WASHINGTON (CP) -- Free trade in North America has resulted in sharp gains for the rich at the expense of the average Canadian worker, says a report from the U.S. Economic Policy Institute released Thursday.
In fact, lower-income Canadians are worse off than they were before free trade and cuts to federal social programs at the same time have compounded the problem, said co-author Bruce Campbell, executive director at the Canadian Centre for Policy Alternatives.
The Ottawa-based think-tank is an independent non-partisan organization that promotes research on economic and social policy "from a progressive point of view" -- according to its Web site -- and concerns about social and economic justice.
Similarly, the U.S. institute carries out economic research and education, with a "concern for the the living standards of working people."
While trade between the NAFTA partners has grown rapidly, the free trade deals have not helped all workers, the report says.
"The most striking feature of this growing inequality has been the massive gains of the richest one per cent of income earners at the expense of most of the population," said Campbell, who called for a major assessment of the costs and benefits of the North American Free Trade Agreement.
"Economic and political elites promised that free trade would usher in a golden era of prosperity for Canada. It clearly has not delivered the goods."
The institute's report found similar problems in Mexico and, to a lesser extent, the United States.
"In each nation, workers' share of the gains from rising productivity fell and the proporation of income and wealth going to those at the very top of the economic pyramid grew," said Jeff Faux, founder of the Washington-based think-tank.
NAFTA came into effect in 1994, five years after the Canada-U.S. free trade deal. In 2005, two-way trade between Canada and the United States approached nearly $500 billion US, while U.S.-Mexican trade amounted to about $290 billion US, both figures sharply higher than when the trade deals began.
However, Campbell said both agreements were supposed to boost living standards for many, help close the productivity gap with the United States, create a more efficient economy and strengthen Canada's social safety net.
Yet there is no evidence that Canada gained a special advantage in the American market, said Campbell, and the country's share of U.S. imports actually fell after 1994.
A federal Industry Department study found that the largest factor in a surge of Canadian exports in the 1990s was the low Canadian dollar. Another federal study found that by 1997, more jobs were being destroyed by imports from the U.S. than created by exports.
Expectations that Canada would become a magnet for foreign direct investment didn't materialize, said the study, with Canada's share dropping from 17 per cent to 13 per cent from 1993 to 2004.
And diversification in Canada's industrial base has been disappointing, said Campbell, with the average unemployment rate in the last 15 years remaining about the same as the previous 15 years.
Big business, though, has done well.
A study of 40 non-financial member companies of the Canadian Council of Chief Executives found their combined revenues jumped 105 per cent between 1988 and 2002 while their overall workforce shrank by 15 per cent.
The wealth hasn't trickled down, said Campbell, despite steady productivity growth in the Canadian economy.
"If free trade was supposed to usher in a new era of rising living standards, reversing the sluggishness of the 1980s, the record reveals quite the opposite."
Annual growth in average personal income per capita was at 1.55 per cent a year in the 1980s but slid to 0.63 per cent a year between 1989 and 2005.
Massive cuts to Canadian social programs haven't helped, said Campbell, and tax cuts and transfers didn't offset the difficulties as they did in the past.
Federal non-military spending cuts in the second half of the 1990s were the largest in Canadian history, bringing spending down to the level of the late 1940s.
