Baloney Meter: Will free trade with the EU benefit everyone in Canada?

Will CETA really benefit every Canadian?

OTTAWA — “At its heart, CETA is a framework for trade that works for everyone.” — Prime Minister Justin Trudeau.

——

Sometimes, politicians can say just enough to let the words mean anything to anyone.

Last week, Prime Minister Justin Trudeau was extolling the virtues of free trade with the European Union, known best by its acronym CETA. In his speech, Trudeau talked about better incomes for workers, entrepreneurs who will have access to new customers, consumers paying less at the checkout counter, manufacturers who can expand their global reach, and more predictability and transparency for the “engineering, architecture, and information technology” sectors.

In short, he said, “CETA is a framework for trade that works for everyone.”

So does it?

Spoiler alert: The Canadian Press Baloney Meter is a dispassionate examination of political statements culminating in a ranking of accuracy on a scale of “no baloney” to “full of baloney” (complete methodology below).

This one earns a rating of “some baloney” because it rests on your definition of “everyone.” Let’s sort through it all.

THE FACTS

A 2008 joint study by Canada and the European Union suggested trade would increase by 20 per cent and generate $12 billion annually in new economic activity — a gain of almost one per cent of gross domestic product yearly in Canada. The government says the ripple effects would translate into an extra $1,000 for every Canadian family, and 80,000 new jobs nationwide as tariffs are eliminated and the price to ship and purchase goods drops.

Similar studies have also pegged an economic boost from CETA, but with lower effects on gross domestic product.

A study published in the International Journal of Political Economy in September estimates 23,000 job losses in Canada over the next seven years — a blip in the domestic job market — and 200,000 job losses in the EU. The wage impacts under the economic models used in the paper would also be different than what the government says: The authors predict that average annual earnings would decline by almost $2,500 by 2023.

THE EXPERTS

Research shows that overall, countries that liberalize trade see gains in jobs, average incomes, and standard of living, says Ian Lee from the Sprott School of Business at Carleton University. The benefits accrue in the long run, and may not materialize immediately, he said. But, Lee said, not everybody benefits, pointing to the Canadian textiles industry that suffered job losses after NAFTA was signed.

The editor of the International Journal of Political Economy, Mario Seccareccia, an economics professor from the University of Ottawa, said the September research paper suggests benefits will accrue disproportionately to upper income earners, leaving working class people behind.

On the other hand, the narrow assumptions underlying earlier studies may severely underestimate the economic gains to Canada, said Domenico Lombardi, director of the global economy program at the Centre for International Governance Innovation.

Lombardi said CETA is more than a trade deal. It’s a new-generation agreement that includes provisions about harmonizing regulations and fostering greater co-operation. In that sense, he said, there are benefits that accrue to everyone, from companies down to consumers, although the benefits are more difficult to quantify.

All this leads to a question, posed by Dan Ciuriak, former deputy chief economist at Global Affairs Canada: “Who did the prime minister have in mind when he said, ‘everyone’?”

Ciuriak said CETA has a small, positive effect on Canada and the EU overall under the conventional economic models, making it good for all as Trudeau suggested. And consumers in Canada in the EU are likely to see more choice and lower prices, meaning “everyone” in that sense is better off under CETA, he said.

The effects of the deal will vary by province and between EU member nations, but there is no independent study that considers the impacts of CETA on provinces that shows all would be in positive territory, said Ciuriak, who was responsible for economic analysis of proposed trade agreements in his last posting at Global Affairs Canada. (Global Affairs Canada’s website includes a section about provincial benefits.)

There will likely be negative effects in other countries not part of the deal as their exports are displaced by a newfound preference between Canada and the EU, Ciuriak said.

THE VERDICT

“Overall, taking into consideration that it is a political statement, rather than a nuanced, footnoted academic assessment, I would characterize it primarily as beef, not baloney,” Ciuriak said.

Unfortunately, beef isn’t on the rating scale — at least not yet.

But given all the above, Trudeau’s comment earns a rating of “some baloney” because key information is missing. In its place, is the ability for the anyone to describe “everyone” in their own way.

METHODOLOGY

The Baloney Meter is a project of The Canadian Press that examines the level of accuracy in statements made by politicians. Each claim is researched and assigned a rating based on the following scale:

No baloney — the statement is completely accurate

A little baloney — the statement is mostly accurate but more information is required

Some baloney — the statement is partly accurate but important details are missing

A lot of baloney — the statement is mostly inaccurate but contains elements of truth

Full of baloney — the statement is completely inaccurate

SOURCES

Address by Prime Minister Justin Trudeau to the European Parliament: http://pm.gc.ca/eng/news/2017/02/16/address-prime-minister-justin-trudeau-european-parliament

Pierre Kohler and Servaas Storm: “CETA Without Blinders: How Cutting ‘Trade Costs and More’ Will Cause Unemployment, Inequality and Welfare Losses.” September 2016: http://www.ase.tufts.edu/gdae/Pubs/wp/16-03CETA.pdf

Global Affairs Canada: “(CETA) Benefits for provinces and territories.” http://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/benefits-avantages.aspx?lang=eng

Standing Senate Committee on Foreign Affairs and International Trade: “Free Trade Agreements: A tool for economic prosperity.” February 2017: https://sencanada.ca/content/sen/committee/421/AEFA/reports/FreeTradeReport_e.pdf

Colin Kirkpatrick, et al: “A trade SIA relating to the negotiation of a Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada.” June 2011: http://trade.ec.europa.eu/doclib/docs/2011/september/tradoc_148201.pdf

EU and Government of Canada: “Assessing the costs and benefits of a closer EU-Canada economic partnership.” 2008: http://trade.ec.europa.eu/doclib/docs/2008/october/tradoc_141032.pdf

RBC Economics Research: “The Comprehensive Economic and Trade Agreement.” October 2013: http://www.rbc.com/economics/economic-reports/pdf/other-reports/CETA.pdf

Jordan Press, The Canadian Press

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