TPP compensation for auto and other sectors should be rejects claims report

Published: December 1, 2015

Updated: July 24, 2018

Author: Luke Jones

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The recent TPP free trade agreement between Canada and 11 other Pacific Rim nations has already stirred up plenty of controversy in the Canadian auto industry as well as other sectors. Now, a new report says the federal government’s plan to pay off industries with multi-billion dollar handouts is a bad economic policy and says those in line for compensation should reject it.

The report from economists Dmitry Lysenko and Saul Schwartz was released on Tuesday by the Institute for Research on Public Policy. The study focuses on the Ottawa market, but the effects of the TPP trade deal announced by former Prime Minister Stephen Harper last month are similar around Canada.

“The federal government committed assistance primarily for political reasons; when it needed support and could not find another solution, it offered compensation.”

“Whether the assistance made economic sense was not a major consideration.”

Sectors such as auto parts manufacturers, farmers, and fisheries are likely to be hit hard by the TPP agreement, which allows offshore companies to ship parts and goods to Canada that were made with cheaper labor in other countries. At the moment Ontario has a rich auto parts manufacturing sector, but with Japanese companies now able to import parts more cheaply from abroad.

Compensation numbering billions of dollars has been offered to sectors to be affected by the TPP agreement, with the Ottawa authority pledging money to those industries. However, the study says this is not enough and says the government would be better spending the money and resources on helping workers in those sectors adjust.

“If you just think about the economic rationale for these [compensation] programs, there isn’t one,” Mr. Schwartz, a professor at Carleton University’s School of Public Policy and Administration, said.

“What they do is create inequity because lots of workers and firms outside those sectors are harmed, but will receive no compensation.”

The report says the compensation is “unlikely to be effective in maintaining the viability of those sectors” and “effectively stifle incentives to change,” the report says.

“That’s a bad deal, for sure,” Prof. Schwartz said. “It’s overly generous and it’s unprecedented, in that it’s guaranteeing that their incomes won’t go down for 10 years. Furthermore, they’re rich.”