Let’s trade freely with Europe

One of the best-established law of economics is that trade is good for all parties. By specializing in some types of production and exchanging with others, we become more productive at what we do, while being able to access goods and services produced by millions of other individuals.

Tariffs, protection for specific industries and other barriers have no rationale apart from pleasing some politically influential constituencies. By making trade more difficult, they impoverish us all.

That's why we should commend the Stephen Harper government for its zeal in seeking free-trade deals with various countries around the world. Ottawa has so far signed agreements with nine relatively minor countries. But we are negotiating or are about to start negotiating with several more, including major players such as Japan, India, China and other Pacific region countries.

More importantly, negotiations for a Comprehensive Economic and Trade Agreement (CETA) with the European Union are said to be in their final phase. Europe is the world's single-largest common market with more than 500 million people and a GDP of almost $17 trillion.

Although the debate has attracted far less interest with the general public, some of the same protectionist fallacies that were raised 25 years ago with NAFTA are being used today to oppose a deal with Europe.

The Council of Canadians has launched a campaign to shield municipalities from possibly more open procurement requirements and to allow "buy local" policies. As a Montrealer watching the news every day about how the local mob got control of the city's construction contracts, I welcome more openness to outside firms.

One chief concern that has attracted a lot of attention of late and is said to threaten the deal is the European demand that Canada extend patent protection for pharmaceuticals to match its own standards. That could lead to higher health care costs, by delaying the advent of lower-cost generics.

But that's not a good reason to scuttle a deal.

First, whatever one thinks of patent protection, the fact is Canada cannot afford to have its own rules while major powers have different ones. Investment in research and development of new drugs will simply go elsewhere.

Second, all good things have a cost. We should not forget that innovative new drugs increase the well-being and life expectancy of patients and bring down the cost of other treatments.

Third, drugs only make up a small proportion of overall health care costs. There are lots of better ways to make our health care system more efficient.

It's ironic that this issue is being raised in the context of negotiating an agreement with Europe. Most European countries have universal health-care systems that cost the same or less than ours, but where waiting lists for surgeries are nonexistent. Why? In part, because they let private providers offer services instead of keeping a closed, government-controlled monopoly.

A kind of "freer trade" in health care services, you might say. And that, too, would bring benefits to all.

Michel Kelly-Gagnon est président et directeur général de l'Institut économique de Montréal. Il signe ce texte à titre personnel.
* Cette chronique est publiée dans les journaux de Sun Media, tant dans ses quotidiens présents dans plusieurs des marchés urbains canadiens les plus importants (Toronto, Ottawa, Calgary, Edmonton, Winnipeg et London) que dans ses 28 quotidiens régionaux.