Free Trade . . . for Big Business

Against the Current No. 19, March/April 1989

Francois Moreau

“FREE-TRADE PRESSURE is on Canada’s unions,” said The Globe and Mail, Canada’s largest daily business paper, the day after the free-trade agreement between the United States and Canada went into force on January 1, 1989. After more than a year of stormy debate and political confrontation, this came as a sweet victory for Canada’s ruling class, which had spent millions of dollars campaigning for free trade against massive opposition.

Free trade was the main issue at stake in the Canadian federal elections held November 21, 1988. Most opinion polls indicated that a majority of the population opposed the free-trade proposals of Bryan Mulroney’s outgoing Conservative government. But despite the fall of its popular vote to 43percent from 52 percent in 1984, Mulroney’s government was able to retain a comfortable majority of seats in the House of Commons, thanks to the vagaries of the parliamentary system acquired under British imperial tutelage.

The free-trade agreement provides for a gradual phasing out of remaining tariffs between Canada and the United States, which cover about a quarter of the two-way trade between the two countries. This in itself would not be the end of the world, since tariffs are already quite low and have been falling steadily since World War II through GATI’s bar- gaining rounds.

More important are the so-called “non-tariff’ barriers, which cover any- thing likely to have any effect on a corporation’s competitive position in the other country’s market Trade economists and officials complain that while tariffs have been going down over the past decades, non-tariff barriers have been steadily reinforced over the same period of time.

U.S. government officials and corporations especially resent what they see as government alterations of free-market forces on the Canadian side of the Order, through subsidies, grants, low-interest loans, regulated prices, marketing boards, purchasing policies, safety requirements, foreign investment limitations, Canadian ownership rules, support for industries deemed essential, etc.

In the eyes of American bosses, those “unfair practices” even extend to social programs such as public pension schemes and even public health insurance, all considered to give undue advantage to Canadian corporations. For instance, automobile companies in Canada don’t have to fund health plans negotiated with their employees, since there is a public health insurance system in Canada.

The so-called “free trade” agreement between the United States and Canada should rather be seen as a massive deregulation program designed to shift the balance even more toward economic liberalism, the free reign of market forces. This is in line with the ruling class’s overall shift to the right during the 1980s, characterized by a spirited attempt to roll back the oppressed and workers’ gains of the 1960s and ’70s in order to beef up its profit rate, which had been severely depressed during the stagnation and crisis of the 1970s and early ’80s.

For some years now the Canadian bourgeoisie has witnessed with growing envy the great achievements of its British and American counterparts in their class war against their country’s union movement. The Canadian bourgeoisie has not been able to achieve anything of the magnitude of the British miners’ defeat or the American unions’ self-destructive concession bargaining.

Instead, there is a growing gap between the rate of unionization in the workers tried to benefit from the recovery and to take advantage of the virtual full employment in Southern Ontario’s industrial core. Labor costs in Canada are now higher than in most areas of the United States. Canadian bosses are not amused.

On the social front, the Mulroney government met with stiff resistance when, in 1985, it tried to remove the old-age pension’s adjustment to the cost of living. It was forced to retreat under a massive mobilization of the retired.

Contrary to its U.S. role model Ronald Reagan, Mulroney and his Conservatives were not able to run on a platform of deep, savage cuts in social programs. No party could get elected on such a platform in Canada, given the depth of working-class feeling for those programs. The Tories had to promise that they would leave all those programs untouched. Consequently, each time they try to cut any social program of importance they provoke a political crisis.

A never-ending string of scandals has further eroded their support, and the Tories have badly trailed opposition party ties in the polls for half of their mandate. As a result, they have put their austerity programs on the shelf in order to rebuild their electoral base. Canadian bosses were discontented by this lack of courage but continued supporting the Tories, not only because from their point of view the Conservatives represented a lesser evil, but mostly because of free trade.

Why Business Backs Free Trade

The whole-hearted support given to free trade by the bulk of the Canadian capitalist class is a new development True, mainstream economists had always been in favor of free trade for ideological reasons, having nothing to do with the real world, but the real bourgeoisie knew better. It knew that the “perfect competition” dear to academic economists has not existed for a century, if ever.

Two-thirds of Canadian-U.S. trade flows between components of the same multinational corporations. The three big U.S. auto makers account for a good third of Canada’s U.S. trade. So, the Canadian bourgeoisie knew it needed some kind of protection from its government against the overwhelming power of U.S. business up to the 1960s. The campaign was instrumental in defeating free trade the last time it was proposed, in 1911, by the Laurier government.

So, what has changed? First, U.S. corporations no longer enjoy the same kind of crushing superiority over their competitors. Quite the contrary, the American bourgeoisie has steadily lost ground to its European, and ow, Asian competitors. This could lead it to retreat to Fortress America in the trade wars to come. The Canadian bourgeoisie doesn’t want to be left out in the cold. Forced to choose, it would rather join Fortress America. Its free trade is with the United States, not with Japan or the little dragons of Asia.

Second, Canadian capitalism has grown stronger. Its multinational corporations rank sixth in the world-not bad for a country of 26 million Canadian billionaires –there are seven of them, according to the last rankings of Forbes Magazine — are strong enough to speak eye-to-eye to anybody in the world.

Canadian banks are world-class players on the Euromarkets. Canadian capitalism also has a few successful high-tech corporations such as Northern Telecom. Most large Canadian corporations have already launched important U.S. operations. Some have made the headlines with major acquisitions, such as Campeau Corporation with its buy-out of Allied Stores and Federated Stores. A Canadian developer, Olympia and York, has become the largest New York landlord with the Battery Park City project.

True, many small and medium-sized Canadian companies will be crushed by U.S. competition under free trade. But the largest corporations feel strong enough to take on that competition, as they have been doing for some years now. Free trade will just allow them much greater operational flexibility on the North American scale. They will be totally free to locate plants and facilities wherever returns look best-on either side of the border, and even along the Mexican-U.S. border, in the free zone where workers are paid 69 cents an hour. If it means closing some Canadian plants — so be it. They will gain whatever happens.

But free trade is much more than a commercial strategy for the Canadian ruling class. It is even more, a class strategy. Canadian bosses are going to use free trade as a war machine against the working class of Canada and Quebec to roll back any acquisition in excess of U.S. practices. “Right-to-work” states with no minimum wage will be put in direct competition with Canadian provinces with 40 percent unionization rate and $5 minimum wage, such as Quebec. Canadian bosses hope to extract concessions from their unions in a way that previously they could not.

The Canadian bourgeoisie also puts much hope in the expected pressure for harmonization and standardization coming out of a continent-wide unfettered free-trade area Given the relative weight of the two countries, such harmonization is most likely to take place by Canada moving towards U.S. practices, which is exactly what most Canadian bosses would welcome. Under the free-trade agreements, the two governments have seven years to agree on what are “unfair subsidies,” that is, which government regulations and policies will be allowed to continue and which will be prohibited as unfairly distorting trade.

One can easily see the immense potential impact of those discussions, since one can hardly think of a single government policy that could be completely neutral with respect to a corporation’s competitive position, directly or indirectly. The Canadian ruling class feels confident it will be able to retain those policies that are in its interests.

It is equally sanguine about getting rid of those policies that are either bureaucratically entrenched leftovers of past capitalist needs, or concessions made to the working class or popular movements, which domestic opposition has so far prevented the bourgeoisie from taking back. Free trade will give them a new start in program-cutting. They will make concessions to the United States on the back of the people-in the best interests of Canadian capital.

Working-Class Opposition

The free-trade agreement negotiated between Reagan and Mulroney has met with nearly unanimous opposition in the Canadian and Quebec labor movement, with the exception of the right-wing, almost yellow Canadian Federation of Labor, one-tenth the size of the Canadian Labor Congress. Unions have done much to inform their members of the agreement’s implications for workers’ interests and mobilize them against free trade, and in support of the labor-affiliated New Democratic Party.

However, the public-opinion campaign against free trade was left to an umbrella organization called the “Pro-Canada Network,” which gave it a squarely Canadian-nationalist outlook, as one would have expected. It was no longer Canadian bosses against workers, but Big Bad United States against Nice Little Canada Class lines were deliberately blurred in an effort to make the pro-Canada campaign not appear too union-oriented. The few significant Canadian capitalists opposed to free trade were made into heroes and given the podium.

The New Democratic Party campaign also collapsed into the same Canadian-nationalist strategy, putting class issues aside and trying to appear as the middle-of-the-road voice of “average Canadian families”, whoever those may be. As a result, the big-business opposition Liberal Party, in power for most of the century, was able to win back most of the support it had been losing to the NDP by waging a completely demagogical campaign against free trade, for Canadian nationalism, and even against the rich(!), complete with no less than forty promises (for the forty days of the campaign). This divided the anti-free trade vote, allowed the Liberals to retain second place ahead of the NDP and resulted in the reelection of the Conservative government.

The Canadian-nationalist accent given to the anti-free trade campaign also explains its failure in Quebec. The Tories were able to increase their 1984 majority, mostly by channeling the Quebecois nationalist vote against the much-hated Liberals, while the NDP was still perceived as a foreign party. Despite high hopes and strong union backing, the NDP failed to elect its first-ever Quebec member of Parliament, although a few candidates came close in francophone working-class ridings [precincts].

The November 21 elections were a big political victory for the Canadian bourgeoisie. It was able to reelect its favorite government with a parliamentary majority and to clear the way for the free-trade agreement Now, the political agenda is moving to the issue of “deficit reduction”-that is, cutbacks in social spending-while the Navy will press its project of a 12-strong fleet of nuclear attack submarines.

The Canadian bourgeoisie has been able to recapture the political initiative and put the working class on the defensive again. Free trade will be used to put mounting pressure on the union movement. But the bourgeois agenda has not been really accepted by the population of Canada and Quebec. Capitalist attacks will meet with stiff resistance.

March-April 1989, ATC 19

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