On TPP, Trudeau Must Think Like a Keynesian

[Oscar]

On TPP, Trudeau Must Think Like a Keynesian

[ http://thetyee.ca/Opinion/2016/01/22/TP ... Keynesian/ ]

Canadian people need a new deal, not transnational corporations.

By Murray Dobbin, TheTyee.ca January 22, 2016

Place your bets. Will Justin Trudeau and his economic advisors choose a neo-Keynesian approach to the growing economic disaster facing the country or will it stick to the neo-liberal ideology that has been the stock response of Liberal and Conservative governments for the past 30 years?

Trudeau's planned deficits (though very modest ones) for three or four years suggests the possibility of a return to government intervention in the economy. But his infrastructure program is not really incompatible with neo-liberalism: even the most devout free-marketeer will agree, under pressure, that we actually need roads and bridges and sewer and water lines.

The real test of where the Liberals are going to take the economy is tied up in the government's pending decision on the Trans Pacific Partnership -- the TPP. The fact that the Liberals have not yet committed to the TPP (Trade Minister Chrystia Freeland said recently "We're very much not there yet." [ http://www.cbc.ca/news/politics/trans-p ... -1.3402248 ] -- a significant retreat from her initial statements) suggests there is a real debate going on in the PMO about signing another investment protection agreement.

There is now a large body of research and commentary exposing just how detrimental the TPP is to Canada's economy and democracy. [ http://thetyee.ca/Opinion/2016/01/18/TP ... Investors/ ] But there has been little in the commentary that looks at the actual record of these deals -- specifically the first ones signed; NAFTA and its predecessor the Canada-U.S. Free Trade Agreement. A trip down memory lane will be helpful in understanding where the TPP (and its EU counterpart, CETA) will take us.

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Keynes vs. Friedman

Perhaps Mr. Trudeau believes he can have it both ways: tinker a bit with some neo-Keynesian policies of intervention but stay in the big boys club and avoid Bay Street condemnation by signing the TPP. Unfortunately it simply doesn't work that way. An examination of what happened to Ontario's effort in strategic public investment demonstrates in spades just how incompatible the two approaches are.

Ontario's Green Energy Act promoted domestic solar and wind generation. However, in November 2012, the "buy local" aspects of the program were ruled in violation of WTO rules. [ http://www.citizen.org/documents/ontari ... -paper.pdf ]. In May, 2013 Canada lost its appeal. Ontario immediately announced that the made-in-Ontario content requirements for wind and solar projects would be scrapped. The program was effectively dead. And every time Canada signs another "trade" deal the noose tightens around any government-sponsored effort to transition to a clean-energy economy.

Even if these agreements actually enhanced trade, international trade will almost certainly remain in the doldrums for the foreseeable future. [ http://www.reuters.com/article/us-oecd- ... 1F20151109 ] This is the case not just because of the slowdown in growth in China but because most developed countries are struggling and following neo-liberal policies of austerity and suppression of wages -- the same deadly combo Canada has experienced. It all adds up to chronic low demand and diminished world trade.

One can only hope that Trudeau and his advisors will conclude that when approaching economic growth they should focus on the things they can change and avoid those they can't. Between 75 and 80 per cent of our economy is domestic: good and services produced and consumed here. If the government actually wants to grow the Canadian economy it has to find a way out of its trade straight jacket and stimulate the domestic economy. The country that rejects the ideological extremism of neo-liberalism first will have a huge advantage over the next 10 years.

But to do so requires an actual rejection of some key neo-liberal policies -- including, of course, rejection of any more investment protection agreements. Additionally, as I argued in a recent column, a return to fair and robust taxation sufficient to bring the government share of the economy back to 1980 levels -- levels necessary to permanently stimulate the domestic economy.
[ http://thetyee.ca/Opinion/2015/12/26/Ma ... tion-Fair/ ]

If the NDP is looking for ways to prosecute a new adversary the economy is it -- it will dominate the political landscape for the rest of the Liberal mandate. There are compelling argument: An industrial strategy focused on accomplishing the climate change promises of the Paris summit, a return to strings-attached federal transfers to prod the provinces to reduce tuition fees and increase social assistance levels (or even a guaranteed annual income), imposing a living-wage standard on all federally-funded projects, pressing Trudeau on his promises on CPP and EI and ending oil subsidies, eliminating the tax breaks on capital gains and dividends, adding a couple of tax brackets on wealthy Canadians, and perhaps a tax on idle corporate capital (half of one per cent would bring in over $3 billion).

Pierre Trudeau's first government faced an NDP caucus and leader that pressed him from the left on numerous fronts. Is it too much to hope that history might repeat itself? [Tyee]

Read more: Politics:
[ http://thetyee.ca/Topic/Politics/ ]

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Murray Dobbin contributes his State of the Nation column to The Tyee and Rabble. Find his previous columns here:
[ http://thetyee.ca/Bios/Murray_Dobbin/ ]