the pretense of more other options.
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Old 10-28-2016, 05:59 PM   #6
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Canadian version lf hyde park: oh no, your points are also valid/and or better! No, please, I didn't mean to interrupt. What do you think about a possible counterpoint...?

LOL
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Old 11-02-2016, 10:20 AM   #7
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A very late thank you & merci Xy & Tad for your interesting answers to my slightly exotic question!

In the meantime the Walloons have gotten over their fuss & the Canadian government airplane overcame it's technical problems, your handsome Prime Minister has visited Brussels and signed CETA. As soon as the EP ratifies it, it can take effect preliminarily) until the 27-28 EU member state parliaments (depending how you view the current status of our dear Brexiteers...) ratify it.

Tad - it's a relief to hear that as another federal system, Canada is tolerant about the legislative fuss that comes with it.
(From many years of working experience, I can assure you there's almost nothing worse than explaining the complicated inner workings of a federal system to people coming from the central state mindset. But if you look at the many internal conflicts throughout the world - many of them could be appeased by going from a central to a federal system).

Xy - you raise an important point: Despite the pain caused by many a structural change free trade has brought with it - how realistic is old-school protectionism in the age of the internet & international shipping?

If you look at the debates during the US election campaign now - or the anti-CETA protests in many EU countries - this is a naive, nostalgic nationalism that assumes that you can simply turn back the hands of economic change to the 'good old days. While it's more about finding new structures, to guarantee social, economic, environmental, etc. standards and let everyone participate in making some progress.

As The Economist so nicely put it in the current issue: If the EU can't have free trade with cuddly Canada - with who else can they have it?
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Old 11-02-2016, 10:25 AM   #8
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Agouderia; when I read this column in the newspaper earlier this week I thought of this thread, your post reminded me to post the link. The author is a former finance minister (amongst other posts), in the Liberal government early this century.

http://www.theglobeandmail.com/repor...ticle32587093/

A bit more of an insider's view on how the whole thing came together and what the obstacles to it were.
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Old 11-25-2016, 02:45 PM   #9
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Just a follow up. Given that:
- Trump re-iterated his intent to kill off the TPP as soon as he is in office,
- and Trump still probably look to re-negotiate NAFTA in hopes of wringing more concessions out of Canada and Mexico (now that fracking has the US less concerned about energy security, the big concession of Canada and Mexico promising never to cut off resources to the US is less of a priority, which was one of the big concessions back at the time IIRC).
- And given that Trump seems to see himself as a dealmaker, has a history of nasty negotiations, and has promised a 'better' deal for the US ....

I'm expecting a lot of Canada/US trade friction over the coming several years.

So I'm all the happier to see CETA get at least EU level agreement. I know full deployment requires each country to agree, but much goes into effect with what we have, as I understand it. Whatever benefits come out of it will never match what would be lost by any more difficult trade relations with the US, but it gives some other outlet and perhaps gives Canadian companies some other models of how things could be done, rather than strictly the existing North American way. If nothing else, perhaps we could get more people aiming to build Mittelstand type companies?
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