Canadian Manufacturing

Canada must revamp trade, investment policies to exploit emerging global patterns: report

C.D. Howe Institute report says new policies needed for nation to wean itself from 'mercantilist' approach

Toronto—Canada should adapt its international trade and investment policies to revitalize its flagging trade and productivity performance, according to a new report from the C.D. Howe Institute.

The report, Breaking Free: a Post-mercantilist Trade and Productivity Agenda for Canada, urges the nation to reshape policies more in line with a world of global value chains, evolving trade and investment patterns and deepening economic integration.

C.D. Howe research fellow Michael Hart says to be more competitive, Canada needs to wean itself more completely from a mercantilist approach best suited to an era in which products and firms had clear national identities, which is rarely the case today.

“Canada’s trade and investment policies are stuck in the past. We risk being caught flat-footed and side-lined in the highly integrated global marketplace,” said Hart, holder of the Simon Reisman Chair in Trade Policy at the Norman Paterson School of International Affairs at Carleton University.

What’s more, Canada shouldn’t wait for a hypothetical payoff from negotiations with other countries, according to Hart, but instead proceed in its own interest to remove home-grown impediments to trade.

He identifies disruptive anti-dumping and countervailing duty regimes, ineffective subsidies and procurement preferences, tariff restrictions, including in supply-managed sectors, overabundant regulations and remaining restrictions on foreign ownership as areas where liberalization should prevail.

Such reforms would generate cost savings for the government, and leave the economy more competitive and with a stronger tax base, he claims.

These reforms, according to the report, would leave Canada free to focus on easing passage for secure trade and people at the vital Canada-U.S. border and aligning its regulations with the United States and other major trading partners in areas where regulatory duplication does not make sense.

Beyond the United States, Canada should focus its diplomatic resources on the basis of a clearly articulated business case or foreign policy rationale, the report claims.

By these criteria, Hart said there is more potential for a useful breakthrough for Canada across the Pacific—where there is growing demand for what Canada can provide and where government-to-government relations “remain an important part of enhancing economic ties”—than across the Atlantic or in the rest of the Americas.

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