The entire episode around the bringing in of outside workers for the LNG facility in Saint John and the subsequent protests by local workers is a valuable lesson in what many people still think free trade is all about.
Essentially, we seem to continue to conceive of free trade as really meaning free access. We get to sell you what we want, when we want, on our terms, and you get nothing in return. Job openings in Alberta? Great, we will fill them. Municipal sewer and water to be replaced in Arkansas, we darn well better be able to bid on the project. Cheaper labour available in Red Deer, don’t even think about it.
In fact, I suspect that if we compared photos of the crowd of protestors outside the hotel where the visiting workers were staying with a photo of protestors expressing their anger over the “buy American” clause in the U.S. stimulus package, we would likely find a number of the same faces. There’s the rub. You can’t have it both ways. If you want access to their markets, their jobs and their money, they have to have access to yours. Put conditions on it, and they will reciprocate. Those are what we call “non-tariff barriers,” and they continue to abound today. This is why companies in Sackville, New Brunswick, will often find it easier to do business in Amherst, Mass. then in Amherst, N.S.
We also need to think clearly about what we are asking companies to do when we demand they hire local, regardless of cost differences. And I think it is fair for us to assume, as few of us have access to the full details, that there was indeed a fairly large cost difference in this case. After all, it was apparently cost-effective for these companies to fly the workers in, pay them a wage, put them up at a hotel and bus them to the job site. But let’s not digress.
Where we ask companies (or consumers, for that matter) to pay a premium for local workers, or local products, we are indeed contributing to the local economy, but at what cost? Every extra dollar spent by that company is a dollar not available to create another job or purchase another product or service. That is called “opportunity cost. ”Free trade allows us to minimize the opportunity costs and maximize the returns by focusing on what we each do best, and for the least cost. We can then leverage growth and opportunities in one area to create growth and opportunities in another.
As a Haligonian, I would love the Irvings to spend all of their businesses’ money here, creating employment and opportunity for my friends and neighbours.
But I understand that by controlling costs and the size of the payroll here, Irving Oil has funds available to build the LNG plant in Saint John or to hire another gas jockey in Portland, Me. In return, the gas jockey has money to purchase those new cymbals for his drum set (from the folks at Sabian in Meductic) and the construction worker in Saint John (and, regardless of the protests, let’s not forget the numbers of native New Brunswickers employed on the LNG project) can take that vacation in River Hebert or River John. That’s how trade works.
So, when we demand that local companies only hire local we need to be very careful what we wish for. Saving one job today may well cost us two or three or 3,000 jobs tomorrow. Trade barriers have a way of building momentum and multiplying their negative effects.
This is a point AIMS has made in this paper and others throughout our 15 years of existence. Protectionism breeds protectionism and harms, ultimately, the individual worker and their family.
That’s why our advice to average New Brunswickers today is the same as that we gave to President Bush in 2002, you can’t just be a“fair-weather free trader.”
Think about how you felt when you first heard about the “buy American” clause in the Obama stimulus bill, and then consider what might happen the next time an Albertan employer has their pick between a worker from New Brunswick and one from Nova Scotia.
Charles Cirtwill is the Executive Vice President of the Atlantic Institute for Market Studies, an independent, nonpartisan public policy think-tank based in Halifax.