Canada-US Free Trade Agreement Research Articles

Leadership Matters: International Treaty Ratification in Canada and the United States

The ratification process for international treaties has become increasingly politicized in many democratic states. While scholars have devoted attention to the negotiation of international agreements, few have studied ratification struggles that define the ultimate success or failure of international commitments. Fewer still have examined the dynamics of this process in comparative perspective. In this article, I address this gap in the literature by exploring the politics of contemporary international treaty ratification processes in Canada and the United States. Drawing on two-level game theory, I posit that the likelihood of ratification success in these two different systems is often a function of similar dynamics in elite strategies for treaty ratification. Democratic leaders who sign international agreements must consider a range of factors, from the characteristics of the treaty itself to legislative pressures, interest groups, and public opinion in both parliamentary democracies and presidential systems. A structured, focused comparison of Canadian and U.S. case studies shows that the likelihood of successful treaty ratification depends primarily upon executive strategies within certain scope conditions. Given the challenges of minority government in Canada and deep political divisions in the U.S., this study also directs attention to the importance of coalition-building to ratify international agreements. Recent political developments in Canada and the United States suggest a trend toward politicization of international treaty ratification processes. In the United States alone, there have been more than five hundred instances of presidential endorsement that did not lead to congressional ratification. (2) Canadian Prime Minister Brian Mulroney was nearly defeated in a federal election in 1988 when he linked his political fate to the Canada-U.S. Free Trade Agreement (CUFTA), and President Bill Clinton won a narrow victory for North American Free Trade Agreement (NAFTA) ratification in 1993. The Kyoto Protocol prompted serious resistance from provincial leaders in Canada, and President Bush actually withdrew U.S. support for the treaty soon after taking office. Recent struggles over treaties offer important lessons about the relationship between executive leadership and international cooperation in many democratic systems. The outcomes of contested national elections in both countries in 2004 also raised the stakes in building political coalitions for controversial treaties. Minority government in Canada and deep political divisions in the United States mean that executives bear an even heavier share of responsibility in debates about treaties, international commitments, and sovereignty. Scholars have devoted a great deal of attention to the negotiation of international agreements, but few have focused on ratification struggles that truly define the success or failure of international commitments. (3) Fewer still have studied the dynamics of ratification struggles in comparative perspective. Yet breakdowns, and near-breakdowns, of international cooperation are surprisingly common in the ratification phase. This study investigates the role that executive strategies play in four case studies of U.S. and Canadian struggles over international cooperation. Research questions include: What are the legal and political requirements for ratification of an international agreement across democratic systems? How similar or different are ratification processes? What conditions influence the likelihood of ratification success? What conditions lead to failure? And, why would treaty ratification processes ever fail if the chief negotiators are fully aware of domestic political constraints? This study employs the comparative case study method for the purpose of exploring four episodes of treaty ratification struggles: 1. United States' ratification of NAFTA (1991-1993); 2. Canadian ratification of CUFTA and NAFTA (1988-1993); 3. …

Canada-U.S. Free Trade and Price Convergence in North America

1. Introduction The debate over the 1989 Canada-U.S. Free Trade Agreement (CUSTA) and the 1994 North American Free Trade Agreement (NAFTA) included much discussion of the possible positive and negative effects of convergence in North America. Economists pointed to the potential benefits of scale economies and gains from trade associated with different relative prices. Market integration would be associated with a convergence of productivity, wages, and costs on both sides of the border as mutually beneficial trade established a single market price. Free trade opponents of various types predicted that cultural convergence would rob Canada of its distinct identity (as elusive as this identity might be to define) and also argued that any changes in wages and prices would tend to raise prices but lower wages in Canada. This paper looks at wages and prices in Canada and the U.S. and attempts to identify the extent and nature of any convergence attributable to the formal trade liberalization agreements of 1989 and 1994. The paper begins by explaining why economic theory holds that trade liberalization should lead to price convergence. Next, it examines the impact of the 1965 Canada-U.S. Auto Pact on convergence of wages, prices, and returns to capital. The existing literature on the post-CUSTA experience is then reviewed, and new evidence updating this work is presented. We find fairly consistent evidence that divergence, rather than convergence, followed CUSTA's introduction. We consider three general explanations for the result: 1) the size of tariff reductions; 2) the failure to reduce non-tariff trade impediments; and 3) the combination of limited exchange rate pass-through combined with exchange rate volatility. The evidence seems to point to the second and third of these potential explanations. 2. The Link between Economic Integration and Convergence The convergence of prices for outputs and inputs has long been viewed as a measure of economic integration. As barriers to the movement of inputs and final outputs between members of a regional trading arrangement are reduced or eliminated, there should be an intensification of trade among member countries. In the neoclassical economic model, an intensification of trade should lead to an equalization of prices net of transport costs and taxes (Hine, 1994). Furthermore, since trade is a substitute for factor movements in the neoclassical model, increased trade should also lead to a convergence of wages and returns to capital within the region. To the extent that direct factor movements are stimulated by differences in wage rates and rates-of-return to capital, increased cross-border flows of capital and labor, perhaps facilitated by formal trade agreements, should further contribute to a convergence of returns to factors of production within the integrating region. Most empirical studies focus on trade and foreign direct investment as measures of closer economic integration; however, there are compelling reasons to focus on price-based measures of economic integration rather than these more traditional measures based on trade flows. The theory of contestable markets provides the fundamental insight that the threat of substantial new entry into domestic industries can cause monopoly prices to decline to competitive levels without actual entry taking place. Moreover, the threat of new entry can lead to reductions in X-inefficiency (higher than necessary costs that, in turn, are encouraged by the protection from more efficient competitors enjoyed by incumbent producers). In the extreme, the threat of new competition from imports can promote significantly lower prices in domestic markets without any significant increases in import volumes. This means that examining convergence of prices and cost contributes not only directly to the debate over the consequences of trade liberalization but also indirectly to the literature on economic integration. …

Federalism and the Evolving Cross-Border Role of Provincial, State, and Municipal Governments

THE EVOLUTION OF A MODERN BILATERAL RELATIONSHIPIn his introduction to first American Assembly volume dealing with Canada-US relations, John Sloan Dickey emphasized that book aims at a better understanding of relations in time, place, and human affairs that add up to phrase each of us uses with such unconscious ease: 'the United States and Canada,' or vice versa.' Nevertheless, coverage of bilateral relationship in this excellent volume is dominated by decisions made and actions taken by representatives of national governments in Ottawa and Washington, DC. The second volume, which appeared two decades later, does occasionally go beyond respective national beltways, with Gordon Robertsoris chapter discussing how Canadian federalism, especially unfolding events in Quebec, might eventually affect crossborder ties.2 Other chapters deal with influence of economy, culture, and environment on Canada-US relations.Thus, second volume puts somewhat less emphasis on importance of Ottawa-Washington relationship, and this is not too surprising, because between publication of first book in 1964 and second in 1985, Robert Keohane, Joseph Nye, Jr., and others had begun to write about complex interdependence and growing networks of international ties which go far beyond relations between national governments. Indeed, Keohane and Nye highlighted Canada-US relations in 1977, labelling these ties quintessential model of complex interdependence, defined by the absence of force, lack of hierarchy among issues, and presence of multiple channels of contact between societies.' For Keohane and Nye, three types of cross-border interactions are prominent in contemporary world of international relations. The first is interstate interactions, typified by official exchanges between representatives of national governments. The second is transnational interactions which involve at least one nonstate actor such as a corporation, a labour union, or a church organization. The third is transgovernmental interactions which include at least one governmental entity or representative not linked directly to leadership of a national government. In this chapter, we will focus primarily on this latter category which was largely ignored in first two American Assembly volumes and which merited only one sentence in Keohane and Nye's own study of Canada-US relationship.DOCUMENTING MULTIPLE CHANNELS OF INTERACTIONCanada and United States share a 4,ooo-mile border and another 1,500mile border separating Alaska from British Columbia and Yukon. The evolving cross-border relationship, which affects 32 million Canadians and 295 million Americans, is as complex and diverse as any in world, evincing many of features of globalization emphasized by Keohane in following statement: Interdependence refers to a state of world, whereas globalization describes a trend of increasing transnational flows and increasingly thick networks of interdependence.4 The overall complexity in bilateral relationship is illustrated in figure 1.In economic terms, United States and Canada maintain largest bilateral trading relationship in world, with two-way trade in goods and services in range of US$1.2 billion per day, up over 150 percent since 1988, year before Canada-US free trade agreement (FTA) went into effect. US foreign direct investment in Canada, a type of investment which provides Americans with control over management of companies operating in Canada, surpassed $192 billion in 2003, with US-owned companies accounting for over 10 percent of Canada's gross domestic product (GDP) and providing 1.16 million jobs for Canadian workers.5 Canadian foreign direct investment in United States stood at $105 billion at end of 2003, with more than 470,000 Americans working for Canadian majority-owned non-bank enterprises. …

Commerce et Constitution : une analyse de la stratégie de marchandage dans l'Accord canado-américain de libre-échange

This paper attempts to explain the controversial, and politically risky, Canada-us Free Trade Agreement (CUFTÀ) as a by-product of political entrepreneurship in pursuit of electoral realignment. Upon becoming Prime Minister of Canada in 1984, Brian Mulroney harbored one overriding ambition : to engineer electoral realignment whereby his Conservative Party would supplant the Liberals as the dominant federal party in Quebec, and by extension, in Canada. Mulroney sought realignment by satisfying Quebec's fundamental institutional demands, which took the form of the Meech Lake constitutional Accord. This objective necessitated the construction of a coalition that married the trade and constitutional issues. Mulroney's brokerage skills ensured that CUFTA progressed in tandem with Meech Lake as a means to realizing his first-order objectives.

Political Economy, Civil Society, and the Deep Integration Debate in Canada

We're launching the attack folks--and if we have our way, it will be on the same scale or bigger than past movements opposing the MAI and free trade. --Susan Thompson, Founder and Editor, Vive le Canada Canadians could be headed for another great debate on integration with the United States ... the potential benefits are elusive, while the pitfalls are significant.... --Marc Lee, Economist, Canadian Centre for Policy Alternatives It has been over fifteen years since an unprecedented coalition of civil society groups mobilized across Canada against the Canada-U.S. Free Trade Agreement (CUSFTA). During the 1988 debate over the CUSFTA, a self-described (Cameron and Drache, 1985) coalition of women's, church, labor, Aboriginal, environmental, student, senior, anti-poverty, and other social justice groups exploited strengths in numbers, leadership, and expertise to mount an effective public educational and parliamentary protest campaign against the CUSFTA. Since that divisive debate and federal election in 1988, subsequent federal Progressive Conservative, and then, Liberal governments have built on the free trade accord by joining the North American Free Trade Agreement (NAFTA). Interestingly, over the past year and unlike any other time since 1988, civil society groups again began to mobilize in a campaign for and against proposals that would deepen continental integration. This article adopts a political process approach for assessing the mobilization potential of those civil society groups especially engaged in a campaign against deep integration. The discussion that follows also falls squarely within the concerns of the new Canadian political economy tradition, (1) asking how the adoption of a neoliberal governing policy agenda has unsettled some of the dominant patterns of collective action and resistance that have unfolded across Canada since the late 1980s. Specifically, the strategic options facing civil society groups today across Canada are constrained by political circumstances and a time period that paradoxically looks at once similar and yet markedly different than the supportive environment for political protest that faced groups in 1988. In fact, this article concludes that despite parallels between the 1988 and the more recent integration debates--years both marked by contested federal elections--civil society groups in Canada currently lack crucial political leverage to generate the sorts of political influence so effectively applied during the anti-CUSFTA campaign. Civil society can be understood as that arena of organized political activity between the private sphere (the household and the firm) and the formal political institutions of governance (the parliament, political parties, the judiciary, etc. (Macdonald, 1994). (2) The focus in this article in particular is on those popular sector civil society organizations who have been mobilizing across Canada to promote social or political changes through a variety of types of national and transnational collective action. On the surface the political environment appears to have become much more favorable to civil society intervention. Moreover, Canadian activists and civic groups have, over more than sixteen years of opposing neoliberal globalization initiatives, become innovative practitioners of new tactical repertoires of reeducating and mobilizing constituencies. However, despite a record of notable advances in political protest strategies and action, there is little record of change in political power relations across Canada. What civil society groups lack, then, are reliable political allies and sustained links to state power. A fundamental reorientation in Canada's political economy, marked by the political delegitimation of economic nationalism, has reduced the mobilization potential for civil society groups and presents significant challenges for groups that hope to effectively counter deep integration initiatives. …

Economic Integration, Business Cycle, and Productivity in North America

This paper examines the effect of the major Canada-U.S. trade agreements on the dynamics of business cycles and productivity in Canada. The North American Free Trade Agreement (NAFTA) and its predecessor, the Canada-U.S. Free Trade Agreement (CUSFTA), have led to a substantial expansion of trade flows. Although common factors have played a larger role in explaining business cycles in Canada and the United States since the early 1980s, country-specific and idiosyncratic factors remain important for Canada. At the same time, while increased trade integration seems to have positively contributed to total factor productivity of Canadian industries, the persistence of structural differences between the two countries has prevented convergence of aggregate labor productivity. While these findings seem to weigh against moving toward a monetary union, they also suggest that substantial benefits could be reaped from further reducing remaining barriers to trade.

Economic Integration, Business Cycle, and Productivity in North America

This paper examines the effect of the major Canada-U.S. trade agreements on the dynamics of business cycles and productivity in Canada. The North American Free Trade Agreement (NAFTA) and its predecessor, the Canada-U.S. Free Trade Agreement (CUSFTA), have led to a substantial expansion of trade flows. Although common factors have played a larger role in explaining business cycles in Canada and the United States since the early 1980s, country-specific and idiosyncratic factors remain important for Canada. At the same time, while increased trade integration seems to have positively contributed to total factor productivity of Canadian industries, the persistence of structural differences between the two countries has prevented convergence of aggregate labor productivity. While these findings seem to weigh against moving toward a monetary union, they also suggest that substantial benefits could be reaped from further reducing remaining barriers to trade.

Foreign Policy at the Fringe

BEYOND THE BILATERAL RELATIONSHIP with the United States, the are essentially marginal to Canada's interests, however one defines the latter, and they are likely to remain so in the foreseeable future. In such a context, the challenge for the government is to design a policy that is consistent over time, that can have significant impact in the few areas that are more relevant to the country's interests, that is likely to command sufficient resources for that purpose and that can be sustained over time. No easy task.This article first examines the structural basis of Canada's relationship with the rest of the Americas--or more precisely, the lack thereof--and challenges three of the key assumptions of the policy adopted since 1989. A second section examines a limited number of files whose relevance for Canada is higher--Mexico and Brazil--and another where a focused policy could have significant positive impacts.THE AMERICAS OF OUR DREAMSSince 1989, Canadian policy toward the has been remarkably proactive. The story of Canada's rediscovery of the Americas(1) has been portrayed as a decisive march toward the country's full integration in hemispheric affairs. The landmarks of Canada's deepening option for the hemisphere are numerous and impressive: the Canada-US Free Trade Agreement in 1988; full membership in the Organization of American States (OAS) in 1990; the North American Free Trade Agreement (NAFTA) in 1994; the Miami Summit, also in 1994, where Canada forcefully endorsed the project of a Free Trade Area of the (FTAA); free trade with Chile in 1997; the Quebec Summit in 2001; and then a bilateral trade agreement with Costa Rica (2002) and trade negotiations with the rest of Central America. Between these landmarks, the government and its diplomats have shown remarkable commitment to, and certainly made their mark on, hemispheric affairs, playing a key role in setting up the negotiation and support infrastructure for the FTAA, in addition to chairing the first stage of the negotiation. Similarly, Canada's commitment to a suddenly proactive OAS translated into a number of initiatives, from the establishment of a unit for the promotion of democracy, in the general secretariat of the OAS, to the inclusion of a democracy clause in the Quebec Summit declaration and the adoption in Lima, in 2001, of an Inter-American Democratic Charter.On the ground, an activist diplomacy was translating these general principles into continuing support for democratic consolidation and peace processes in Guatemala, Colombia and perhaps, more spectacularly, in Peru.(2) Finally, the significant capabilities of Canada's diplomatic apparatus, however stretched, have been put to intensive use in the hosting of an extraordinary number of major hemispheric events: from the Business Forum in Toronto (1998), the Pan-American Games in Winnipeg (1999), the Ninth Conference of the Spouses of Heads of State and Government of the Americas (1999), to the OAS General Assembly in Windsor (2000) and the Quebec Summit of the (2001).Three broad assumptions have driven those activities: 1) the hemisphere is now the only possible regional home for Canada in the vast world, what happens there is important from the standpoint of Canada's economic, political and security interests, and Canada has the capacity to become a significant player in the region; 2) the hemisphere is integrating--economically, politically and as a security complex--as a rules-based regional trade regime is emerging and as its multilateral institutional machinery gains relevance; and 3) the region is getting better, both economically and politically, its countries are progressively joining the global community of democracies and, albeit slowly, struggling out of economic under-development.(3)While these assumptions might have been relatively compelling in 1989 and especially in 1994 after the Miami Summit--but before Mexico's Peso Crisis--they now simply look wrong--completely wrong--which suggests that the policy they underlie might require substantial change. …

The Prospects of a North American Project

FIFTEEN YEARS AGO, the governments of Canada and the United States were into the final weeks of fevered negotiations on the Canada-US Free Trade Agreement (FTA). Proponents claimed the dawning of a new age of economic prosperity; detractors bemoaned the end of Canadian sovereignty. Five years later, the three governments of North America, including Mexico, placed the last touches on what was to become the North American Free Trade Agreement (NAFTA). In August of this year, the Couchiching Institute decided it was time to bring together some of the founders, detractors and commentators of the day, as well as current leaders in government, academia and the private sector, to assess the impact of those agreements on the North American community. More importantly, participants in the conference Continentalism: What's in it for us? examined the likelihood of closer and greater continental integration and the impact that it would bring to North American life.The Couchiching Institute on Public Affairs has hosted an annual conference on domestic and international public policy issues for 72 years. Born in the social and economic flux of the early 1930s, Couchiching brings together decision-makers from the public and private sectors, representatives of the academic, cultural and not-for-profit sectors, students, and interested Canadians from every walk of life to engage in spirited debate, constructive dialogue, and no-holds-barred argument over the direction and focus of public policy. Unlike some other prestigious conferences, Couchiching's doors are open to anyone who wishes to register. Couchiching's objective is to create in Canada a force for greater citizen engagement in public discourse. Couchiching reaches out to Canadians through its annual conference, its televised proceedings, year-round events in Ottawa, Toronto, Montreal and Vancouver, and its Web site, encouraging Canadians to become engaged in issues of critical importance to their lives, to the social and political fabric of the country and of the wider international community. Each summer, more than 250 delegates spend four days at a YMCA conference centre just outside of Orillia, on the shores of Lake Couchiching, to listen, engage and debate. Canada is a richer place for it.The summer of 2003 brought together speakers and delegates from Canada, the United States and Mexico to look at the issue of North American continental integration. Canadian perspectives were given by David Dodge, Governor of the Bank of Canada; well-known author and nationalist Mel Hurtig; Hassan Yussuff of the Canadian Labour Congress; Chief Economist Renee St-Jacques of Industry Canada; the Honourable Michael Wilson; Judith Maxwell of the Canadian Policy Research Networks; writer and retired journalist Anthony Westell; the Honourable Lloyd Axworthy; Elizabeth McDonald of the Canadian Film and Television Production Association; Ron Atkey Senior Partner at Osler, Hoskin & Harcourt LLP; Alan Nymark, former deputy minister of Environment Canada; and the Honourable Bill Graham. American speakers included Robert Fauver, former G7/G8 sherpa; Stephen Kelly, Deputy Head of Mission at the US Embassy in Ottawa; Anthony DePalma of the New York Times; Stephen Handelman of Time magazine; Ambassador Thomas Graham Jr.; Edward Asner (who was most entertaining and needed little introduction); and former Undersecretary of State Frank Loy. Finally, we heard insight and perspective on Mexico from Ambassador Andres Rozental, President of the Mexican Council on Foreign Relations; Undersecretary for Economic Relations and International Cooperation Dr. …

The Trade-Security Nexus: The New Reality in Canada-U.S. Economic Integration

...the relatively unrestricted mobility of capital between Canada and the United States has done more to integrate the economies of the two countries than any other factor except geography. (Aitken 1961,19) ...the further regional economic integration proceeds in other parts of the world the more vital will relations with Canada become for the national interests of the United States... [at the same time] If Canada wants the United States to do something she must be able to prove that it is in the interests of the United States to do it. (Aitken 1961,155-6) ********** Hugh Aitken said more than can be captured in the above quotes in his prescient book, American Capital and Canadian Resources, published more than four decades ago. He also noted the differences between the way integration was unfolding in North America and in Europe, the interrelationship between economic integration and continental defense, and the challenges the increasingly intimate relationship with the U.S. posed, and would continue to pose, for Canada (Aitken 1961, ch. 1). Aitken was describing a relationship that was the result of decisions of corporate and individual investors, not government policy (2) (though some U.S. government concerns such as security of supply of certain key commodities in the context of the Cold War did influence U.S. corporate investment in Canadian resources). The questions Aitken raised about the implications of Canada's growing economic ties with the U.S. remain at the center of the Canadian agenda. The immediate economic impact of closure of the border following the terrorist attacks on the U.S. on September 11, 2001, emphasized the differences in national priorities. For Canada the issue was and remains economic security, which translates into unimpeded access to the U.S. market for Canadian exports and imports. For the U.S. the issue was and continues to be homeland security, in which a secure border trumps economic connectedness with Canada and Canadian economic dependence. This article examines Canada-U.S. economic relations in light of the now critical connection between trade and security. It demonstrates the linkages between the two economies and the asymmetrical character of that relationship and argues that lack of attention to the linkage between trade and security could hinder the hitherto predictable cross-border movement of goods on which Canada's economic health has come to depend. The article begins with some discussion of two of the analytical prisms through which the bilateral relation ship has been understood. The second section outlines the origins of bilateral economic ties in the nineteenth century, and then in the third attempts to measure the extent of Canada-U.S. economic integration, with particular attention to trends since the implementation of Canada- U.S. Free Trade Agreement (CUSETA) in 1989 and the North American Free Trade Agreement (NAFTA) in 1994. This section of the paper also looks at business attitudes toward the relationship. The fourth part of the article quickly reviews impact of the September 11 terrorist attacks. The conclusion examines some of the factors shaping the environment in which the next stages in the relationship will unfold. 1. Analytical Perspectives on the Canada-U.S. Economic Relationship Two of the many analytical paradigms on Canada-U.S. relations inform this article. The first is the literature on economic integration, particularly the European experience, and the way in which, implicitly or explicitly, our understanding of what has occurred (and is occurring) in Europe shapes our analysis of the Canada-U.S. (and sometimes the Canada-U .S.-Mexico) relationship. The second is the Keohane and Nye conclusion about lack of issue linkage in the Canada-U.S. relationship, the idea that since World War II differences of views between the two-on-one issue in their relationship normally did not affect the outcome of bargaining on other unrelated matters (2001, 146-51). …

The Canada-United States bilateral import demand functions: gradual switching in long-run relationships

By estimating long-run relationships in bilateral import functions, the effects of the Canada-US Free Trade Agreement is analysed. We also incorporate the gradual switching model into the import function to capture the phased tariff reductions. The result shows that the free trade agreement made both countries sensitive to domestic and foreign prices and insensitive to the domestic income.

Regional Implications of North American Integration: A Canadian Perspective on High Technology Manufacturing

Using questionnaire data the paper outlines structural and performance responses of a sample of Toronto's technology intensive manufacturers to the Canada US Free Trade Agreement (FTA) of 1989 and the North American Free Trade Agreement (NAFTA) of 1994. Free trade has elicited complex reactions. Those firms with prior global and US export connections, including large and small firms, foreign affiliates and Canadian-owned firms, were better prepared for the new trade regime in their product and production technology. Freer trade has stimulated firms with limited exports to seek improvements in innovation and productivity, foreign affiliates have gained product mandates and increased outsourcing has been one of the production responses. A partir des données provenant d'un questionnaire, cet article cherche àesquisser les réponses aux accords de 1989 entre le Canada et les Etats-Unis sur le libre-échange (Canada US Free Trade Agreement - FTA) et aux accords nord-américains de 1994 sur le libre-échange (North American Free Trade Agreement - NAFTA) quant à la structure et àla performance d'un échantillon des entreprises industrielles àhaute technologie situées àToronto. Le libre-échange a suscitédes réactions complexes. Les entreprises qui jouissaient des liens d'exportation internationaux et américains antérieurs, y compris les grandes et les petites entreprises, les filiales à l'étranger, et les entreprises à capital majoritaire canadien, ont été mieux préparés à la nouvelle fac¸on de vendre leur technolgie de produit et de production. Les échanges plus libres ont incité les entreprises àfaible vocation exportatrice à développer l'innovation et à augmenter la productivité, tandis que les filiales à l'étranger ont obtenus des mandats de produit, et que le recours à la sous-traitance a été l'une des réponses de la production. Dieser Aufsatz verwendet Fragebogendaten, um strukturelle und Leistungsreaktionen ausgewählter, technologisch intensiv engagierter Torontoer Herstellerfirmen auf das Freihandelsabkommen (Free Trade Agreement FTA) zwischen Kanada und den USA im Jahre 1989 und auf das Nordamerikanische Freihandelsabkommen (North American Free Trade Agreement NAFTA) vom Jahre 1994 zu umreißen. Freihandel hat komplexe Reaktionen gezeitigt. Firmen mit bereits bestehenden globalen und US Exportverbindungen, einschließlich großer und kleiner Firmen, ausländischer Schwestergesellschaften und Firmen in kanadischem Besitz waren mit ihren Erzeugnissen und ihrer Produktionstechnologie besser auf das neue Handelssystem vorbereitet. Freierer Handel hat Firmen mit begrenztem Export angeregt, Verbesserungen in Innovation und Produktion vorzunehmen, ausländische Schwestergesellschaften haben Aufträge für ihre Erzeugnisse bekommen, und vermehrte Produktionsverlagerung hat sich als eine der Produktionsreaktiunen erwiesen.

A Chance to End Culture Trade Conflict between Canada and the United States

More than a year has passed since the dispute between the United More States and Canada over the latter's legislation on magazines, Bill C-55, was resolved. Canada agreed to amend this bill to accommodate U.S. concerns, and the United States dropped its threat of retaliation. In the months that followed, no new bilateral cultural trade disputes emerged on the scale of the magazine dispute. How should we interpret this period? Is it peace, or just a pause in fighting? Without question, it is not peace. The fundamental sources of tension between Canada and the United States, which include the pressures of information technology and deepening economic integration on Canadian distinctiveness, remain. This is instead a brief interlude, and will be followed in the near future by yet another trade dispute centered on culture. The resonance of the magazine dispute in Canada was due not to its commercial value but to the larger issue of Canadian identity, which is under pressure from the assimilating nature of deepening integration. As integration proceeds, Canadian concerns over cultural distinctiveness from the United States will grow unless or until something is done to counter this national insecurity over identity. The resolution of the magazine dispute addressed only the specific disagreement over Canadian legislation on split-run magazines. This made a settlement of the immediate dispute simpler and in many ways easier. Yet by not recognizing the underlying issues for Canadians, the United States only postponed an eventual cultural trade reckoning between the two countries. The Perspective from Washington Three factors contributed to stiffening U.S. resolve to combat Canadian cultural protectionism in the late 1990s. First, there emerged in Washington a new appreciation of the global impact of Canadian policy. Second, a grand coalition formed, linking the U.S. entertainment, media, and information-technology sectors in a common front to oppose cultural protectionism. Third, the failure of the Clinton administration to secure fast-track negotiating authority over international trade deals from the 105th and 106th Congresses reoriented the energies of American trade negotiators. Policymakers in Washington have long understood that other trading partners would look to the U.S. treatment of Canada for precedents, since most countries aspire to have the kind of access to the American market that Canada enjoys. Successful Canadian protectionism can be a model for other countries seeking to escape U.S. retaliation. Canada's support for liberalizing trade in most sectors and its active participation in successive rounds of multilateral trade negotiations has meant that, for the most part, Canada has been a model trading partner in the best sense. However, there are exceptions to this rule where culture is implicated. The Multilateral Agreement on Investment (MAI) served as an example of this linkage of Canadian cultural concerns and consequences for the international system. Although initially the MAI raised only modest concerns in Canada and the United States, Canadian cultural protectionists began to argue that Canada's ability to maintain its identity would be undermined by the liberalization of investment rules contained in the agreement, which they argued would allow U.S. interests to buy up Canadian cultural industries. With this argument, they were able to rally opposition to the MAI despite the fact that U.S. investors already had greater access to the Canadian market through the Canada-U.S. Free Trade Agreement (CUFTA) and the North American Free Trade Agreement (NAFTA) than the MAI would provide. What was even more startling was that these Canadian arguments were subsequently echoed in Europe and even in Asia. In an increasingly small world, ideas travel fast, and the Canadian concern that the MAI would lead to greater American cultural hegemony struck a chord around the world. …

NAFTA and the Reconstruction of U.S. Hegemony: The Raw Materials Foundations of Economic Competitiveness

Abstract: This paper argues that conflicting assessments of the of free trade in North America are incomplete because they do not analyse these effects in light of the key long term U.S. goal: the reconstruction of U.S. hegemony that was under siege by Japan and Europe. The declining competitiveness of U.S. raw materials supply systems badly damaged U.S. hegemony during the 1970s and l980s. The original U.S. strategy was to create a continental energy market to reduce overseas oil imports, guarantee access to oil and natural gas from Canada and Mexico, and reduce price instability. The evolution into broader agreements reflected the interests of other U.S. industries and the efforts of Canadian and Mexican states and firms to capture benefits from restructuring. This paper analyses the role continental integration of raw materials industries played in strategic efforts to reconstruct U.S. hegemony and the consequences of these efforts. Resume: Cet article argue du fait que les evaluations contradictoires des du libre-echange en Amerique du Nord sont inachevees parce qu'elles n'analysent pas ces effets a Ia lumiere du but principal des Etats-Unis de long terme: Ia reconstruction de l'hegemonie des Etats-Unis qui etait sous le siege par le Japon Ct J'Europe. La competitivite en baisse des circuits d'alimentation de matieres premieres premieres des Etats-Unis a mal endommage I'hegemnie des Etats-Unis pendant les annees 70 et les annees 80. La strategie initiate des Etats-Unis etait de creer un marche de I'energie continental pour neduire les importations de petrole d'outre-mer, I'acces de garantie au petrole et au gaz naturel du Canada et le Mexique, Ct reduit I'instabilite des prix. Levolution dans de plus larges accords a reflete les interets d'autres industries des Etats-Unis et les efforts des etats et des societes canadiens et mexicains aux avantages de saisie de Ia restructuration. Cet article analyse I' integration continentale de role des industries de mateieres premieres premieres jouees dans des efforts strategiques de reconstruire I'hegemonie des Etats-Unis et les consequences de ces efforts. I. Introduction What are the consequences of free trade agreements for North America? The North American Free Trade Agreement (NAFTA) and the Canada-U.S. Free Trade Agreement (CUSFTA) created the institutional framework for the integration of the economies of the United States, Canada and Mexico. Free trade supporters argued that the increased economic competitiveness resulting from continental integration of firm operations, access to lower cost labour, and enlarged markets would benefit all three nations, but critics emphasized the relocation of industries from the U.S. and Canada to Mexico in search of low wage labour and less stringent environmental regulations. Assessments of the of these agreements remain sharply divided (see, e.g., President's Report to Congress, 1997; USITC, 1997; and Weintraub, 1997 for positive assessments and Economic Policy Institute, 1997 for a negative assessment). In part, this results from focussing on different subsets of the total impacts of these agreements. More fundamentally, c onflicting assessments are incomplete because they do not analyse these in light of what this paper will argue are their key long term goals from the U.S. perspective: the reconstruction of U.S. hegemony that was under siege in the 1970s and 1980s by Japan and Europe. Labour costs, market access, and the economies of scale of continental operations are all central components of this hegemonic reconstruction strategy. This paper focuses attention on another central component: U.S. raw materials supply systems. A key factor in U.S. hegemonic decline was reliance on raw materials supply networks developed in the late 1800s and early 1900s. Declining competitiveness in extraction, processing, and particularly transport costs relative to its main competitors helped cause the productivity growth slowdown in the U. …

The Grain Trade in Contemporary Canada-U.S. Relations

Background Canada and the United States share the largest trading relationship between two sovereign nations that has ever existed. Much of current volume in trade has been the result of the tremendous growth subsequent to the 1989 Canada-U.S. Free Trade Agreement (CUFTA). Despite these very large commercial ties across many sectors, and the existence of NAFTA and World Trade Organization (WTO) agreements that outline rules for trade, trade in the grain sector has, nonetheless, been a frequent source of disputes. Increased grain exports from Western Canada into the U.S. have led to numerous disputes in which the U.S. government has legally challenged this Canadian access to its market. This paper analyzes the economic and legal factors that have contributed to these recent grain trade disputes and, further, it speculates as to whether these factors will continue to create pressure for grain disputes. To these ends, it will begin with a brief review of the recent changes in the legal framework for Canada-U.S. trade as a result of CUFTA, NAFTA, and WTO trade agreements, and a description of some of the visible changes in the marketplace, including changes in the grain trade flows that have occurred in the last decade through the merger of firms. This will be followed by an analysis of the economic forces that have affected the Canada-United States grain trade and a description of some of the concerns of the U.S. industry with respect to grain exports from Canada. The final section of the paper contains our assessment of the likelihood of future grain trade disputes. For many years there were significant barriers to trade in grains between Canada and the United States. Canada protected its domestic market for wheat, oats, and barley with the use of import licenses administered by the Canadian Wheat Board (CWB). This protection allowed the CWB to operate the two-price policy, where CWB sales to domestic processors were generally maintained well above world prices. Until 1989, the United States had an import tariff of $0.21 per bushel ($8/t) on grain and canola that had not obtained GRAS (generally regarded as safe for human food consumption) status from the U.S. Food and Drug Administration (U.S. International Trade Commission). These measures virtually eliminated profitable arbitrage opportunities for Canada-U.S. grain trade. In January 1989, the Canada-U.S. Free Trade Agreement made a new attempt to integrate the North American grain market. It contained a formula to allow for removal of the Canadian import licenses and the U.S. import tariff on grains, eliminated export subsidies between the two grain markets, reduced Canada's grain transportation subsidy to some U.S. destinations, and obliged the Canadian Wheat Board (CWB) not to sell grain into the U.S. below cost. The most noteworthy aspect of CUFTA was that, for the first time, an international legal institution was created for the resolution of trade disputes between Canada and the U.S.: the Chapter 18 Binational Panel system. This new element of the legal trade framework was soon tested in the durum case we will turn to presently, but the system functioned effectively to bring a rules-based solution to a trade irritant. The application of the rule of law in an international setting, where power politics previously determined the outcome, was a welcome development for trade liberalization. Since the agreement came into force, the United States has imported significant amounts of bread wheat, durum wheat, feed wheat, barley, oats, canola, and flaxseed. As shown in Figure 1, Canadian grain exports to the United States have risen steadily to exceed four million tonnes in the 1996-97 crop year. What is most striking about the number is that both CWB grains (wheat and barley) and non-CWB grains (oats, canola, and flaxseed) have increased significantly since the CUFTA. The domestic sale of milling wheat, durum, and malting barley in Canada and the U. …

The Commission for Environmental Cooperation and Canada-U.S. Environmental Governance in the NAFTA Era

The advent of the North American Free Trade Agreement (NAFTA) on 1 January 1994, its accompanying North American Agreement on Environmental Cooperation (NAAEC), and resulting Commission for Environmental Cooperation (CEC) brought a potentially major change in the historic pattern of Canada-U.S. environmental governance. In the first instance, NAFTA and NAAEC promised to transform a hitherto almost exclusively bilateral relationship into a new trilateral community, by making many issues, processes, and institutions that flourished along the 49th parallel the subject of a new, and in many ways overarching, trilateral structure (Spencer, Kirton, and Nossal 1982; Swanson 1978). Second, the new CEC, with its single, well-staffed Secretariat and potentially far-reaching powers, provided a new, institutionalized regional center of political activity for an informal relationship long dependent on ad hoc, transgovernmental problem-solving by functional specialists on each side of the border (Fox, Hero, and Nye 1976). Third, by endowing the new CEC with a comprehensive mandate embracing the full range of environmental issues, and by assigning it important trade-related responsibilities, the NAFTA-NAAEC regime took the Canada-U.S. environmental relationship into a more integrated, mutually supportive (though potentially conflictual) connection with the economic subjects, logics, and communities at the center of the Canada-U.S. relationship (Kirton 1994, Kirton 1993). Indeed, the trilateral character, institutional strength, and broad mandate of the CEC suggested that the Canada-U.S. environmental relationship would now importantly and increasingly depend upon how this new, innovative institution would operate in practice. More than three years after the CEC came into existence, there remains considerable disagreement about its overall potential and actual performance. The first and largest group of observers are the skeptical critics. They argued, during the initial NAFTA debate from 1990 to 1993, that the prospective CEC was inadequate to offset the environmentally destructive effects that NAFTA's far-reaching trade and investment liberalization would bring in Mexico and in a Canada-U.S. relationship already five years into its bilateral free trade regime under the 1988 Canada-U.S. Free Trade Agreement (CUFTA). Assessments of the CEC's early operation by nongovernmental organizations (NGOs) remained critical (Public Citizen 1995). Scholarly observers assert that the CEC is in a weak position and might contribute to effective transboundary environmental management only insofar as its often reluctant or suspicious member governments will support it (Mumme and Duncan 1996). More recently, among the many reviews that accompanied the July 1997 Congressionally mandated presidential report on NAFTA's performance, there is a widespread view that NAFTA's environmental legacy and the CEC itself have been a disappointment (USTR 1997). The primary concerns are that the CEC and its companion U.S.-Mexican bilateral institutions, the Border Environmental Cooperation Commission (BECC) and the North American Development Bank (NADBank), have insufficient funds to address the large need for new environmental infrastructure, that the CEC has processed few complaints about its member countries' failure to adequately enforce their environmental laws, and that citizens and environmental NGOs (ENGOs) relative to private sector investors have limited access to NAFTA's institutions (Council on Hemispheric Affairs 1997, Economic Policy Institute 1997, Lustig 1997). A second group of observers are contingent optimists (Johnson and Beaulieu 1996, Abbott 1996). They judge that the positive environmental impact of the CEC depends on a host of ever-changing factors in its internal organization and broader environment. These internal factors include include proper staffing for the Secretariat itself, and its technical expertise, analytic quality, and independent verification of information supplied by governments. …

The Changing Structure of the Quebec Economy

The decade of the 1980s began with what was at the time the most severe recession in the postwar period. During the decade, the Canadian government favored greater trade liberalization and negotiated the Canada-U.S. Free Trade Agreement (CUSFTA). Further liberalization occurred in the early 1990s in the North American Free Trade Agreement (NAFTA) and during the Uruguay Round of GATT negotiations which culminated in the establishment of the World Trade Organization (WTO) in 1995. The last fifteen years have thus witnessed accelerated integration of the Canadian economy into the regional and global economies. The adjustment has not been painless. This paper considers areas of expansion and contraction within the Quebec economy, particularly in light of recent trade liberalization. The discussion begins with a macroeconomic overview and a look at the expected impact of trade liberalization on the Quebec manufacturing sector. Some general comments on the changing structure of the Quebec economy are followed by a more specific inquiry into changes within the manufacturing sector itself. Trends in Quebec's exports and imports are analyzed. Finally, an examination of commodity trade statistics provides some possible clues about the role of trade liberalization in the changing structure of Quebec manufacturing. Macroeconomic Overview Like the United States, Canada experienced a severe recession at the beginning of the 1980s. Recovery began in 1983 and the remainder of the decade saw average annual growth rates of just over 4 percent. Both countries again experienced cyclical downturns in 1990 and 1991, although output in Canada declined sooner and more drastically than in the United States. Recovery was also slower in Canada throughout 1993. By 1994, Canadian GDP growth exceeded that of the United States. For its part, Quebec's GDP paralleled the growth of Canadian GDP for much of the 1980s, but fell more in 1991 and recovered more slowly. Quebec unemployment rates remained well above Canadian (and Ontario) rates. While the Canadian dollar depreciated about 13 percent against the U.S. dollar from 1980 to 1986, appreciation in the early years of the CUSFTA did not help the international competitiveness of Canadian goods. The Canadian dollar appreciated 14 percent from 1987 to 1991 and then depreciated 20 percent by 1994. This most recent depreciation may help explain the even stronger north-south orientation of Canadian exports in the last two years. Before the 1989 implementation of the CUSFTA, just under 16 percent of Quebec's GDP was exported to non-Canadian markets and 75 percent of those exports, accounting for C$16.5 billion, were destined for the United States. Forty-five percent of Quebec's imports originated in the United States. By 1994, almost one quarter of Quebec's GDP was exported and 82 percent of those exports, or $31.8 billion, were headed for the United States. On the other hand, imports from the United States remained at about the same share of total Quebec imports. Expected Impact of Trade Liberalization A number of studies estimated the likely effects of the CUSFTA, and later NAFTA, on Canadian industrial output and employment. Results differ depending on the type of model used and the underlying assumptions and parameters. (1) Models depicting output and employment changes by industrial sector, as well as changes in economic welfare more generally, are characterized as either computable general equilibrium models or macroeconometric models. Computable general equilibrium models are capable of evaluating static effects of changes in trade policy on factor prices, economic welfare, the intersectoral allocation of resources, and the international allocation of production. (2) The Cox and Harris (1986), Brown and Stern (1989), and Brown, Deardorff, and Stern (1992) studies cited in Table 1 are examples of this type of model. These models incorporate insights from recent advances in the theory of industrial organization into the analysis of international trade. …

Consolidating Neoliberal Reforms: “Free Trade” as a Conditioning Framework

Canada has undergone massive economic restructuring since implementing the Canada-US Free Trade Agreement (CUFTA). Mexico is planning to enter into the North American Free Trade Agreement (NAFTA) after a period of dramatic economic and social restructuring. Is it merely fortuitous that both arrangements are closely associated with neoliberal restructuring? This paper looks at how free trade arrangements (FTAs) centred in Washington serve as a restructuring tool or, put differently, as a conditioning institutional framework that promotes and consolidates neoliberal restructuring.

The Effects of the North American Free Trade Agreement on the Canada-United States Trade Relationship

Much of the popular discussion of the effects of the proposed North American Free Trade Agreement (NAFTA) on Canada as well as a number of more academic general assessments have concentrated on the effects of adding Mexico to the previously established Canada-United States Free Trade Area (e.g., Harris and Cox, 1992; Watson, 1992; 1993; Wonnacott, 1993). These studies generally conclude that the economic effects of such an expansion of the currently existing free trade area would be small and only marginally beneficial to Canada. However, this outcome is presented as preferable to the possible alternative of a bilateral agreement between the United States and Mexico, from which Canada is excluded. Such a bilateral agreement would allow Mexico to compete more effectively with Canada in the US market and cause some trade substitution away from Canadian and toward Mexican commodities. It would also make the United States the hub and Canada and Mexico the spokes of a so-called 'hub-and-spokes' system in which only a company located in the US would have relatively unfettered access to the entire North American market. This scenario could encourage investment in the United States at the expense of both Canada and Mexico (Gestrin and Rugman, 1993; Lipsey et al., 1993; Rugman and Gestrin, 1993; Waverman, 1993; Wonnacott, 1993). If the United States continued in this direction and negotiated liberalizing trade agreements with other Latin American countries, the situation would be even worse (Wonnacott, 1993). Canada can do nothing about the increased competition from Mexico in US markets resulting from a US-Mexico accord. However, it can avoid granting the United States the exclusive privilege of access to all of North America, and perhaps ultimately the Americas, by obtaining such access itself through joining the NAFTA. This story represents a simple and persuasive argument in favour of Canadian participation in the NAFTA. However, as most of the authors telling it recognize, it is not the whole story. The NAFTA is much more than the expansion of the Canada-US Free Trade Area to include Mexico. The negotiation of the NAFTA has involved a recasting of the Canada-US Free Trade Agreement (FTA) in a number of important

Canada-United State Free Trade.

The Canada US Free Trade AGreement (FTA) which came into force January 1. 1989 caused heated debate within Canada about the impact it would have on social programs, other directly or indirectly It was argued that Canada would have to give up some social programs because they would be deemed to be substdues to the production of goods or services Alternatively, it was feared that firms would argue that the programs would need to be cut in order to ensure that they could compete with US firms in firms in terms of taxes It is shown that public unease about the fate of social programs was based both on a misunderstanding of FTA provisions, and on ‘misperception’of the mag nitude of social program expenditures Social Programs Such as unemployment insurance, even when they subsidize particular groups of people (eg fisher men) are not normally deemed to be unfair competition which would be countervailable In addition, firsm do not expertence any greter benefit costs in Canada than in the US, albeit there is a different public/private split and thus there is no justification for firms to argue for cutting programs in order tobe competitive, other things being equal