In the best possible scenario, you would look to find which countries do things best, at the lowest cost, with an eye to worker safety, and that is where you would want to buy a product. Yes, that is an oversimplification of the process since there are numerous factors at play, particularly the exchange rates of international currencies and the cost of international transportation, being two that come immediately to mind.
However, politics is the real barrier to making trade flow more ‘naturally.’ The influence politicians have on trade is massive, and, simply put, hard to understand, and harder still for markets to predict. Typically such interferences manifest themselves as various tariffs and regulations imposed to limit market access to certain things or from certain countries. It is typical of two countries arguing over even minor disputes to impose trade barriers to apply pressure to resolve the dispute in their favour. If the tariffs and regulations happen to be on an agricultural product, farmers in some companies are suddenly being squeezed as their government dukes it out with some other country.
Politicians also get into the act of muddying trade waters when they seek to appease their own people by protectionist actions. We have seen an increase of this of late as countries, led by the United States, look inward in terms of trade. This one is more understandable, at least on a philosophical level. There is a level of common sense to wanting to, for example, buy Canadian. It makes sense that people should want to support industry jobs in their own country. However, the question that follows is at what cost that support is reasonable. If you can import shirts, cars or wheat from another country at a lower cost to consumers, is that reasonable to do?
Of course, the rules and regulations of trade are supposed to be made clearer and protected from politicians’ interferences when trade deals are inked. The most obvious one for Canadians is the North American Free Trade Agreement. However, at present, CETA (the Canada-EU deal born in 2017) is getting more press as EU countries appear to be meddling with regulations even with an agreement in place. Therein lies the issue. Trade deals, in principle, are good, but only if both sides wish to honour the details. Even with NAFTA, the pork, beef, wheat and softwood lumber sectors have had to go through extensive and costly litigation to get the US access the deal outlined. Moving forward, how such deals stand up to increased protectionism will be interesting to watch, especially for an export-reliant Canadian farm sector.
- Calvin Daniels
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Disclaimer: opinions expressed are those of the writer.