| Abstract: | Canada is currently involved in renegotiating its tariffs in the present discussions on the General Agreement on Tariffs and Trade (gatt). Although official policy seems to be cast in terms of sectoral tariff cuts, reflecting Canada's trading strengths and weaknesses, there has been strong advocacy by some economists that Canada should enter free-trade agreements with the United States or preferably on a multilateral basis (Daly and Globerman, 1976; Economic Council of Canada, 1975; Wonnacott, 1975). The recent books advocating free trade are persuasive in mood and argument but their authors follow "the established orthodoxy of most economists in this country over the past two decades: foreign investment is, of itself, not a problem except to the jaundiced eye of the (nationalist) beholder. The tariff is the real villain … There are no problems, in this view that a good dose of free trade and free capital markets will not cure" (Rotstein, 1972, 2). So, we are faced with a paradox: on the one hand some economists, including those working for the Economic Council, are strongly committed to the argument that free trade will lead to manufacturing success for Canada while on the other hand the nation is experiencing its worst negative balance for secondary manufactured goods. Canada's trading partners have indicated increasingly that Canada does not produce finished goods of the type they require at attractive prices. This anti-export syndrome is a product of the high exchange value of the Canadian dollar (till early 1977) and the high basic cost of Canadian goods. |
