Chrystia Freeland

[Business of Supply, June 10th, 2014]

Mr. Speaker, I would like to start by saying that I will be splitting my time with my colleague, the member for Bourassa.

It is a real honour and a pleasure to be talking about this subject here in this House today. Rising income inequality is one of the most striking and most important new characteristics of the 21st century economy. It is a way the world economy and, particularly, the economies of the western industrialized countries have changed.

For all of us here in this House grappling with that transformation, it should be our absolute priority to understand it and work on ways to make this new economy work for all Canadians.

I would like to start with some data points. According to the IMF, since 1980, the richest 1% increased their share of income in 24 out of 26 countries. That is a really significant data point, because very often debates about income inequality happen in a national context, as our debate is happening here, and we lose sight of the fact that this particular story is a global story.

Of course there are national aspects, but overall the shape of what is happening is something that is happening particularly across the western industrialized countries. We must understand that in order to really understand what is going on.

This is happening in Canada as well. In 1980, the top 1% collected $8 out of every $100 earned in Canada. By 2010, that had surged 50% to $12 out of every $100. In the meantime, middle-class incomes in this country have been stagnating.

In 1980, middle-class families reported income of $57,000, and 30 years later they were still at $57,000. This growing income divide—and as I said, an income divide that we are seeing growing across the western industrialized countries—is also translating into a growing wealth gap.

I would like to cite one figure. This is based on some very important research that Oxfam has done, which is really important and something for us to all focus on. Oxfam calculated that if we took the richest 85 people in the world, their wealth is equal to the wealth of the bottom 50% of the whole world, 35 billion people. That is just 85 people, which is a lot fewer than it would take to fill this House. It would fill maybe a quarter of my side of the House. Let us think for one moment about what that says about our world today and about how the world economy is working.

It is important when we are talking about this, and particularly when our conversation moves to talking about political solutions, to really reflect on and acknowledge the fact that this is a new phenomenon. The world economy today is working differently from the way it did, particularly in the post-war era, when I think many of our conceptions of how the world economy works, and certainly many of our political ideas, were formed.

In the post-war era, we had a Goldilocks economy. It was a time when there was very strong economic growth across the western industrialized world, and at the same time income inequality was actually decreasing.

Starting about 30 years ago, that changed. Even as the economy grew, we started to see income inequality surging: a growing share of the income going to the very top and incomes in the middle either stagnating or actually declining, depending on which measure and which timeframe.

There is a lot of debate about what is driving this phenomenon. Inevitably that debate becomes politically tinged. All of us who approach honestly what is happening will have to agree that there are three primary drivers. One of them is in fact political.

The 30 years in which we have seen this surging income inequality across the west also coincided with the rise of neo-liberalism, what we might want to call the Thatcher-Reagan revolution. We saw a combination of weaker protections for trade unions, a culture that accepted higher compensation, particularly for executives—higher CEO compensation—a new philosophy of shareholder value in companies, lower taxes at the top, and crucially, deregulation of many industries.

Therefore there was this political element, and again that political element had national features, of course, but it was also something that happened across countries, particularly because we are living in an age when so many businesses operate internationally and there has been, in many cases, particularly on the taxation front, competition across jurisdictions.

However, there are also two other factors that are really important drivers of what is going on, and those are globalization and the technology revolution. For me, those two factors are the ones on which it is really important to focus; and it is important for all of us, particularly those who see rising income inequality as a huge problem, to acknowledge that these two drivers of rising income inequality are also very positive. That is the paradoxical nature of what is going on.

The technology revolution, bringing us so many pluses, is also a driver of increasing income inequality. The same is true of globalization. If we are blind to that paradoxical nature of what is happening, we are not going to be able to come up with good solutions. Particularly when it comes to the technology revolution, it is important for us to understand something. I will refer to one of my favourite books on the subject, The Second Machine Age by Erik Brynjolfsson and Andrew McAfee. They argue that there is no law in economics that provides that the technology revolution will lead to more jobs or evenly distributed rewards. That is really important to bear in mind. Changes in the economy, which are good in aggregate, may not be good for individuals, and it is going to be our job as legislators to find ways to strike that balance.

What can we do about this? I have talked about something that is big, that is new, and that is global. How can we cope with it? I would like to quickly talk about five ways in which we can approach it. The first is to do no harm, and that is why we in the Liberal Party are absolutely opposed to income splitting. At a time when there are powerful economic forces, many of them good, which are driving up income inequality, introducing changes to our own legislation, rather than pushing back against them, and increasing income inequality is absolute political and democratic malpractice.

The second absolutely important thing is to focus on equality of opportunity. A terrific Canadian economist, Miles Corak, has identified something that has been dubbed by his admirers The Great Gatsby curve, which shows that rising income inequality correlates with declining social mobility. We have to push back against that, particularly with investment in schools, families, and early childhood education.

A third area that is absolutely essential is to be open to innovation, particularly innovation for people who might not have the opportunities and networks. One thing we are seeing is that old businesses are dying. That is part of the technology revolution and of globalization. We have to be the country where it is easiest for someone with a great idea to start a new business.

Finally, and this is really crucial, we have to understand that we operate in a globally connected economy. We are living at a time when capital is global, but politics and legislation very often are not. If we want to capture the wealth that is being accumulated in the world, we are going to have to come up with some global answers. I am going to quote Larry Summers, the former U.S. secretary of the treasury, and then Pope Francis. Larry Summers stated:

The share of corporate profits taken by tax authorities around the world is probably a little more than half of what it was 40 years ago. And the reason is a basic process of competition, a basic ability to move business activity or to use accounting tricks to move income to low-tax jurisdictions.

Therefore, we are going to have to work together to push against that trend.

In conclusion, I would like to cite a higher authority on why this is so much of an issue and that is, as threatened, Pope Francis himself. He has said that increasing income inequality is the root of social evil. I really believe that. I hope that together in the House we can identify this as a major problem and work together to try to fix it for Canadians.

[Foreign Affairs, June 6th, 2014]

Mr. Speaker, tomorrow Petro Poroshenko will be inaugurated as president of Ukraine, after earning a powerful democratic mandate in last month's election. However, Ukraine continues to face extreme pressure from Russia. Crimea has been annexed, and Russian nationals, armed by Russia, are terrorizing the people and undermining the government in Donbass.

When will Canada finally join our ally, the United States, in adding Igor Sechin, president of Rosneft and a member of the Kremlin inner circle, to our sanctions list?

[Canada-Honduras Economic Growth and Prosperity Act, June 5th, 2014]

Mr. Speaker, I believe in listening to what the markets say and to what market experts are forecasting. Part of the reason I was so worried and concerned about the April trade numbers is that they were a surprise to market economists. They found them to be very disappointing and part of a worrying trend.

If the hon. member on the other side of the aisle feels that the view of Bay Street economists does not matter, that is his purview. I personally really listen to the people who are in our capital markets and who are paid to have a opinion.

I would also point out, the view of the Canadian Chamber of Commerce, which noted just last month that Canada's lagging trade performance was worthy of a report. That is something all of us should be worried about. We in the Liberal Party believe in listening to what business is telling us. When this esteemed business institution issues a significant, thoughtful report pointing to our lagging trade performance, people should look beyond their talking points and look at what is happening with our economy.

[Canada-Honduras Economic Growth and Prosperity Act, June 5th, 2014]

Mr. Speaker, I could not have said it better myself. The hon. member for Kings—Hants identified a powerful and important opportunity in the Canadian-Honduran relationship.

I would point out, as he so very wisely said, that we have to understand that the learning here is not one-way, and there is a lot for Canada to learn on this specific issue as well.

I would also point out in terms of opportunities that there are some terrific trade opportunities for our beef and pork producers, and that is one reason we in the Liberal Party support this deal.

[Canada-Honduras Economic Growth and Prosperity Act, June 5th, 2014]

Mr. Speaker, I would like to begin by addressing the gender point. I salute all the women in the House. It is important to have more women here. It is always a pleasure for me to meet them and see the very strong female presence, particularly on this side of the House, and the solidarity among us. It is great that they are here. It is great to see some women on the other side of the aisle as well.

To the point of democracy and human rights in Honduras, as I said in my remarks, this is tricky. It is a difficult issue, and it is a tough continuum. Of course I would prefer a world in which everyone enjoys the democracy and human rights Canada does. All of us in the House are united in the belief that part of our duty as Canadian parliamentarians is to work toward improving those conditions not only for Canadians but for everyone in the world.

It is, however, my belief that trade can be a way to help countries move on that authoritarianism-to-democracy continuum. Cutting countries off from the world economy should be a last resort, not the first thing we do.

[Canada-Honduras Economic Growth and Prosperity Act, June 5th, 2014]

Mr. Speaker, I would like to start with the hon. member's point about Germany and how its apprenticeship system, which I think has a lot of admirable traits, may not be relevant to Canada.

I would like to point out to the member that his own employment minister speaks often and very favourably of the German apprenticeship program. Although the German apprenticeship program is not on the agenda tonight, it would be great for the government to get its act together, but maybe the talking points on apprenticeships were not on the top of the pile this evening.

To the point of trade, of course, anyone who advocates trade as strongly, wholeheartedly, and with as deep an interest in it as the Liberal Party does understands that trade is a two-way relationship. What I am arguing, however, is that right now what we are seeing in Canada is a worrying one-way relationship, as witnessed by that $638-million trade deficit in April. What we are seeing is that we are pretty good at buying goods from other people, but we are not that great at selling our stuff abroad. That worries me. It should worry everybody else in this House.

[Canada-Honduras Economic Growth and Prosperity Act, June 5th, 2014]

Mr. Speaker, I will do that, although I would ask you to help ensure more collegial behaviour on all sides of the House.

I suspect that the members on the other side of the House will not doubt the credibility or the significance of a report from the Canadian Chamber of Commerce, one of our country's leading industry bodies. In May 2014, it published a report called “Turning it Around: How to Restore Canada's Trade Success”. That title should worry us. It does not sound like it is too great a verdict.

The first chapter is called “Canada's Lagging Trade Performance”. Here is what it says:

International trade is one of the fastest and most effective ways for Canadian businesses to grow, create jobs and contribute to the economy. However, the increase in exports and outward investment has been slow in recent years, and diversification to emerging economies has been limited.

...Canada is lagging its peers according to several measures. Over the past decade, the value of exports has increased at only a modest pace.... If...price increases [in energy] are excluded, the volume of merchandise exports shipped in 2012 was actually five per cent lower than in 2000 despite a 57 per cent increase in trade worldwide.

For a party like the Liberal Party, which believes strongly in middle-class prosperity and in trade as a path toward that, these are damning words indeed.

According to the report:

Canada’s foreign investment trends tell a similar story. Export Development Canada has recorded significant growth in sales by Canadian foreign affiliates...but evidence suggests that sales levels are relatively higher for affiliates from the U.S., the U.K., Japan and Australia.

Not only are we doing less well than we did in 2000, despite a robustly globalizing world economy, we are lagging our international peers. This is why the Liberal Party believes so strongly in trade and why we would really like to see Canadian policy, Canadian action, that is not just about slogans, not just about photo ops, but is actually about a strategic approach and getting deals done.

That brings me to a deal we have been speaking about quite a lot this week, which is the European trade deal. In October, our Prime Minister, with great fanfare and at some expense, travelled to Brussels to sign an agreement in principle on the European trade deal. I am very sad to report that unfortunately, that deal has not yet been concluded, despite the fact that the Prime Minister has travelled again this week to Brussels, which would have been a great opportunity to conclude that very important deal.

I have more worrying news still to report. We requested from the government the actual documents the Prime Minister signed. We can see the Prime Minister signing it if we look at video of that October 18 event. Here was the response we had from the PCO:

A thorough search of the records under the control of the PCO was carried out on your behalf; however, no records relevant to your request were found.

We would like to hear at some point what the Prime Minister actually signed and what is happening with that deal. We believe the Honduras free trade deal is important, but obviously the European free trade deal is much more important.

In conclusion, we believe absolutely that particularly today, in 2014, in the age of globalization, in the age when technology has truly flattened the world economy, Canada has no choice but to be an energetically and strategically trading nation. That is our path to prosperity for our own middle class, and if we do it right and we do it with pure hearts, as well as with smart brains, we can use trade to be a real way of encouraging the growth of democracy in civil society around the world.

However, I am very sad to say that today in our trade agenda we see Canada falling behind. As the Canadian Chamber of Commerce itself concluded just last month, we have a lagging trade performance. I submit that it is because we are focusing far too much on photo ops, which may have been without an actual document signed. We would love to hear more about that.

We have much less of a clear strategy focusing on big trading partners and on the big places of growth in the world, and much less effective follow-through. We would love to see much more focus on Africa, for example.

Here is what Canada needs: a truly strategic global trade policy, a policy that is about world strategy and fitting Canada into the global economy, a policy that always remembers that we cannot be an effective trading nation without putting our values first, and finally, a trade policy that is not just about photo ops but is about actually getting the deal done.

[Canada-Honduras Economic Growth and Prosperity Act, June 5th, 2014]

I think you gentlemen are probably interested—

[Canada-Honduras Economic Growth and Prosperity Act, June 5th, 2014]

Mr. Speaker, tonight I will speak about why the Liberal Party is supportive of free trade as an important, essential part of Canada's economic strategy. I will talk about why we support this Honduran free trade deal. I will talk about some of the problems with this deal that we need to be aware of. We think it is a deal that we need to enter into with eyes wide open, and I will speak about some of the overall problems that we are seeing in the trade strategy being pursued by the government.

Let me start by talking a little bit about free trade and why it is so essential to Canada. Eighty per cent of our economy is in some way connected with international trade. We are a big country geographically, but there are not too many of us. In this globalized world economy, it is absolutely essential for Canada to be open to the world economy. Some 19.2% of jobs in Canada are directly connected with trade. In addition, each job in the export sector adds another 1.9 jobs, so trade is really an essential part of any economic strategy to make Canada grow.

With the Honduras deal in particular, we have been talking about the relative size of this deal, the relative size of the Honduran economy, why it is really a small piece of our overall trade puzzle, and that is absolutely right, but it is also really important to get Honduran trade right. In fact, right now, I am sad to report that when it comes to Honduras, we are not dealing particularly well. Currently, as of 2012, we exported $39 million worth of goods to Honduras, and imported $219 million worth of goods.

A little bit earlier in the debate we heard some loose talk about Ricardo, and how, when it comes to trade, we should not worry too much about trade deficits. It all evens out in the end. Trade is just basically good. That is a nice theory and a nice point of view, but I submit, when it comes to jobs in Canada and the real lives of middle-class Canadians, it is absolutely essential that we have a strong, export-led, and export-driven economy. I would urge people who are interested in the works of Ricardo, if they have read them, to actually look at the more recent experience of highly successful economies like Germany, where we have seen very powerful, very strong, very strategic export-led growth be a recipe for a strong middle class. I think to argue that deficits do not matter, trade deficits do not matter, is a very profound mistake.

I would like to talk a little bit now about the Honduras deal and an issue that I think is very important for us to bear in mind, and that is the value side of the equation. As I have said, we support this deal. We believe in trade and we believe in trading with the world, but it is important to note that Honduras is a country that has a very troubled political and human rights record. We do not think that is a reason to not trade with Honduras. We are great believers that engagement, that trade, can be a way for Canada's democracy to help countries along that continuum. We have seen that happen in many parts of the world.

We also believe it is absolutely essential to be aware of these issues from the start, and to enter into this trading relationship aware of them and with a plan to monitor them. I would urge all of us, as we are talking about expanding our trade relations with Honduras, to be very mindful of the example of Russia, a country I personally know very well and really love.

As Russia moved out of Communism on the path to a market economy and democracy, we made a similar argument, that trade and engagement would be a valuable way of helping Russia become a more open society, and for many years, I believe that was the case. However, sometimes that just does not work, and what we have seen with Russia is Russia making a choice with Ukraine in November 2013, and most crucially and tragically, with Crimea in February 2014, to exclude itself from the international community.

What that has meant is that the countries that made this pact with Russia, which said they were going to extend a hand of friendship and trade with it, are now having to pull back, and that means a real economic cost. I would say to all of us here, particularly those members who, like the Liberal Party, support this deal with Honduras, let us make a pledge tonight that part of the deal is putting values first.

Part of the deal, of course, is about the Canadian economy and the importance of trade, but we also need to pledge to watch very closely what is happening with democracy, journalists, labour activists, indigenous people, women, and the LGBT community. If there is a tipping point, we have to be prepared, even if it comes at an economic cost, to pull out of that trading relationship. I cannot emphasize how important it is to us as a country to put those values at the centre.

Having spoken about Honduras, I would like to speak a bit more generally about where our free trade agenda is in the picture of the Canadian economy. Like everyone in the House, I noted with great disappointment the surprising trade deficit in April, which was $638 million according to Statistics Canada. That is a very poor performance and it is very worrying.

I suspect that my respected colleagues, especially those on the other side of the House, may not take my word for it when it comes to where Canada's trading relationship and performance are. I think there is an organization, you gentlemen, and it is only gentlemen this evening—we could talk about gender issues, but we will not do that right now—I think you gentlemen are probably interested in the Canadian—

[International Trade, June 5th, 2014]

Mr. Speaker, the Prime Minister flew to Brussels amid great fanfare last October to sign an agreement in principle on the European trade deal, but that deal has now stalled, and when we requested the documents signed in public by the Prime Minister, the Privy Council Office replied that, quote, “no records relevant to the request were found”.

Did the Prime Minister sign anything at all in October, or was it merely an expensive photo op with no substance behind it?