As many of you are already aware,Â Canada is continuing free trade discussions with India. This is a welcome sign in a world of escalating protectionism and a harsh economic climate.
From The Economic Times:
A free trade agreement between India and Canada would boost bilateral trade by 50 per cent and increase the two-way merchandise trade to USD 15 billion over the next five-years, a senior Canadian Minister said.
On November 16, Canadian Minister of International Trade, Peter Van Loan, opened formal talks with Indian Commerce Minister Anand Sharma on a strategic economic partnership between the two countries.
Contrary to the pessimistic populism rallied against ‘offshoring’, free trade is beneficial to all parties involved. One of the major fallacies involved in this confusion is the false belief that trade is a zero-sum game. The idea is that if we purchase products or services from India, we are in fact shipping jobs overseas that could be done by Canadians. A quick moment’s reflection will reveal the absurdity in this logic.
The first thing to understand is that ‘Canada’ and ‘India’ are not involved in any kind of trade. It is individuals of Canada and individuals of India who will be trading. Referring to Canada and India in this context is just shorthand for the sum of individuals in a particular region. With this cleared up, it becomes apparent that purchasing products or services from India is not fundamentally different from purchasing products within Canada. Rarely do we ever rally against the people in one province buying the products in another. Should Albertans not buy corn from BC because it would be ‘shipping farmers jobs to another province’? Should the people of Quebec not trade freely with Ontario because they are capable of manufacturing their own vehicles?
Taken to its logical conclusion, the argument against free trade would suggest that families not purchase anything that they cannot produce themselves. Afterall, why ship jobs outside of the family nest? Let the family farm, harvest, manufacture, cook, and entertain. Imagine the wealth of a family that kept all its jobs internally! The truth is, free trade is a voluntary and mutually beneficial exchange; both parties trade something in return for something more valuable.
As a web developer, I am constantly competing with Indian firms offering hourly wages well below what it would take from me to merely nourish myself in the City of Vancouver. In order to compete in such a marketplace, I must excel in productivity, communication, creativity, and responsiveness. Despite my higher wage, the speed and effectiveness of my delivery keeps clients coming back rather than risk the language/distance barrier of a foreign contractor. There are certainly costs involved in international trade.
Should a foreign contractor be able to deliver the same services, faster and cheaper, why should clients not go with the better deal? If Indians become incredibly efficient at programming, where it no longer makes sense for me to compete, perhaps it would be time to move on to something else. But is this really a net loss for the economy?
If people are paying less for web development, that means they have more available to spend on different things. Perhaps they will use those savings to purchase new furniture,Â graphic design, or office space. Maybe they will invest in their own infrastructure or hire new employees. Similarly, the income earned by those in India may be invested into boosting their own productivity or that of another sector, thereby lowering the costs to purchase those products/services and generating even more savings. The free market is specifically designed to spread wealth to the most productive and efficient places.
The division of labour is equally true beyond borders. Specialization creates efficiency, greater productivity and greater wealth for all parties involved. The bigger we can make the circle of free and open trade, the more savings and improvements we will all experience.
Besides, if you don’t want to trade abroad, no one’s putting a gun to your head. That’s more than you can say for our local government ‘services’.