Tall trade tales in Harper's new Global Markets Action Plan

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The Harper government has replaced Canadian foreign policy with export promotion, and made global trade the latest plank in its permanent election campaign. Last week it released the Global Markets Action Plan, featuring a public relations effort similar to its long-standing Economic Action Plan.

Putting small- and medium-sized business up on the export platform is a main objective of economic policy according to the Conservatives. The paper talks of export zones with private equity finance, innovative technology, being tied into world centres, and breaking into priority emerging markets.

Accordingly, Canadian embassies will now become a branch of Canadian industry, dedicated to promoting the profits of Canadian companies. The plan lists 22 sectors where Canadian firms are said to be world-beaters, ready to take on international competition.

The issue of how "Canadian" are foreign-owned firms which dominate some of these sectors (auto for instance) and how much foreign firms intend to go abroad for Canada, create jobs here, and remit profits here, is ignored.

Instead, expect to see publicly funded government ads running in the months up to the October 2015 election extolling the virtues of exports for Canadian prosperity.

The new plan has the backing of the same business lobby groups that have been dictating economic policy in Canada for more than 30 years: the Canadian Federation of Independent Business, Canadian Chamber of Commerce, Canadian Council of Chief Executives, and Canadian Manufacturers & Exporters.

A former Foreign Affairs chief economist and deputy chief economist have taken a good look at economic policy and thrown cold water on the idea that it makes sense to convert Canadian small- and medium-sized businesses into champion exporters. The evidence suggests when conditions change, firms exit the export market. About 13,000 small and medium businesses left the U.S. market when in 2006 the Canadian dollar rose sharply, cutting or eliminating profits margins.

Do not expect to be told where the serious money that needs to be invested in order to break into new markets abroad is going to come from. These "sunk costs" (from $600,000 to $750,000 per firm) can take years to recoup, and many companies give up and go home when the returns do not arrive in a short-term frame.

In their efforts to promote their economic competence, the Conservatives have reached back in time to the 16th century and the discredited economic doctrine known as mercantilism, which linked a foreign trade surplus with the accumulation of wealth in the form of gold bullion.

International trade has an impact on society that goes far beyond increasing revenues. By the 18th century, the Physiocrats had identified what a country produced as the source of its wealth, not what part of it was sold abroad for payment in gold.

Canadian goods have been sold in other countries for centuries, but the Conservatives seem to have learned nothing from the experience. The great Canadian economic historian and theorist Harold Innis saw that what Canadians produced shaped Canada and its institutions. In effect, a society is what it does, how, and with what.

Innis studied closely what Canada produced in the centuries following European colonization: fish, fur, lumber, mined minerals, and shipping by rail and maritime transport. He showed how exports created hardship when prices fell and wrought havoc when markets turned away from Canadian products.

In the worst cases, for example the 1930s, the world economy collapsed and took a major part of the Western Canadian economy dependent on wheat exports down with it. Rail transportation infrastructure was in bankruptcy. The prairie provinces could not meet their debt obligations and the Bank of Canada was created to lend them money. Unemployment was catastrophic, citizens were destitute.

Two lessons were learned, both forgotten by the Conservatives: first, building economic security requires a strong domestic economy built on public investments and public institutions; second, international co-operation is needed to maintain peace and security in the world and to prevent poorer nations from becoming victims of powerful nations. 

The Conservatives have already abolished the Canadian International Development Agency, the institution created to build sustainable prosperity in poor countries. As for diplomacy, their approach to peace and security has been roundly criticized by Joe Clark, a former Conservative minister of Foreign Affairs.

In the Global Markets Action plan the Conservatives trumpet their commitment to the Canadian economy, hoping to re-enforce faith among Conservative voters that the government has matters fully in hand. Government by advertising and press release is unlikely to translate into good jobs, sustainable growth or shared prosperity, but that is not the idea anyway.

In foreign policy as in everything else, the Harper government positions itself for the next election, and counts on being able to duck out of the way when things go wrong.

Duncan Cameron is the president of rabble.ca and writes a weekly column on politics and current affairs.

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