Does Canada need trade adjustment assistance?
| DOI | 10.1177/0020702017691311 |
| Date | 01 March 2017 |
| Published date | 01 March 2017 |
| Subject Matter | Scholarly Essays |
International Journal
2017, Vol. 72(1) 91–110
!The Author(s) 2017
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DOI: 10.1177/0020702017691311
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Scholarly Essay
Does Canada need trade
adjustment assistance?
Dmitry Lysenko
Department of Education and Early Childhood Development,
Government of Halifax, Nova Scotia, Canada
Lisa Mills
School of Public Policy and Administration, Carleton University,
Ottawa, Ontario, Canada
Saul Schwartz
School of Public Policy and Administration, Carleton University,
Ottawa, Ontario, Canada
Abstract
Trade adjustment assistance (TAA) is government aid to those affected by trade agree-
ments. We review the history of TAA in Canada and ask whether Canada needs to
reintroduce it in response to the recent intensification of trade negotiations. In light of
the compensation offered by the federal government in connection with the
Canada–European Union Comprehensive Economic and Trade Agreement (CETA),
we examine how TAA fits in with the evolution of Canadian federalism in the trade
policy area. Based in part on interviews with provincial trade negotiators, we conclude,
first, that the compensation is an outcome of Canadian federalism. Second, we argue
that while there is no reason to reintroduce a federal TAA program for workers,
compensation for provinces is necessary to facilitate their cooperation with the
implementation of trade treaty provisions. Third, we suggest that a more transparent
rationale for such compensation would be superior to the ad hoc compensation
observed in CETA.
Keywords
Free trade agreement, adjustment assistance, compensation, trade policy, CETA,
Trans-Pacific Partnership, Canada, federalism
Corresponding author:
Saul Schwartz, School of Public Policy and Administration, Carleton University, 1125 Colonel By Drive,
Ottawa, Ontario, K1S 5B6, Canada.
Email: saul.schwartz@carleton.ca
Introduction
Canada has significantly intensified its trade policy over the last decade, negotiating
free trade agreements with many other jurisdictions. In particular, trade agree-
ments with the European Union (EU) and with 11 countries in the Asia-Pacific
region, including the United States (US) and Japan, await ratification.
For countries to benefit from trade liberalization, labour and capital must move
between and within sectors of the economy, implying that some firms may shut
down and some workers may lose their jobs. While some of these outcomes may be
temporary, some are permanent.
Trade adjustment assistance (TAA) is government-provided aid to those
negatively affected by import competition—be they workers, firms, sectors, regions,
or communities.
1
Historically, TAA programs were narrowly defined and aimed
to address increased import competition caused by specific trade agreements.
In Canada, the first TAA program was created in 1965 in response to the Auto
Pact with the US. Various programs then operated in fits and starts until the late
1980s, when the last federal program was phased out. In this essay, we review
Canada’s experience with TAA and ask whether Canada needs to reintroduce
TAA in response to the intensification of trade policy and to the evolution of
Canadian federalism in the area of trade policy.
Three justifications for trade adjustment assistance programs are particularly
important. First, assistance is justified as compensation for losses imposed on the
few so that the majority can benefit from trade. Temporary income support can
help compensate workers for earnings and jobs lost because of trade deals. The
second justification refers to efficiency—to help move labour and capital from
declining to expanding industries or firms. Help can include job search assistance
or retraining for workers plus financial and technical assistance for firms. Third,
TAA can be a way to enhance the political feasibility of trade liberalization since
agreements often require the support of key domestic stakeholders such as unions,
industry associations, or sub-national governments.
Why might it be of interest to ask whether Canada should reintroduce a large-
scale TAA program? One reason is economic and the other political. First, both the
US and the EU have TAA programs aimed at helping their workers and firms
adapt to changes brought by trade agreements. Given the intensification of
Canadian trade negotiations, Canadian workers and firms might benefit from
similar programs. Second, the expanded scope of trade negotiations suggests that
particular forms of TAA aimed at particular provinces and particular industries
have become part of how Canadian federalism operates in the trade policy area,
acting to enhance the possibility of the successful implementation of the
1. Joseph Francois, Marion Jansen, and Ralf Peters, ‘‘Trade adjustment costs and assistance: The
labour force dynamics,’’ in Marion Jansen, Ralf Peters, and Jose
´Manuel Salazar-Xirinachs, eds.,
Trade and Employment: From Myth to Facts (Geneva: International Labour Office, 2011); World
Trade Organization, World Trade Report: Trade in a Globalizing World (Geneva: World Trade
Organization, 2008).
92 International Journal 72(1)
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