WASHINGTON – The governor of Canada’s central bank says policy-makers have a duty to explain the merits of free trade at a moment marked by anti-globalization sentiment lapping across different continents.
Stephen Poloz will deliver a speech in two weeks in New York on strengthening global trade, its growth rendered sluggish by a variety of factors including low commodity prices and a multi-country economic slump.
The Bank of Canada governor said protectionism is also a concern, in an exchange with reporters at the global financial meetings Saturday.
He didn’t cite any examples.
But England is voting on whether to leave the European Union; continental Europe is debating the merits of its open borders, amid terrorist attacks and an influx of migrants; and in the U.S. election, trade is a four-letter word. Every major presidential candidate professes opposition to the Trans-Pacific Partnership — with Donald Trump and Bernie Sanders going one step further: they also propose ripping up existing deals like NAFTA.
“It’s a risk for the economic outlook — that trade becomes unpopular, or less popular,” Poloz said, when asked about global trends.
Policy-makers have a responsibility to speak up about the beneficial effects of trade, he said — about how it creates gains and losses, but that the positives outweigh the negatives.
He said an economist might take that principle for granted but needs to communicate it clearly, to counter the voices of people who don’t understand economics and might otherwise dominate the debate.
“That just puts the onus back on the policy-maker to be very transparent, very open about how trade really works. How the benefits accrue, to demonstrate what life would have looked like without former trade agreements,” he said.
“That’s not beyond us, to explain that to people.”
That includes being honest about the risks of trade liberalization — like job losses in certain sectors: “It’s real people that are adjusting. It’s not without costs. And you can’t be callous about those costs, because they matter. But the point of it is there’s more income for the country as a result. That’s the essence of a trade agreement.”
Poloz also addressed the question of whether he’d waded too deeply into another political issue: the Liberals’ deficit spending.
The non-partisan governor drew some eyebrow-raises this week for crediting the federal budget, as his institution improved the country’s economic forecast.
He said it’s his job to explain how he arrives at his projections. This week the bank revised its forecast to 1.7 per cent economic growth for the year, up 0.3 per cent from the January expectation.
“It comes with the territory,” Poloz told reporters. “We’ll always give an accounting of where the revision to our outlook is coming from.”
Poloz made the remarks at an international conference where the big-spending budget appeared to have friends in high places. The managing director of the International Monetary Fund lauded it in public and private.
Christine Lagarde said stimulative measures obviously won’t work everywhere — but places without heavy debt burdens could afford to pursue growth-friendly measures.
She singled out one example.
“Canada stands out as one such country making the most of this space,” she said in a speech before the spring meetings, and apparently echoed those remarks behind closed doors.
This annoyed the opposition back home.
The Conservatives said people were being misled. They said the budget’s nearly $30-billion annual deficit was being improperly branded as pro-growth. They said the government had been overly generous in its definition of infrastructure by lumping green programs and social spending into the category of infrastructure investment touted by the IMF.
“The Liberals’ infrastructure plan will not create the kind of economic growth and increased productivity that Canada needs,” said opposition critic Dianne Watts.
“Instead of investing in roads, bridges and highways, the Liberals are playing a game of bait and switch and spending on projects that experts don’t think of as economic infrastructure.”
That didn’t stop the Wall Street Journal this week from calling Canada a poster child for the IMF position that now’s the time to spend on infrastructure.