Weekly Bulletin #5

During the past week, a few more polls have come out that show although the rise of the Tory fortunes has ebbed somewhat (they are back in minority territory), the Liberals slide has not abated. A lot can happen between now and the next election, especially considering none of us know when it will occur, but the Liberals have their work cut out if they want to even form a weak minority while a majority is possible but far from certain for the Tories. Even the most optimistic scenario for them would show them only winning a majority by a few seats, thus a solid Tory majority is out of the picture for now. In terms of events this past week, the big one was the prime-minister visiting India.

As a country with more than 1 billion people, a growing middle class, a growing educated population, and a young population, it is a country we can ill afford to ignore. Increased trade and investment between the two countries will undoubtedly benefit both countries at the same time forming any trade or investment agreement can be somewhat tricky. India, despite its growth, is still a developing country. Corruption and weak infrastructure have been cited as major deterrents to Canadian firms investing there and likewise some people express legitimate concern that free trade agreements are only feasible with countries that have similiar wages, which is clearly not the case in India. I support establishing a trade agreement to remove all tariffs on non-sensitive goods between the two countries while gradually reduce tariffs in the more sensitive areas as well as eliminate many of the non-tariff barriers. I also support an investment deal that would grant Canadian and Indian investors full access to all sectors of the economy open to foreign investment. This would not prevent governments from implementing laws regulating investment as long as they applied equally to both domestic and foreign investors and in the case of takeovers and entry of foreign investors, as long as they are no more restrictive than those applied to other foreign investors. Labour mobility would not be appropriate at this time and likewise I support maintaining visas on Indian nationals wishing to visit Canada (and likewise think India has every right to maintain visas on Canadian visitors). At the same time we could do a better job of recognizing foreign credentials and also making it easier for legitimate visitors to obtain visas. That does not mean we automatically recognize foreign credentials, there have been cases of individuals presenting fraudalent ones as well as many Indian universities do not meet the standards required here. However, those who do meet Canadian standards should be able to have their's recognized. Some standardized test would probably be the best solution. Also knowledge of one of the two official languages should be a requirement since I wouldn't want a doctor operating on me who couldn't speak English. And to avoid sounding racist, I believe any person practicing in the medical profession anywhere should speak the local language. Otherwise an English Canadian doctor who cannot speak French shouldn't practice in Quebec.

Still, I believe longer term, more open trade and investment will be good for Canada. Now I know there are two common concerns which many will raise about freer trade with India. The first is we will be flooded with cheap imports. For starters, India is member of the WTO so under WTO rules, Canada must grant most favoured nation status to all WTO members. This means whatever the lowest tariff applied for any good (save those we have free trade agreements with) from any WTO country, this must be applied for good from all WTO countries. In the case of Canada, tariffs on imports from India are already very low to begin with. In fact it is Indian tariffs on Canadian imports that need to come down more than anything. In addition, while cheaper imports may result in some lost jobs, it will create more jobs overall. Canada is an export driven economy so the more export markets we can open, the more jobs we will create. Likewise cheaper imports means consumers have more money left over to buy other goods and services and this will create jobs elsewhere. Through comparative advantage, trade is a win win scenario for both sides, it is not a zero sum game as some like to think. When Canada signed NAFTA, many jobs were lost, but more were created as a result of NAFTA. One can feel individually sorry for those who lost their job, but government policy must be based on what is best for the whole country, not what benefits one individual.

The other concern is offshore outsourcing which is quite prevalent nowadays not just for low skilled jobs like call centres, but even many IT jobs. I know people who have personally lost their jobs due to this in the past year and I am sure many others do. However, this concern should not result in us adopting protectionist measures. For starters, we don't have a free trade agreement with India and neither do Britain or the United States, yet that hasn't slowed or prevented offshore outsourcing, so having more open trade will not affect this one iota. In fact one could argue more open trade would reduce offshore outsourcing since as the standard of living of the average Indian rises, they will demand higher wages and as wages rise, the cost benefits for firms of outsourcing will diminish. Even if their wages are still lower, there is a high cost to set up operations abroad as well as many risks so wages have to be significantly lower for it to be profitable. Besides, if it becomes unprofitable in India, the firms that outsource will just find another location i.e. Nigeria or wherever. The best way to reduce outsourcing for those who oppose it is to not buy from firms who do it. If enough consumers refuse to buy from firms who do it, firms will stop doing it. That is the great thing about the free market, is consumers have the power to influence the behavior of firms so rather than asking the government to clamp down on it, those who oppose it should vote with their wallet. As long as consumers demand lower prices and workers demand higher wages, it won't be possible for firms to meet both demands and stay profitable, thus they will outsource. As with everything, there are cost and benefits and the reality is we would pay more for goods and services if outsourcing didn't occur, so people need to realize, you cannot employ only domestic workers and expect cheaper prices. You want to stop outsourcing, you need to be prepared to pay higher prices. And maybe that is not a bad thing, but people need to be realistic on what can and cannot be done.

Overall, I am glad to see the PM reaching out to India and hopefully China soon. I should note though that despite their differences, the Conservatives, Liberals, and Bloc Quebecois are all generally pro free trade while the NDP and the Greens are still protectionist, so this is not an issue that will determine which party I would vote for as the Liberals and Conservatives are similiar enough on this issue even though this wasn't always the case.