Subject: The NDP Plan: Trade Policy, Fiscal and Monetary Policy

From: [email-masked] (MARY OLIN)
Date: 12 Mar 1993 20:01 PST

TRADE POLICY THAT CONTRIBUTES TO FULL EMPLOYMENT
     Conservative trade agreements have placed Canada's governments in a
straight-jacket.  Many measures necessary to encourage high-wage, high
value-added development in Canada are illegal under the Free Trade
Agreement.  Under our plan, Canada will abrogate the Free Trade
Agreement and will not proceed with NAFTA. 
     The Free Trade Agreement and NAFTA are international treaties in
which a Conservative Canadian government has signed a contract with a
(since-defeated) conservative American government, committing Canada to
follow conservative economic policies ruinous to our country, in return
for nothing of substance in the way of improved market access. 
     The Free Trade Agreement and NAFTA fail Canada for many other
reasons:
     Both agreements limit the ability of Canadian federal and
provincial governments to control foreign investment and the
exploitation of Canada's natural resources. 
     Neither agreement seriously addresses the need for basic standards
in a trading relationship.  They therefore open the prospect of pitting
Canadian workers against exploited sweat-shop work forces in the
southern United States and in Mexico with few labour rights and few
enforceable health, safety and environmental standards. 
     Both agreements have the effect of constructing an
American-dominated trading bloc, contrary to our interests.  Our
transportation, telecommunications, water and energy resources are
opened wide to continental integration.  Europe and Asia are provided
with strong incentives to respond by reinforcing their own regional
trading blocs. 
     These trade deals produced neither Brian Mulroney's 250,000
promised new jobs, nor did they bring the promised end to the U.S. 
trade harassment, nor were they cushioned by the promised "most generous
adjustment programs...  anywhere".  Instead, they helped create our
deepest and first Made-In-Canada recession.  Canadian manufacturing jobs
have disappeared at four times the rate of U.S.  manufacturing losses
since 1989.  We have experienced our worst balance of payments with the
United States in ten years.  U.S.  trade harassment of Canadian exports
has become more, not less intense under the Free Trade Agreement. 
     It is our policy to abrogate the Free Trade Agreement.  And it is
our policy to not proceed with NAFTA. 
     Under our plan, Canada will regulate our trade relationship with
the United States through the GATT framework, to which both Canada and
the U.S.  have belonged since 1948. 
     We will propose to continue the orderly reduction of tariffs
between Canada and the United States, governing the balance of our
trading relationship within GATT rules and through sectoral trading
agreements such as the Auto Pact. 
     Setting aside the Conservative government's trade deals is the
first step towards rebuilding Canadian trade policy so that it
contributes to full employment.  Under our plan a new trade strategy
will include the following elements:

-->Common Standards
     Countries around the world have become increasingly concerned about
the effects of trade on their economies and the quality of life of their
citizens.  A consideralble body of international agreements are forming
to ensure that trade meets human needs, and does not trigger a "race to
the bottom".  Among them:
     The European Charter of Social Rights of Workers
     Negotiated in 1989, the European Community social charter twins
freer trade between EC member nations with provisions for fair
remuneration, social security, the right to bargain collectively, and
for a rise in the level of working conditions in less developed regions
of Europe. 
     The International Labour Organization
     Canada has already signed 29 ILO conventions, including those which
establisha minimum employment age and a framework for minimum
occupational health and safety standards (number 138 and 155), those
which ban forced labour and discrimination (numbers 29, 105 and 111),
and those which provide for the right to organize and bargain
collectively, and to receive equal pay for equal work (numbers 98 and
100). 
     The United Nations Commission on the Environment and Development
(UNCED)
     The UNCED summit in Rio de Janeiro in 1992 produced few concrete
gains.  It did, however, demonstrate that countries can sit down at the
same table and agree on basic environmental standards, a process that
can be built on. 
     The draft subsidies code within GATT
     It is in Canada's interest that subsidies be governed by a common
set of rules, so that trade sucess isn't determined by who gets the
biggest subsidy.  In cases like these, smaller economies tend to lose. 
At the same time, we need common rules that recognize the need to
promote equitabile development between regions and to upgrade skills,
technology and industry.  The subsidies code in the early 1992 "Dunkel
draft" of the Uruguay Round of GATT includes much of this. 
     Canada should work with like-minded countries to broaden and deepen
the approach to international trade that runs through these agreements,
building a broadly-based, multi-lateral trading environment in which
trading partners with lower standards will be helped to raise them. 
     Specifically, under our plan we will work with other nations to
include social, labour and environmental provisions within the terms of
GATT. 

-->Market Access and Development through GATT
     In the decades to come the Pacific Rim will represent our largest
potential market.  An increasingly integrated and prosperous Europe also
represents important trade potential.  And Latin America and other
developing regions represent further important potential markets. 
     Canada is too dependent on trade with the United States.  Our
southern neighbour accounts for over 75 percent of our trade, including
most of our value-added exports. 
     Under our plan, Canada will therefore work for a broad,
multi-lateral, steady and planned reduction of tariff and trade barriers
through GATT.  We will also assist Canadian companies to develop
opportunities in these opening markets. 
     GATT, with all its imperfections, is the best existing trade regime
for our country.  It encompasses most of the world, and therefore does
not lock us into a regional trading bloc.  Canada has traded with the
United States and most other nations in the world under GATT since 1948. 

-->Agriculture under GATT
     Canada's agriculture supply management system is threatened by
certain proposals contained in the draft "Uruguay round" proposals
currently being negotiated. 
     These proposals call for supply management (in which Canadian
producers of certain agricultural products are assigned quotas which
guarantee a reasonable return) to be replaced by high tariff walls,
which will then be gradually reduced. 
     Supply management has served Canada well, protecting farmers from
market failure while avoiding the outrageous costs and waste produced by
European Community-style agricultural subsidies. 
     The NDP is strongly committed to agricultural supply management and
will work unrelentingly to protect it within GATT. 

-->A Better Future by Building on the United Nations
     GATT is a serviceable platform to replace the Free Trade Agreement
and NAFTA. 
     In the long term, we believe more than GATT is needed to ensure
world trade serves the real needs of people in all trading nations,
north and south, industrialized and developing. 
     We are committed to the United Nations as the forum where all of
the world's peoples can come together to work on common challenges.  We
will work for the day when the UN brings the same focused attention to
trade and development that it currently does through the Security
Council to military conflict. 

-->Sectoral Trade Agreements
     The 1965 Auto Pact is a good example of a sectoral trading
agreement that can supplement GATT by managing a trading relationship in
a mature industry.  The Auto Pact establishes a requirement for Canadian
content in North American-built vehicles sold in Canada.  The agreement
produced a substantial expansion in our automotive industry, a
cornerstone of our economy. 
     The Canadian content rules in the Auto Pact are a useful model that
could be applied in a number of other sectors, steel being a critical
example. 
     Under our plan, where Canada has a strategic interest in doing so
we will seek to negotiate sectoral agreements with trading partners, on
the model of the auto pact.  We will start by proposing a steel pact to
the United States. 

-->Unfair Trading Practices
     International agreements such as those discussed above are our best
instrument to govern our trade with other countries.  Canada must
nevertheless be equipped to respond to firms who export goods into our
country in a manner that violates our trading standards. 
     When access to the Canadian market is granted to the products of
exporters from other countries who do not respect basic standards on
pollution, labour and human rights as set out in international
agreements, we are forcing Canadian firms to compete in our own market
against products whose prices reflect this exploitation. 
     Our plan includes a Canadian Trade and Investment Act, which will
permit Canadian companies, workers and consumers to take legal action
against foreign companies who gain unfair advantage in our domestic
market through practices contrary to agreed international standards as
outlined above. 

-->A Focused and Coherent Export Strategy
     Diversification is our best means of lessening our dependence on
trade with the United States.  Our plan includes the development of a
focused and coherent export strategy.  The federal government,
provincial governments, and Canadian enterprise must work in close
partnership to expand and diversify Canadian trade. 
     Our plan includes:
     Reallocating resources to export development within Canada's
External Affairs and International Trade Department, with particular
attention to the Asia-Pacific region, and substantial attention to Latin
America and Europe;
     Working closely with Canadian business to ensure that multilingual,
competent and culturally-sensitive personnel work on trade development,
and that export development information is widely shared and promptly
acted on by Canadian-homebased exporters;
     Reviewing Canada's system of export credits to ensure best possible
value is received;
     Coordinating closely wiith provincial trade offices. 

FISCAL AND MONETARY POLICY THAT CREATES JOBS
     In the past twenty years, Liberal and Conservative governments have
single-mindedly attacked inflation, without regard to the consequences
of their policies on jobs and the economy.  Canada's reward has been a
steady, long-term, and permanent increase in unemployment.  Under our
plan, federal fiscal and monetary policy will complement the
government's first priority: achieving full employment. 

-->Interest Rates
     In its December 1992 "Economic Outlook", the Organization for
Economic Co-operation and Development (OECD) comments that "the
maintenance of higher-than-expected interest rates could alter the
course of the [Canadian] economy for the worse."
     We agree with the OECD analysts that higher interest rates will
damage the Canadian economy.  Current interest rates may look low in
nominal terms, but in real terms--after inflation--they are very high. 
At almost 5 percent, our real interest rates are about double the real
interest rates of 1 to 3 percent in the United States. 
     Canada's real interest rates should continue to decline.  Lower
real interest rates will contribute to faster economic growth and will
reduce government debt service charges, helping to pay for both private
and public- sector investments necessary to move towards a
full-employment economy. 

-->The Exchange Rate
     In the same report cited above, the OECD comments on the late-1992
decline in the value of the Canadian dollar, from 84 cents against the
U.S.  dollar to 80 cents: "...exchange-rate depreciation should allow
Canadian exporters to gain market share while restoring profit margins."
     We agree here as well.  A less punitive interest rate policy will
continue to allow our dollar to find its real value against the American
dollar and other currencies.  This will provide a much-needed boost to
our export industries.  Some studies suggest that permitting interest
rates to fall by 2 percentage points and permitting the dollar to find
its real value against other currencies would stimulate enough new
investment to create 100,000 jobs. 

-->Foreign Transfers
     Under our plan, tax-subsidized savings (RRSPs and RRPs) will be
confined to investments in Canada.  The Canadian taxpayer will no longer
subsidize transfers of capital that create jobs in other countries. 

-->The Public Debt
     The OECD estimates that Canada's net public debt owed by all levels
of government in 1992 is equivalent to 53.9 percent of our gross
domestic product.  That is considerably higher than most of our major
trading partners.  Other ways of calculating the level of our debt set
it even higher.  Over 32 cents of every federal dollar goes to interest
on the public debt-- about $40 billion a year.  Some $8 billion goes out
of the country to foreign holders of our federal debt. 
     According to the OECD the U.S.  net public debt is 37.9 of the GDP;
the United Kingdom 35.6 percent; France 28.8 percent; Germany 22.7
percent; Japan 6.1 percent.  The OECD calculates that Sweden's net
public debt as a percentage of gross domestic product is only 3.4
percent. 
     Since our major trading partners don't devote as much as we do to
paying interest on their accumulated public debt (aggregating all levels
of government), they have comparatively more available to invest in
physical and social infrastructure; in industry; in research and
development; and in adopting more sustainable and efficient
environmental policies. 
     If Canada's comparative disadvantage in this respect is sustained
over a long period, the quality of life of Canadians will decline
relative to those of our trading partners, and our products and services
will, broadly speaking, likely be less competitive in both our domestiic
and foreign markets. 
     A continued high-unemployment, trickle-down economic policy that
strangles economic growth, and piles up ever more public debt to provide
income support for jobless Canadians who could be contributing to
growth, will guarantee this result. 
     The federal government will collect roughly $370 million a year in
federal income taxes from every 100,000 unemployed workers we can get
back to work.  Getting those same 100,000 workers back on the job will
save the federal government about $900 million a year in income support
they'll no longer need.  And the increased economic activity those
workers will generate will indirectly create hundreds of millions of
dollars more in revenues for the federal purse.  In short, reducing
unemployment is a highly efficient way to cut the annual federal
deficit. 
     We have to rebuild our real economy, or there is no solution to
Canada's fiscal problems.  We therefore believe that most major new
government investments should be directed to programs such as
infrastructure, venture capital, training, child care, and research and
development, which will create real jobs, or otherwise earn a return by
producing a more competitive workforce or more economic growth. 
     In the long term, Canada must get its net public debt more closely
in line with its major trading partners.  To do so, our plan will help
turn unemployment around without increasing the deficit over a
Parliamentary term, by balancing new spending with new revenue,
reallocations of existing funds, and by helping to trigger growth. 
     We will work hard to eliminate inefficiencies in government
spending.  For example, we will cut subsidies and tax breaks to produce
a fair return to the Canadian taxpayer.  Canada's Auditor-General
identifies areas of waste and inefficiency in every annual report: the
Auditor-General will get a ready response rather than a cold shoulder
under our plan. 
     And we will seek to reallocate funds from lower priority programs
to higher priority programs, before adding to the debt to fund
initiatives.  For example, our commitment to real global security will
mean lower priority on defense spending.