Three Ways Freer Trade and the TPP Will Benefit Canadians

After years of negotiations, 12 Pacific Rim countries, including Canada, have reached a tentative trade deal. The Trans-Pacific Partnership (TPP) covers 40 per cent of the global economy. But is it a good deal? Is it even a good idea to trade more openly with other nations?

The second, more general question is easier to answer than the specific one. And the answer is a resounding “yes.” Indeed, the benefits of trade come in several forms.
First, there are the benefits of comparative advantage. Canada should export grains and import coffee beans, rather than grow coffee beans in Canadian greenhouses and have other, water-deprived countries try to grow grains.

There are benefits related to a larger scale of operation. In the 1960s, the Canadian Auto Pact permitted manufacturers to ship their vehicles tax-free across the border. This meant that only some of a manufacturer’s models were assembled in Canada and some in the U.S., according to their specialties. As a rule, specialization increases efficiency.

Third, we benefit from the diffusion of knowledge. With freer trade, we can get the benefits of research and development undertaken abroad, and new production processes developed in the countries we trade with.

Back in the day, some political parties objected to parts of the 1994 North American Free Trade Agreement (NAFTA) between Canada, the U.S. and Mexico. Looking back, though, no political party would want Canada to revert to its pre-NAFTA trading status. This pact encouraged imports and exports, improved average living standards and resulted in a more efficient economy for all three countries.