Consumers take back seat to special interest groups

Industry Minister Sinclair Stevens is doing his very best to demonstrate that the change of government in Ottawa has done nothing to advance the cause of Canadian consumers. Policy decisions still favor the special interest groups that have political clout at the expense of the public in general.

Mr. Stevens indicated last week, according to a Canadian Press report, that the Conservative Government, like the Liberal government before it, may resort to delaying tactics at the docks to restrict auto imports from Japan. Such devices as a deliberate slowing of customs inspection and certification procedures would be used, the minister hinted, if Japanese exporters increase their vehicle shipments to Canada while the two countries are discussing a new arrangement to replace the so-called voluntary export quotas that expired at the end of March.

Such a sneaky and underhanded way of protecting the domestic auto industry would discredit Canada’s efforts to resist the raising of non- tariff trade barriers by other countries.

W. Rowley, a partner in the Toronto legal firm of McMillan Binch, told the Canada and International Trade Conference in Ottawa on Saturday that it should be obvious it is not in Canada’s interest to continue to contribute to protectionist trends. Canada’s dependence on exports is greater than that of any other of the Western industrialized countries. The national interest, therefore, lies in fighting protectionism. Fight compromised “As a small country,” Mr. Rowley said, “our ability to fight the trend abroad is compromised by our inability to fight it successfully at home.” Mr. Rowley, one of Canada’s recognized authorities on competition policy, cited Canada’s trade policies respecting automobiles,footwear, textiles and wine as evidence of the Government’s increasing tendency to favor protection over the objectives competition policy is intended to serve.

An increasingly visible aspect of national politics and, therefore, of international trade policies, is that government in Canada is unequal to the tough responsibility of maintaining an open market when constituents have been heard to complain. “The harsh reality is that, as a nation, we have refused to accept the short-term pain associated with learning the lessons of competitive and open markets. “Instead, we have preferred generally to disadvantage the Canadian customers of the industries we choose to protect and to spread the increased costs of continued inefficiency over the population at large.” Mr. Rowley said Canada could not afford such policies in the past and it cannot afford them now; rejection of protectionism is necessary for the country’s salvation. “The simple reality is that Canada no longer has the trading clout necessary to sustain without undue losses the protection it would impose. The last GATT (General Agreement on Tariffs and Trade) round in Tokyo established this. Subsequent events have confirmed it.” When quotas on Japanese car exports to the United States and Canada were introduced early in this decade, the North American auto industry was experiencing very considerable difficulties. But Mr. Rowley said the evidence was clear that the principal cause of the problem was not small car imports from Japan – but arose instead from high wages, inefficiencies and poor planning in the domestic industry.

After several years of protection, the North American auto industry now is in good health, an improvement that contributed to U.S. President Ronald Reagan’s decision to allow the import quotas to lapse – a decision that the Canadian Government so far has refused to follow. But Mr. Rowley believes that concern over the interests of U.S. consumers also influenced the decision of the Reagan Administration. He quoted a New York Times editorial that claimed the Administration had become convinced the cost of auto protectionism had been too high.

A study by the U.S. International Trade Commission, an independent agency, had found that the quotas had saved 44,000 jobs – but at a cost in higher car prices of about $90,000 a year for each job saved. A similar study by the Federal Trade Commission had put the cost figure at $240,000 a job.

Mr. Rowley said that, for Canada, the high costs of auto protection are magnified by the cheap Canadian dollar. “In these circumstances and against the background of the Government’s preliminary decision to maintain quotas for the time being, there is clearly a role for competition policy advocacy.” Mr. Rowley is struck by the different role of competition policy in Canada and the United States. In the United States, where competition and anti-trust issues have been passionately debated for nearly a century, competition policy was central to the debate when the auto import restraints were introduced and again when the quotas were permitted to lapse. In Canada, by contrast, competition policy issues were ignored by the Liberal government when the quotas were established, and they continue to be ignored by the Conservative Government now, when, in the United States, the import quotas have been discredited by their inordinately high costs to consumers. Public disorganized It seems evident that in Canada, government – of whatever political stripe – feels itself to be under no compulsion to give high priority to consumer interests. Consumers are a disorganized group whose interests remain unfocused and diffuse.

The special interest groups, such as the auto industry and its labor union, by contrast, are well organized and they know very well what they want – protection from competition. They are capable of putting intense, concentrated pressure on government to influence policy decisions in their favor. The tactic works very well when the special interest groups are dealing with opportunistic governments that are less concerned with principles than with re-election.

Mr. Rowley believes it would be helpful if the director of investigation and research under the Combines Investigation Act were to take on an active role as a competition policy advocate. One beneficial result of this might be that Canadians would be helped to regain faith in the market system.


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