Us-Canada Free Trade Essay, Research Paper
A. Unemployment rate increases
B. Companies relocation
A. Public service
B. Canadian Culture
A. Lumber industry in Canada
B. Waste disposal
Canada-US Free Trade Agreement can be said as one of the major affair in the modern Canadian history. There are many different views of this issue; some would say Canada enjoys a huge advantage from it. “The Canadian prime minister proclaimed that the new agreement would result in a net increase of 350,000 jobs”1 In the other way, other would say Canada is the victim of this issue. From the view of most Canadian, the lost from the free trade must be more than the gain. That is because right after the agreement has established, Canada has stepped into a small recession period, unemployment has became a major issue, businesses move away from Canada. This essay is divided into three roughly parts, which looks at the issues of economy, human, and environment; besides it can be stated that the Canada-US Free Trade Agreement is not a good deal for Canada.
On January 1, 1989, the Canada-US Free Trade Agreement has finally been came into effect. Later on, North American Free Trade Agreement (NAFTA) was established in 1994, which included Mexico in the Free Trade area too. These two agreements are both established under Article XXIV of the General Agreement on Tariffs and Trade (GATT). The GATT is established in 1947 by many countries (not just Canada-US), in order to allows countries to form free trade areas. Therefore, greater trade liberalization can be achieved.
As the meaning of the name, free trade is to remove the government controls or regulation on economics activity that affect trading between US and Canada. The most important issue is the elimination of tariff for the import and export between Canada and US. However, right before the free trade agreement has been established, the tariff collected by Canada is much more than the US. It is clearly that the FTA results a directly economic loss for Canada. There is not the only concern, but several other issues has brought out indirectly.
From the point of view of a business, the goal is to use the minimum cost to get the most out of it. A company cannot run without people, it cannot run without paying the employees. As a traditional, wages for Canadian mostly are higher than the American. This is due to the higher income tax and more public service the government has to provide. If the labor cost in US or Mexico is less than in Canada, and the tariff has been minimized, to earn more profit, businesses must move out of Canada. “Four years after the deal has concluded, there were about 500,000 fewer Canadians holding full-time jobs than before the deal.”2 This proves the deal is actually eliminating the job opportunity in Canada.
Another major concern for a business is the taxation from the government. As everybody knows, Canada is a high tax rate country. Due to the relatively small population, large land mass, and our reliance on resource industries, Canada has to take more tax to support all the necessary public services. As the free trade agreement has been established, basically there is no difference to do business in either the US, Mexico or Canada. This leads to the relocation of companies from Canada to either US or Mexico. “92 percent of all new businesses established in Buffalo in 1989 were started by Canadians.”3 Also, some US companies who have subdivisions in Canada do not have to keep office in Canada in order to eliminate the tariff anymore. As investments move out from Canada, economy will turn bad and living standard in Canada will be lowered too.
As mentioned before, as investments moved out from Canada, job opportunities will be decreased. It results a higher unemployment rate and lowering of living standard. However, except for that direct effect, other indirect issues such as public service and the culture of Canadian must be discuss in here too.
People maybe surprised to hear that how does the free trade agreement is able to affect the public services in Canada. Actually, the Free trade restrictions have limited the ability of governments to respond to the social problem. Investments in Canada decease, taxation income to government decreases too. In the other way, unemployment increase, more people will depend more on social assistance such as health care, unemployment insurance, and other public services continue to grow too. Instead of supporting these services, the federal government has dismantled them. The federal government transferred these to the provincial and municipal government.
In Metro Toronto, for instance, the number of welfare cases has increased at an annual rate of 20 percent. Beginning the same year, the federal government imposed a 5 percent cap on increases in its annual Canada Assistance Plan transfers to Ontario, Alberta, and British Columbia. Over three years this cap has cost the Ontario government $3.7 billion in lost revenue for social assistance programs.4
Canadian is supposed to have some protection of their culture in the Free Trade Agreement. ” Canada’s claims that special protective measures that fully and permanently exempt culture from the rules of free trade are “enshrined” in Article 2005 of FTA”5. However, this is not really the case Canadian is having right now. Since more products from US is now able to come into the Canadian market, especially some cultural products. These cultural products included television broadcasting, music, books and movies etc. ” since 1988, sales of American recorded music to oversea has exceed the domestic US market already”6. Not only to mention the economy advantage gained from the US, but it also affect the new generation cultural development in Canada.
Canada is a resources rich country, and many people are depending on the natural resource industry. Under the free trade agreement, our government is constrained to regulate exports and imports of resources, also the use of local and regional development strategies, subsidies and environmental standard are being constrained too.
One of the important natural resources in Canada is the lumber. Since 1950, Canadian forests are in serious trouble because of over cutting and inadequate reforestation practices. The federal government has heavily subsidized reforestation carried out in Canada in the past, but the US regard it as an unfair trade practice and a subsidy to our lumber exports. Therefore, the right of Canadian government to establish environmental assistance programs is being challenged.
Another major environmental concern is the waste disposal in Canada. From the free trade agreement, waste disposal policy has been deregulated. Waste from US is now more easily to dispose in Canada. “Forth-fifths of all the toxic waste it (US) dumps ends up to Canada now”7. Following that trend, Canada will become a dumping country by the very soon.
From the previous three arguments, it has been stated very clearly that the Free Trade Agreement is obviously not favorable to the Canadian at all. Usually, the mobility of people is limited; this may due to the family and cultural factors. However, capitals are now free to flow between US, Canada and Mexico after the establishment of FTA. This results unemployment in the unfavorable country the first, then other indirect unfavorable outcomes follow. Therefore, the very first thing Canada government has to do is to develop another side-agreement for the labor standard. Otherwise the result maybe ending up that Canada’s provinces will become the new states in the United States.
BARLOW, MAUDE. 1990. Parcel of Rogues, How Free Trade is failing Canada. Toronto: Key Porter Books Limited.
CAMERON, DUCAN AND WATKINS, MEL. 1993. Canada Under Free Trade. Toronto: James Lorimer & Company Ltd.
WAARNOCK, JOHN W. 1988. Free Trade and the New Right Agenda. New Star Books Ltd.