All Business

FREE TRADE OR EXTINCTION

Neanderthals were isolationists, and look what happened to them

STEVE MAICH April 25 2005
All Business

FREE TRADE OR EXTINCTION

Neanderthals were isolationists, and look what happened to them

STEVE MAICH April 25 2005

FREE TRADE OR EXTINCTION

Neanderthals were isolationists, and look what happened to them

All Business

STEVE MAICH

NEXT TIME the guy next door goes off on a rant about how free trade is ruining the country and how Ottawa has to do more to protect Canadian jobs, you might want to gently remind him that protectionism and tariffs only lead to higher prices, inefficient industries and a lower standard of living. Or you could just call him a Neanderthal.

This approach may not win you many friends, but you’d have history on your side. A new study by economists at Michigan State University, Tilburg University in the Netherlands and the University of Wyoming suggests the Neanderthals may have died out 30,000

years ago in large part because they failed to embrace the principles of free trade. According to the researchers, Homo sapiens figured out how to divide labour and trade goods within and between regions, while the shorter, stronger Neanderthals lived in disorganized, isolated tribes. As a result, the knuckle draggers gradually disappeared from the face of the earth and Homo sapiens went on to create the wonders of the world, such as luxury automobiles, reality TV and the double mochaccino.

Granted, this is only one theory among many to explain the extinction of our squat cousins. But the evidence provides some tantalizing food for thought—especially now, as we grapple with an increasingly hostile environment for cross-border commerce. Throughout the Western world, anti-globalization protests, trade disputes and politically motivated tariff walls are clogging the arteries of commerce. And nowhere is the rise of protectionism more worrying than in that bastion of free enterprise, the United States.

To say the Canada/U.S. trade partnership has hit a rocky patch is like saying Yellowknife can be chilly in January. From the scientifically unsupported ban on Canadian beef, and the totally indefensible anti-dumping case against Canadian pork producers, to the unending softwood lumber dispute and Americans’ constant agitation over agricultural subsidies, it’s become obvious the Bush administration’s enthusiasm for free enterprise is, shall we say... inconsistent.

Even the World Trade Organization hasn’t been able to patch the cracks in the world’s

WHILE THE U.S. and Canada sink into a mire of retaliatory pique, Asian tigers are weighing a partnership that could challenge North America’s economic dominance

most extensive trade relationship. Created to arbitrate disputes and enforce international treaties, the WTO has repeatedly backed Canada when the softwood issue came before its panel. But when the U.S. and others choose not to play by the rules, there’s not a thing anyone can do except retaliate. And so mutually destructive trade skirmishes remain standard practice worldwide.

In May, Canada will slap a 15 per cent surtax on several U.S. imports in protest against the Byrd amendment, a contentious piece of legislation that allows the U.S. government to distribute money from antidumping and other trade levies to American companies deemed to have been harmed by unfair trading practices. U.S. products such as cigarettes and oysters will be more

expensive here—all because our American cousins have, yet again, chosen to play cheap politics rather than live up to their international commitments. The European Union has imposed similar sanctions on U.S. goods, and several others, including Mexico and Japan, are following suit. But don’t hold your breath waiting for Washington to have a change of heart. The Byrd controversy isn’t an isolated policy spat. It’s another example of how the world’s most important trading nation is backsliding into a shell of protectionism and screw-you individualism.

For Canada, the consequences are al-

ready becoming obvious. We are a trading nation to the core, and cross-border exports account for about 27 per cent of this country’s gross domestic product. Between 2001 and 2003, our exports fell by $22.5 billion, or almost five per cent, due almost entirely to declining shipments south of the border. If not for rising energy prices, the decline would have been even worse. Some of this was due to a rising loonie and the economic slowdown in the U.S., but the collapse of lumber and beef sales, and the generally slower traffic at the border, made a bad situation worse.

While the United States and its main trading partners sink into a mire of punitive tariffs and retaliatory pique, nations elsewhere are tearing down the walls that separate their economies. China recently signed a major trade pact with Pakistan and has floated the idea of establishing a free trade agreement with India. That means nations with a history of mutual distrust are moving toward a partnership that would link two of the world’s fastest-growing economies and present a serious challenge to North America’s global economic dominance.

All of which leaves Canada with a choice. Option one: we can finally forge new ties with the exploding economic tigers in Asia and diversify our trade. Last week’s tentative deal between Enbridge and PetroChina to send up to 200,000 barrels of oil a day overseas is a good step in the right direction. But given that only 1.3 per cent of Canada’s exports went to China in 2003, compared to 79.7 per cent heading south, we’ve got a lot of ground to make up. No country will ever supplant the U.S. as our biggest trading partner, but we desperately need links with other nations to compliment it.

Option two? To close our eyes to the changing world. That’s the one the Neanderthals chose, and it didn’t turn out so well. IK1

Read Steve Maich’s weblog, “All Business,” at www.macleans.ca/allbusiness