EclectEcon

From the Toronto Globe and Mail:

Canada's economy has flourished under the North American free-trade agreement, and with the right policy moves, could repeat that experience as it deals with the trade shock from Asia, a new study suggests.

In a paper to be released this week, Royal Bank of Canada examines a wide range of data showing Canada's economic performance before and after free trade with the rest of North America.

“Canadians have prospered,” conclude economists Craig Wright and Derek Holt.

“Few countries have provided as shining an example of how to adapt and prosper in a post-freer trade world than Canada.”

But it wasn't always clear that this would be the case — something that's important to keep in mind when dealing with the intense competition from Asia these days, says Mr. Holt, RBC's assistant chief economist.

Before Canada signed on to the Canada-U.S. free-trade agreement in 1988 and the North American free-trade agreement in 1993, critics charged that Canadian production would move south, exports would evaporate, jobs would dry up, foreign investment in Canada would deteriorate, the tax base would shrink, and the restructuring would force the country into a painful and long-term funk.

Those critics were the interventionists from the NDP, and their supporters. The McDonald Commission published something like 80 or more volumes of studies carried out in the early 1980s and concluded, following research by John Whalley, Rick Harris, and others, that the net gain to Canada from moving toward freer trade would be on the order of 5 - 10%. Respectable economists knew all about these studies. The only concern at the time was how and whether to deal with displacements caused by the movement toward freer trade, and for the most part the social safety net in Canada did its job.