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Employees work along a Geely Automobile Corporation assembly line in China’s Zhejiang province on June 21, 2012. (CARLOS BARRIA/REUTERS)
Employees work along a Geely Automobile Corporation assembly line in China’s Zhejiang province on June 21, 2012. (CARLOS BARRIA/REUTERS)

Globe editorial

Trade policy should adjust to a value-chain world Add to ...

An arresting paper this month, written by Carleton University’s Michael Hart and published by the C.D. Howe Institute, makes a compelling argument: that the worldwide phenomenon of “value chains” may call for a lessened emphasis in international trade policy on give-and-take negotiations between nation-states, and for more unilateral giving up of self-defeating trade barriers and retaliatory measures.

Many observers and scholars have drawn attention to the enormous shift in international trade, from the purchase and sale of finished products to the purchase and sale of parts and components. The consequence is that the supposed national origin of a specific traded good has become a dubious, ghostly concept. Instead, most finished goods are the result of complex “chains” in which value is added in many countries. But comparatively few trade commentators have tried to deal with the policy implications of this change, as Professor Hart has done.

He applies the more or less pejorative adjective “mercantilist” to the hitherto familiar government-to-government trade negotiations, in which each side tries to maximize export opportunities and minimize exposure to imports; the paper’s title is Breaking Free: A Post-Mercantilist Trade and Productivity Agenda for Canada. (Quite a while ago, Adam Smith of the University of Glasgow was in favour of post-mercantilism, too.)

Prof. Hart praises the Harper government for reducing or doing away with tariffs on essential imported inputs and on capital goods, and goes further by advocating the elimination of all tariffs. Moreover, he argues for getting rid of antidumping and countervail duty measures, and other policies that assume that products have “clear national identities” or favour “national champions.”

Though somewhat dismissive of the numerous bilateral trade negotiations that Canada has entered into, Prof. Hart is keen on the Trans-Pacific Partnership negotiations, because of the prospect of more dynamic relations with the Asian economies whose rise is so closely associated with the whole value-chain phenomenon.

Bilateral agreements at least help induce Canada to open itself up. But Prof. Hart is right to look so incisively for the practical consequences that make good sense in an age in which the national origin of products is a distraction and almost an illusion.

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