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Mitch Cronin

Is This Your Canada?

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IFG: you said

Hi, Former CPAIR - From one who often seems to encourage voter participation, that sort of nihilism comes as bit of a surprise. While apparently impressive to some folk, tarring all politics with a uniformly ugly brush is neither wise nor useful.

the difference is that there is discussion and then there is blind dogma..

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The rest of the country seems to agree Harper has turned up the volume on attack ads by a bit too much. But that's just my read, I have no back-up for that comment.

Hmmm, every time I see an opposition attack ad, I think about how the opposition complains about attack ads.

Do you like the idea of paying more for drugs now? "small guy"? Do you like the idea that some foreign pharmaceutical company could now sue our government for any legislation that hurts their profits? Can you point to a single part of the TPP that I should be happy with?

No, you should be happy with almost all of it. Unfortunately, like most of your arguments, your TPP one is wrong. I underlined the highlights.

http://www.macleans.ca/economy/economicanalysis/why-the-tpp-is-such-a-big-and-good-deal-for-canada/

"Why the TPP is such a big—and good—deal for Canada

Yes, there will be costs. But on average, we can expect TPP trade liberalization to deliver higher productivity, higher GDP, and higher incomes to Canadians

On October 4th, 1987 negotiators completed the Canada-US Free Trade Agreement. Exactly 28 years plus a day later, 12 countries agreed to form the Trans-Pacific Partnership (TPP for short). This is a big deal. The TPP will include Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam. Together, they account for about 40 per cent of global GDP and over 800 million people. The 12 countries are projected to grow even larger and account for 50 per cent of global GDP by 2050. It’s no exaggeration to call this the largest free trade deal in the world.

So, what’s in the TPP? As there are way (way) too many aspects of the deal to cover in one post, I’ll try to summarize the key changes that may find their way into the current election campaign. For interested readers, though, a technical summary is available here.

What the TPP won’t do

Let me start by saying what is not part of the TPP. There will no doubt be many misleading claims over the coming weeks about this deal, and it is useful to head them off right from the start.

It won’t lead to the privatization of crown corporations like Canada Post or Via Rail. It won’t undermine the ability of the Canadian government to subsidize Canadian cultural industries. In fact, the CBC and Telefilm Canada are specifically exempt from the provisions governing State-Owned Enterprises.

The TPP also won’t constrain governments from tackling environmental challenges. This point deserves more attention. Naomi Klein recently claims that TPP will limit the ability of countries to take action on climate change. This is just silly. Carbon taxes are in no way a violation of anything in the TPP deal. Similar charges are levelled against NAFTA, overlooking the fact that B.C. has a carbon tax which doesn’t violate anything. B.C.’s approach is perhaps the world’s best example of good environmental policy that we should all think carefully about—and one that (hopefully) Alberta will adopt very soon (though again, a topic for another day). TPP does nothing to prevent this.

Finally, one will also no doubt hear that TPP will increase drug costs. This is false, but there was indeed the potential that this could have been true. One of the main sticking points, primarily between Australia and the United States, was the length of monopoly status afforded to prescription drug companies when they bring out a new drug. For a drug to receive government approval, it must submit a large quantity of data. This data is useful to competitors, such as generic drug companies, when they produce competing drugs. So-called “data protection periods” prevent these competitors from using the original data. (A great Bookings Institute backgrounder on Prescription Drugs and the TPP is here.)

In the United States, this period is 12 years. In Canada, it is 8. In Australia, it is only 5. The US wanted longer periods, while most other countries wanted shorter. The longer the period, the longer the monopoly status of the original drug manufacturer, the longer the drug’s price remains high, and so on. There are some who label the exclusivity periods the “Death Sentence Clause.” That is a little over the top, but it would have certainly increased healthcare costs.

What does TPP do? The countries agreed on a five-year period, as Australia was demanding. As Canada already has a longer period than this, the TPP doesn’t change much at all from our perspective.

What the TPP will do: Lower trade barriers

Let’s get to the heart of the deal: trade liberalization. The TPP will lower tariffs as well as lower non-tariff technical barriers almost across the board. There are far (far) too many changes to list. There are roughly 18,000 tariff lines in the United States that will change for TPP countries. Canada has even more, with about 19,500 tariff lines. (A user-friendly download facility through the WTO is available here.) In time, almost all tariffs on goods and services going in and out of these 12 countries will fall to zero.

Consumers are the big winners here. All too often we focus on lower tariffs for Canadian producers when they export abroad. But we must not forget that lower import tariffs mean lower prices for all of us on the goods and services that we buy. Lower prices means our incomes can go further and our standards of living increase.

How large are the tariff changes likely to be? There is huge variation across products, but in the graph below I plot the simple average tariff rates for TPP countries that we don’t already have a trade agreement with.

For the most part, tariffs are not that high (a huge success of the WTO, and its predecessor the GATT). Two big countries in the TPP group include Malaysia and Vietnam. Overall, it looks like their tariffs on our goods will fall by more than our tariffs on theirs. For Singapore and New Zealand, the reverse is true (both countries are famous free trading nations).

Of course, tariffs are much higher on many specific goods. Tariff on metals and mineral products imports into Vietnam and Malaysia are roughly 40 to 50 per cent. They will be eliminated in 10 years. Petroleum products have a 30 per cent tariff in Vietnam—also scheduled to be eliminated over 10 years. Aircraft engine parts face a 5 per cent tariff in Australia, which will be eliminated once the deal is in force. The list goes on and on. Instead of listing them here, interested readers can see a (very) long list on the Department of Foreign Affairs, Trade, and Development website here, or another summary here.

Some non-tariff barriers will also be falling. The most prominent, and one that will feature loudly across various Southern Ontario ridings this election, is the increased access to imported auto parts for Canada’s auto sector. Currently, to receive preferential treatment under NAFTA, motor vehicles must contain no less than 62.5 per cent of their value from within North America. That is, most of the parts can’t come from Europe, Asia, or elsewhere. Under TPP, the threshold will be for autos to have no less than 45 per cent TPP-originating content.

Will this hurt Canada’s auto sector? Some argue it will, while others are more optimistic. In a previous article I argued that this may actually benefit Canada’s auto sector as a whole. With cheaper parts, assembly operations will become more profitable. Their productivity may rise, as will their employment and exports. If you work at a Toyota plant, this is likely good news. Of course, only time will tell, but it is certainly not obvious that lowering the new Rules-of-Origin thresholds is a “concession” or something detrimental to the Canadian auto sector as a whole.

There are also measures to liberalize services (such as banking) and provisions covering the movement of workers. As services accounts for three-quarters of Canada’s GDP and employs the vast majority of Canadian workers, this is potentially big deal. There’s also much room for growth, with services currently only 17 per cent of Canada’s total trade. As for worker mobility, this will allow technicians or other professionals to easily access these Pacific Rim markets. The details are substantially more complicated here, so I’ll leave those for someone far more knowledgeable to discuss.

The winners and losers (broadly speaking)

So what will be the likely effect of these lower trade costs? On average, we can expect higher productivity, higher GDP, and higher incomes. Of course, there will be costs on some that should not be overlooked.

At the press conference announcing the deal, International Trade Minister Ed Fast said that “we do not anticipate that there will be job losses” though some sectors “will have to adapt.” That’s just silly. There will be job losses in some sectors, and job gains in others. Overall, there will be very little if any change in total employment due to the TPP. Economists don’t focus on the number of jobs, what is far more important (in the long-run) is the type of jobs. Shifting employment towards sectors where we have a comparative advantage will increase our economy’s productivity in the long-run.

How will each of Canada’s provinces be affected? Below I plot the share of overall economic activity associated with trade with non-NAFTA TPP countries for each of Canada’s provinces.

Typically, these shares are not very large. Approximately exports from BC are 2 per cent of B.C.’s economy; they have a similar share on the import side. Ontario is a big outlier here, with imports equivalent to nearly 2.5 per cent of its GDP compared to only 0.5 per cent involved in exports. Ontario consumers and businesses that import inputs from abroad are going to win. About one-third of Ontario imports from these countries are in the form of equipment (HS codes 84 and 85, for those interested). Business importing such equipment will face lower costs, and therefore improved competitiveness. Also, Ontario consumers spend over $1 billion in food imports from non-NAFTA TPP countries. Our eventually lower tariffs will be a big boost to their pocketbooks.

Of course, only with time and further detailed reflection and analysis will we know the true consequences of this deal. From my perspective (for what what’s worth), it will be good for Canada’s economy overall. Of course there will be difficult adjustments for some workers in Canada, but our focus and attention should be on designing policies to help those adversely affected, not in blocking the deal outright as some propose.

Supply management and the TPP

Let me end with what might be the most contentious issue for the election: increased imports of dairy, chicken, turkey, and other “supply managed” products. The NDP has, and will likely continue, to demand Canada “protect” its dairy farmers with high tariffs and quotas on production. So, how does TPP affect dairy farmers and the broader Supply Management system? It barely changes a thing. The system as a whole will be retained.

There will be modest changes, however, with slight increases in the amount of certain agricultural good allowed into Canada tariff-free. These quota increases are fairly minor: equivalent to 3.25 per cent of the Canadian market for dairy, 2.3 per cent for eggs, 2.1 per cent for chicken, 2 per cent for turkey, and so on. This benefits Canadian consumers, unambiguously. What about producers? Increased competition will be a challenge, for sure, but the government will provide compensation. Affected farmers will have 100 per cent income protection for a full 10 years after TPP comes into force. The government is also setting aside $1.5 billion to compensate for lost value of quotas. Some estimate this package of compensation to be worth close to $4.3 billion over the next 15 years.

What do other countries think about this? Accounting for close to one-third of international dairy trade, New Zealand stood to gain the most from liberalization. It is surely disappointed. The trade minister there points out that, on balance, he’s happy as TPP “establishes in the long run, complete elimination of all tariffs on everything that New Zealand exports,” with two exceptions: (1) beef imported into Japan, and (2) some dairy products into Canada. He points out though that the work is not over. The deal will open up “political space for future generations” to build on. He also wisely notes “the excellent is almost always the enemy of the good”, and is happy where things landed.

We shouldn’t forget, though, that supply management is a terrible policy, especially for low income Canadians. Although TPP does little to change it, we can eliminate it unilaterally—we don’t need a trade deal to do it. In time, hopefully, better policy will prevail.

Trevor Tombe is an assistant professor in the department of economics at the University of Calgary. Follow him on Twitter: @trevortombe"

Please folks, vote for the economy on voting day.

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Mitch,

There is nothing wrong with being concerned about drug prices, but assuming the article I posted is credible, I think we now know the facts about the subject. Canada has 8 year protection and it is actually decreasing to 5 years monopoly status for the drug companies. You may not agree with 8 years protection decreasing to 5 and I do not have an opinion on this timeline but once again, it gets shorter allowing generics in sooner..

So please explain to us why you are saying drug prices will rise. You have said in very clear terms that they will so the least you can do is explain why drug prices will go up under TPP.

All I want is hard facts on the issue. If you have evidence that drug process will rise, I have no problem with it being revealed here.

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It would be nice if all the details were released right away. I am not sure why there is a waiting period. I am no expert on this stuff and am just going by the article I quoted above. However, according to the article, the timeline for protection for the drug companies in Canada goes from 8 years to 5 years.

Does this not mean that generics can come in sooner? And don't generics normally have a result of lowering the drug prices?

I happen to have some relatives that are taking very expensive drugs for a variety of ailments. This could make a difference.

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Guest tailwheel

I have to admit that I am not sure about TPP. They always say that trade agreements are goo and I am sure that there will be some jobs gained and perhaps some prices will go down. But I do hate to see good jobs lost, in any country.

I am still trying to figure it out.

Unfortunately, we hear about the job losses but rarely hear about the job gains so it is hard to figure out.

I hate sitting on the fence but have to admit that I am.

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Tariffs are a form of economic war. They create a false economy and give a sense of protection to the citizens of the country they are pretending to protect. Those who imposed them stood on the back of railway cars and lauded themselves for how they stood up for the little guy and protecting them from cut throat wages from afar.

But, like real war, the battles are waged unseen by the vast majority and it is usually the little guy standing on the front line. The sense of protection they create is often borne of propaganda, not reality, and hides many wounds never seen or understood by the masses. As much as tariffs seem to benefit some parts of the economy, there are many other parts that are held back by countervailing duties imposed by the participating country(s) in retaliation. The propagandists who would have us believe that their duties were fair and right will never tell you about what the "enemy" has imposed in response. The ultimate result is that everything is stagnated... country A can't sell its stuff to country B and vice versa.

The governments that create tariffs could be paralleled with helicopter parents of modern society. They hover over their charges and smile with the satisfaction that everyone thinks they are a great parent for being so involved and protective. Like children raised by parents who do everything for them and protect them from everything, a workforce protected by tariffs is lost when they are left on their own. Ultimately, the result is a grown child who doesn't know how to function on their own. So there are 3 levels of grown child. Those who had to stand on their own two feet, those who never had to and those whose parents realized (or were told) that they were harming their child and stopped being helicopter parents before it hurt the child permanently.

Canada is a resourceful country populated by smart resourceful people. We can easily compete in a world without tariffs and doing it before we turn into spoiled adults is better than waiting until we are completely spoiled.

When life, economics and politics move forward (as they always do), those who decide that the status quo is/was better fight and complain and get left behind. The farther they leave themselves behind, the harder it is for them to catch up and the more they complain. They are generally poor and frustrated, often complaining about how much less they have than those who accepted the change. Those who accept change and make an effort to find their place in the new reality are often more prosperous and referred to as "the haves" by those who are left behind. They are generally happier.

After the politics and economics are all behind us, when we think back on those who lived the best lives, we realize it is the ones who were happy. Is it just a coincidence that they also happened to be prosperous?

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My experience has not shown me any correlation between prosperity and happiness at all. And if you read any of the many books written lately about happiness, you'd find that quite commonly there is no correlation.

Not having things you need can certainly cause misery, but after the needs are met, "prosperity" has diddly to do with happiness.

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I agree, Mitch. Prosperity doesn't bring happiness.

But you miss my point completely.

People who are, by nature, unhappy (pessimists) are less likely to be prosperous.

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Trade tariffs and other economic tools that were so-called barriers to trade actually protected and supported the growth of a middle class. The media soon started referring to these policies as 'protectionist' and anti growth, which led to their being dropped in favour of 'free' instead of 'fair' trade policies and the redirection of wealth to the 1%ers.

Maybe we could eliminate unions altogether, workplace safety laws and everything else that made and maintained a middle class in favour of a more level playing field with the likes of Bangladesh etc.?

Inchman; would you stand against the threat if Canada were to decide to allow anti-labour airlines like Norwegian to fly side-by-side against you out of Pearson with 787's flown by oriental pilots that make less than a third of what you do?

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Mitch: although you and I will likely disagree on most things, it is good to see you back posting on this forum. Your thoughts do provoke discussion and that is good.

Have a great Thanksgiving.

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Tariffs are a form of economic war. They create a false economy and give a sense of protection to the citizens of the country they are pretending to protect. Those who imposed them stood on the back of railway cars and lauded themselves for how they stood up for the little guy and protecting them from cut throat wages from afar.

They are also a form of protectionism used to protect jobs, but they are not the only ones our government has imposed. Your opinion of tariffs is pretty clear. I wonder if you feel the same about our government's past actions to restrict airport slot access to certain foreign carriers, done largely to protect jobs at your own employer.

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.... People who are, by nature, unhappy (pessimists) are less likely to be prosperous.

Well, Inchman ... pessimists may plan for the worst (still hoping for the best, tho', like anybody else), but in my own experience, life then yields many happy surprises ;)

Cheers, IFG :b:

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Mitch: although you and I will likely disagree on most things, it is good to see you back posting on this forum. Your thoughts do provoke discussion and that is good.

Have a great Thanksgiving.

I agree, different opinions are good. I just wouldn't mind some detail on why there is an opinion that drug prices are going to go up under the TPP. It may very well be true and I certainly would like to know why. This is an important issue and could change votes as many people spend a lot of money on drugs.

Mitch?

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I told you already flyinghigh.... I won't take your bait. You have all the same resources at your disposal as the rest of us do.... much to the chagrin of certain wannabe autocrats. :)

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I know a sales rep for a large multinational pharmaceutical company. He believes prices may rise, especially if the patent protection times are shortened, since the company who develops it can use that as an excuse for higher prices to recoup their research costs.

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They are also a form of protectionism used to protect jobs, but they are not the only ones our government has imposed. Your opinion of tariffs is pretty clear. I wonder if you feel the same about our government's past actions to restrict airport slot access to certain foreign carriers, done largely to protect jobs at your own employer.

The bottom line is that I believe in an equal playing field from a subsidy/tariff point of view. The foreign carrier in question has been identified by multiple countries for not playing fair. In this particular case, they started the war and the Canadian government did the right thing by restricting them. And I'm glad it happend happen before they did irreparable damage to another country's air services. They, and their government, are relentless in their efforts to take over the world of aviation and have already wiped out a number of airlines and hurt others significantly.

The UAE has been shown to use many techniques to prop up EK. This is in direct opposition to both the spirit and letter of the concept of open skies.

As for other airlines who do follow the rules, I have no problem with them coming to Canada regardless as to what they pay their pilots. Last time I looked, Canada had very few restrictions on airlines from countries who play fair. As a matter of fact, aviation is an excellent example of how lack of tariffs can bring up the wages of the less advantaged country rather than the other way around. Most of the pressure on pilot wages over the last couple of decades was from within North America, not beyond.

As far as optimism and pessimism goes, IFG, I agree. But rather than sitting back and whining "woe is me", if people just thought "what does this mean for the future" or "how can I make this work for me", they would be both happier and more prosperous.

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I told you already flyinghigh.... I won't take your bait. You have all the same resources at your disposal as the rest of us do....

I am not sure what bait there is when asking for details to back up a firm statement that you made. I did point out multiple points of the TPP that you should be happy with after you asked me to do so. Are you happy with it now?

I know a sales rep for a large multinational pharmaceutical company. He believes prices may rise, especially if the patent protection times are shortened, since the company who develops it can use that as an excuse for higher prices to recoup their research costs.

Thanks J.O.

It seems awfully strange to me. If the patent period is extended, there is strong opposition as it is stated that the companies will have a longer monopoly period. I can see reason in that argument. Now it is shortened and guess what? Prices will rise as an excuse will be made for a shorter monopoly period.

What should be done? Cancel the TPP perhaps.

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I can see J.O.'s point to an extent. Prices may rise over the initial 5 year period, but that would be offset greatly by the cheaper cost thereafter imho.

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Lol... you certainly wouldn't find it in those words.

You all know where I'm coming from.... if not, you're not missing anything, so don't worry about it. :)

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To get back to the original question, the resolution should be looked at in more detail.

First, the resolution was put forth by Russia. They don't do anything without an agenda. In this case, it might give them a good opportunity to invade the Ukraine further, suggesting that there are neo-Nazi groups starting to organize there.

Second, the US and Ukraine (the target) voted against it. The entire EU abstained, so are we that far off center on this?

One part of the resolution suggests that countries should pass laws that limit freedom of speech. Our society is based on free speech and fortunately the Canadian ambassador is not going to be baited by Putin.

( Shall declare illegal and prohibit organizations, and organized and all other propaganda activities, that promote and incite racial discrimination, and shall recognize participation in such organizations or activities as an offence punishable by law;

The resolution was 7 pages long, of which the Huff decided to focus on 2 paragraphs.

Basically it was an agenda-based resolution with a couple of paragraphs that said "and we should uphold Mom and apple pie". HP fashioned an attention getting headline and it appeared to catch some people, speaking of being baited.

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Pretty much as I stated earlier in the thread about Russia's games. It is unfortunate that some use this story as an excuse to paint a political leader as a Nazi-sympathizer or whatever the intention was.

It seems to encapsulate much of the type of arguments that we see as excuses from that part of the spectrum.

And when asked to back up arguments(as seen here), there is none to be found aside from the occasional "Dear Leader" statement or something similar.

Caramilk bars is the response....what a role model.

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