Free trade lumbers along a bumpy road
Housing shocks, protectionism, and the post-pandemic economy
For many months it has been crystal clear that protectionism wasn’t some temporary, Trump-era deviation from an otherwise broad consensus.
To be sure, for decades, countries with few exceptions knocked down trade barriers, pursued deregulation and privatization policies across key industries and generally embraced economic integration and trade liberalization.
However, over the past several years, we’ve seen that the trade winds that fueled globalization, economic growth and job creation for over a generation are dramatically shifting.
Various international groupings of countries such as the OECD, G7 and G20 continue to say all the right things when it comes to vowing to stand up for and pursue policies in line with free and unbound trade.
Yet in practice, countries in every corner of the globe are imposing trade restrictions of all kinds.
According to the WTO, nearly 100 governments have introduced more than 200 trade restrictions in recent months that have impacted global trade. And while some of those measures have been to loosen restrictions for essential goods, including medicines and PPE, many are blatantly protectionist and will likely face trade challenges down the road.
Aside from pandemic-related protectionism, the world was already awash is trade-restrictive measures.
For example, agriculture exporters from Canada continue to lament the tariff barriers they face trying to enter the European Union – over three year after a marque Canada-EU trade pact became law.
And the China-U.S. trade war shows no signs of abating as the Biden administration doubles down on much of the Trump trade doctrine. A recent introductory meeting between US Trade Representative Katherine Tai and Chinese Vice Premier Liu He produced only a terse readout and reports that both sides raised issues of concern. In short, it’s business as usual.
The Biden administration has even expanded on Trump protectionism by making a long-standing Buy American executive order even more restrictive with President Biden stating bluntly he’s “strenuously limited” the ability of Cabinet to grant exemptions to the policy.
Even traditionally strong trade relationships are being put to the test. As the price of lumber soars in North America and around the world, many U.S. stakeholders have called for a renewed Canada-U.S. Softwood Lumber Agreement which expired in 2015. The general belief is that stabilizing supply will have a calming effect on lumber prices which are skyrocketing for a variety of reasons and are in part fueling a massive affordability crisis in the housing market.
The U.S. response? It recently doubled the tariffs on Canadian lumber from 9 per cent to nearly 20 percent.
And this is all happening before the world truly roars back to some level of pre-pandemic normalcy.
One thing is for sure: In the post-pandemic global economy, competition is going to be fierce. And in this new, hyper competitive world, the gospel of free trade is no longer orthodoxy.