William Watson: War with Wallonia averted! National treatment survives! (maybe)
In the part of the Wealth of Nations where he talks about buying goods from neighbouring countries if they can produce them more cheaply than we can—“What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom” (Book IV, Ch 2)—Adam Smith tells of a war between France and Holland in 1672 that “seems to have been in part occasioned by [a] commercial dispute” triggered by Jean-Baptiste Colbert’s aggressive tariffs of 1667.
For a while late last week and early this, it looked as if Canada might have to call up the reserves in preparation for hostilities against Wallonia, the predominantly French-speaking part of Belgium, which was holding out—the very last jurisdiction in Europe to do so—against the CETA.
CETA is not, as you might think, the Canada-EU Trade Agreement but rather the Comprehensive Economic and Trade Agreement. As a result of last minute negotiations (these things always come down to the last minute—the best-known book about the Canada-U.S. Free Trade Agreement is Michael Hart’s Decision at Midnight) it seems the deal has now been saved, although back it must go to 38 different European decision-making bodies for approval of the tiny tweaks that in the end satisfied the Walloons (rhymes with “balloons”).
It seems no one likes trade deals anymore. Partly this is because they’re more or less incomprehensible. The entire Canada-U.S. Reciprocity Agreement of 1854 was less than 2,000 words. CETA is more than 1,500 pages, though I suppose that depends which reader you use. In large part, the length is to provide carve-outs and exceptions of one kind or another to protect and assuage different domestic interests. What’s rich is that the interests thus protected often turn around to complain about the obvious unfairness of deals that are so complicated. “They must be unfair. Look how many pages they are!”
Richness multiplies. I was at a conference in the United States a couple of weeks ago at which a presenter, one with considerable experience as a U.S. trade negotiator, complained, Trump-like, that NAFTA and TPP involve all sorts of obligations on the U.S. government that have nothing to do with trade. What’s rich about that is that what caused the international community to take up “new issues” beyond trade, such as investment, intellectual property and protectionism via domestic regulation, was U.S. negotiating pressure applied unrelentingly since the 1960s.
Would-be U.S. trade partners coveted access to the biggest, richest market in the world but had only their own much more meagre markets to offer in return. Getting access to Canada is nice for U.S. producers (especially hockey equipment producers or snow shovel makers) but it’s nothing compared to what our producers get via access to the 10-times bigger U.S. market. So the U.S. asked for these other things, which were of real interest to its companies operating globally, of which it had and still has lots. Gradually America’s partners went along and now, of all things, the U.S. is complaining about the kind of agreements on non-trade matters that were its idea in the first place.
Despite these ironies, it’s still possible to support these deals. The organizing principle of most of them, as it was of the General Agreement on Tariffs and Trade (1947-94), as it is of the World Trade Organization (1995- ) is the simple, easily communicable and actually very appealing concept of “national treatment.” In general, foreigners should be subject to the same laws that a country’s own firms and traders are. Countries can regulate in their own way. They can be as Thatcherite as they want or as Left as they want. But however they do choose to regulate they have to treat foreigners the same way as they treat domestic traders and investors.
It’s a simple, clear principle that, put in these terms, won’t actually upset very many people. Moreover, most deals allow at least some residual discrimination against foreigners where that’s necessary to get de facto equal treatment.
But “do unto foreigners as you do unto your own firms and traders” seems a rule designed to keep the peace. Even with warlike Walloons.
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