From Deep Integration to Reclaiming Sovereignty: Managing Canada-U.S. Economic Relations Under NAFTA

By Bruce Campbell

ISBN: 0-88627-330-7 May 2003

CAW 567 From Deep Integration to Reclaiming Sovereignty: Managing Canada-U.S. Economic Relations Under NAFTA

By Bruce Campbell

ISBN: 0-88627-330-7 May 2003

About the Author: Bruce Campbell is Executive Director of the Canadian Centre for Policy Alternatives.

Acknowledgements: The author wishes to thank Tony Clarke, John Foster, Ricardo Grinspun, Andrew Jackson, Seth Klein, Scott Sinclair, and Michelle Swenarchuk for comments on an earlier version of this paper.

CANADIAN CENTRE FOR POLICY ALTERNATIVES 410-75 Albert Street, Ottawa, ON K1P 5E7 tel: 613-563-1341 fax: 613-233-1458 email: [email protected] http://www.policyalternatives.ca Introduction together where one entity is dominant, the resulting combination resembles the domi- Post-September 11 has changed the way the nant entity. This is assimilation—a process of United States views the world and the way becoming like the dominant entity. The dis- the world views the United States. In the Bush tinction is important. What we are talking Administration’s new world order, about is a process that more often resembles multilateralism is dead. Unilateralism trumps assimilation than integration. international law except when it serves U.S. The use of language is important in this interests. Military and economic agendas are debate. Public opinion responses vary with the indistinguishable. Globalization means en- choice of words. Many currently forcing free market rules and investor supports the idea of economic integration freedoms for U.S. multinationals, protecting with the U.S., but most Canadians would also domestic markets for national producers prefer to see Canada-U.S. differences main- where required, and securing U.S. access to tained or widened. They don’t want assimila- the world’s resources. tion. As public opinion researcher Andrew The American government wages an un- Parkin told a Parliamentary committee, al- ending war on an undefined “terrorism,” leav- though Canadians favour close cooperation ing the world in a state of anxiety reminis- on economic and security matters, this, they cent of the Cold War. In its self-appointed believe, should not compromise Canadian new role, it enlists coalitions of the willing, uniqueness or sovereignty. rebukes the uncommitted, threatens the un- Integration is proceeding through the ac- willing and crushes the evildoers. tions and decisions of corporations within the It is in this climate—where not being in policy framework created by NAFTA. Two- lockstep with the hyperpower raises the spec- way trade and investment flows, intra-com- tre of retaliation—that the discussion of deep- pany trade, and the continental integration ening Canada-U.S. economic integration is of production have accelerated dramatically playing out. Business leaders and free trade over the last 15 years. Most Canadian manu- warriors are beating the drums for another big facturing output is now exported south of the leap of faith into a new comprehensive ar- border. rangement with the United States. Once again It is also occurring, explicitly and implic- they are warning that the status quo is not itly, at the policy level. It is happening explic- acceptable, that the costs of not taking this itly through an array of NAFTA-established leap could be catastrophic for the economy bodies engaged in everything from harmoniz- and the well-being of Canadians. ing labour mobility provisions to standards “Integration” is defined by the Oxford Dic- for pollutants. It is happening through explicit tionary as a process where two or more enti- harmonization measures taking place in fo- ties come together to form a single entity. rums outside the NAFTA apparatus, but very Implied in the definition is an equality of the much related. These notably include the post- separate entities and the creation of a new September 11 measures to harmonize secu- entity that combines equal elements of the rity, transportation, immigration, and refu- pre-existing entities. In a process of coming gee policies and practices. They include meas-

From deep integration to reclaiming sovereignty 1 ures to improve the border infrastructure and The most radical integration proposal is expedite border procedures. the creation of a so-called common currency Integration is also happening implicitly (or (in reality, adoption of the U.S. dollar). It is indirectly) through, for example, the harmo- advocated by some in the business commu- nization of social policy and tax policy. nity, and in the business-funded think tanks, NAFTA does not mandate this kind of har- and by two political parties—the Bloc and the monization; nor is it inevitable; but NAFTA Alliance. There is no consensus on this pro- facilitates the tax-cut agendas of posal within the business and policy estab- neoconservative governments. lishment, and it remains a possibility only in Finally, the Americas free trade negotiations the long term. currently underway are proceeding very much A prominent deep integration proposal is in the NAFTA mold and could result in the the so-called Big Idea or strategic bargain. deepening of the Canada-U.S. economic re- Spurred by September 11, it has been circu- lationship. The way the FTAA is shaping up, lating in the public domain for a year now. as evidenced in the drafts that have been made The luminaries behind it include the C.D. public, it appears to be heading toward a Howe Institute led by Wendy Dobson and “NAFTA-plus” deal. That is to say, it goes former trade negotiators Michael Hart and beyond NAFTA in its market-centred orien- William Dymond; IRPP president and former tation, forging into new areas of domestic Mulroney chief of staff Hugh Segal; free trade market deregulation and new constraints on commissioner Donald MacDonald; former government action. In the same way that Canadian ambassador to the U.S. Alan NAFTA was not only an extension, but also a Gotlieb; Tom d’Aquino, CEO of the newly- deepening of the FTA, so the FTAA will likely named Canadian Council of Chief Executives; be not just an extension, but also a deepening and Perrin Beatty, head of the Canadian of NAFTA. At least that is the agenda of the Manufacturers and Exporters Association. U.S., and also, it would appear, of the Cana- These are the same free trade warriors who dian government at this time. This FTAA brought us free trade Round One in the track is scheduled for completion in 2005, 1980s. Big it may be, but it is neither a new though how big an integration step it will be nor a good idea. And it feels like déjà vu all remains to be seen. over again, coming from the same folks who Free trade proponents from various quar- promised at the time that a big comprehen- ters advocate a range of deep integration sive deal would put an end to American har- tracks, from small steps to quantum leaps. assment of our exports. Some advocate big measures such as a cus- The essence of the strategic bargain is to toms union, common trade policy, common trade economic security (Canada’s goal) for energy policy, a common security perimeter, homeland security (the U.S. goal). For etc. Others favour a more stealth-like or be- Canada, this means putting the remaining low-the-radar approach—regulatory harmo- components of our sovereignty on the table nization, harmonization of tax, competition, in a mother-of-all negotiations—trade policy, and resource policies, etc. culture, energy, other resources including water, agriculture, defense and security, etc.—

2 Canadian Centre for Policy Alternatives in return for further enhanced (and this time the balance between the market and govern- genuine) security of access for Canadian ment, between investor rights and citizen goods, services and “knowledge workers,” and rights. Worse, as Stephen Clarkson has elo- full citizenship for Canadian investors in the quently pointed out, it has frozen this imbal- U.S. ance in a supra-constitutional arrangement Proponents stress that there is a window that make these neoconservative experiments of opportunity to be seized, given America’s difficult, perhaps even impossible, to reverse. heightened preoccupation with secure borders Secondly, most Canadian governments con- and a secure supply of resources. They also tinue to pursue think that this can be accomplished without neoconservative Further integration at much in the way of new institutions; and they policies whose argue that the European Union is not the ap- negative social ef- the policy/regulatory propriate model here. The Big Idea, though fects are rein- level is neither inevitable stalled in the current climate of policy diver- forced by the nor desirable. It should gence on Iraq and reticence on the part of NAFTA frame- Prime Minister Chrétien, will likely gain se- work. be avoided or reshaped rious traction in a -led govern- Thirdly, its where possible, and ment. proposed deepen- reversed where feasible. And finally, there are those like myself who ing and widening do not think the Canadian government in an FTAA is be- should be actively pursuing deeper levels of ing driven by neoconservative governments integration with the United States along the bent on further deregulating markets and fur- tracks outlined above. Further integration at ther constraining the role of government. The the policy/regulatory level is neither inevita- Canadian government’s initial FTAA negoti- ble nor desirable. It should be avoided or re- ating position combines some of the worst shaped where possible, and reversed where features of NAFTA and the GATS. (Sinclair feasible. Where it takes place, it should only 2003) do so under clear and well-defined conditions. Finally, the power imbalance is so great be- The impact of nearly 10 years of NAFTA tween the U.S. hyperpower (which is both (and 15 years of the bilateral FTA) has been imperial and neoconservative in orientation) clearly negative when measured against the and the two peripheral partners that, even only standard that counts ultimately when with two progressive governments in power, evaluating public policy: has it bettered the the prospect of a major renegotiation of lives of those affected by it? Not only has NAFTA is remote. Nor does extending it to NAFTA failed to deliver the goods it prom- the 34 countries of the hemisphere (minus ised to the Canadian people, but it has also Cuba) significantly alter this gross imbalance significantly eroded Canada’s sovereignty— of power. The U.S. is three times larger eco- the capacity of government to carry out its nomically than all the other countries com- democratic mandate. bined. NAFTA has embedded neoconservative structures and policies. It has radically shifted

From deep integration to reclaiming sovereignty 3 Living under NAFTA: The impact hamstringing government—to transfer power from workers to management and investors, In examining NAFTA’s impacts, it is impor- from wages to profits, from the public sector tant to stress that causality is complex and that to the market. not all the bad things that have happened can What have been the net employment ef- be attributed in whole or even in part to fects? Despite the much-improved job crea- NAFTA. The complexity of causation and the tion record of the last few years (driven mainly interaction between NAFTA and other by demand within the domestic economy), neoconservative policies; the interplay of these unemployment has never fallen below its level on a vastly uneven continental landscape of when the FTA came into effect. A little-pub- social and labour licized Industry Canada study showed that, in the first eight years of “free trade,” new jobs A negative social adjust- market institu- tions—all affect from the increase in exports were more than ment has taken place social and eco- outweighed by jobs displaced or destroyed by under cover of the war nomic outcomes the growth of imports. (Dungan and Murphy,1999) This is not something that “free on the deficit; and a cut differently, be- tween and within trade” proponents like to talk about. Nor do in taxes, largely for the NAFTA coun- they like to recall that Canada’s performance upper-income groups tries. Even if one during the 1990s (the first 10 years of “free and corporations, has were to deny that trade”) according to key economic indica- tors—GDP growth, per capita income, and occurred under cover of the negative ef- fects are the result unemployment—was the worst of any dec- competitiveness. of NAFTA, one ade since the 1930s. can surely ask why Second, a negative social adjustment (most it failed to deliver on its own promises: secure visibly in the cuts to unemployment insur- market access, closing the productivity gap, ance) has taken place under cover of the war more and better jobs, stronger social pro- on the deficit; and a cut in taxes, largely for grams, generalized prosperity. upper-income groups and corporations, has What have been the major NAFTA-related occurred under cover of competitiveness. impacts? What problems has it helped to cre- Canadian social programs are still more gen- ate or exacerbate? In what areas has it not erous and taxes are still higher at the top end solved the problems it was supposed to solve? than in the U.S. Neither tax nor social pro- The following list is not exhaustive. gram cuts were necessary or inevitable under First, there has been a long and painful pe- NAFTA. They were undertaken by riod of economic and social restructuring neoconservative governments pursuing an marked by income loss, employment loss, and agenda that is reinforced, but not mandated, the growth of insecure and precarious employ- by NAFTA. ment. Although the worst is over, restructur- Though still much less extreme than in the ing continues. This is not an unintended con- United States, 15 years of “free trade” have sequence. NAFTA and its policy siblings were seen major increases in both income inequal- designed—by enhancing capital mobility and ity and wealth inequality. (Kerstetter, 2003)

4 Canadian Centre for Policy Alternatives They have also seen a deepening of poverty, diate threat, since it is not subject to NAFTA’s of homelessness, of hunger and the use of food social service exemptions. banks. Again, NAFTA alone did not produce Water is another resource that, despite these effects. They are the product of the claims to the contrary, has not been properly neoconservative policy package as a whole, of protected under NAFTA, and where private which NAFTA is a key component. foreign investors are trying to make inroads, Third, labour and environmental side- but meeting fierce resistance from Canadian agreements were negotiated under NAFTA to citizens. As with health care and education, mitigate social and environmental dumping— NAFTA poses a huge threat to these public the competitive bidding down of labour and goods, since, once a government goes down environmental standards to attract invest- this road, the de- ment. NAFTA’s Labour and Environment cision is irrevers- Commissions have done some useful research, ible. The Chapter 11 investor- highlighted some problem areas, and occa- Fifth, NAFTA state dispute mechanism sionally provided a mechanism for NGO co- gutted the auto poses the most dangerous operation. However, the complaint process pact (a “man- immediate threat, since it does not work and neither accord has been aged” as opposed effective in addressing the environmental and to a “free trade” is not subject to NAFTA’s labour problems created by NAFTA. Mean- economic inte- social service exemptions. while, binding investor-state cases and other gration accord), NAFTA provisions have put a chill on envi- eliminating its ability to establish a domestic ronmental and labour standards-setting investment floor through minimum content throughout the region. requirements. NAFTA has greatly intensified Fourth, NAFTA contains protections for the competitive race for auto assembly and social services such as health care and educa- parts plants among the many jurisdictions of tion. But these exemptions, as the Romanow North America. As the government of On- Commission noted, are seriously flawed and, tario has recently learned, if it wants to stay in tandem with the GATS, constitute a threat in the game it has to provide huge direct and to domestic policy flexibility and options indirect subsidies and other incentives to at- around health reform. As yet, foreign penetra- tract and maintain these investments. This has tion in this sector is limited, but this is begin- a major fiscal impact, reducing resources avail- ning to change as some neoconservative gov- able for health, education, and other social ernments, after years of financially starving priorities. health care, are opening the door to more for- Sixth, contrary to the promise that pro- profit delivery and financing. The very com- ductivity would soar under free trade and mercialization of health care weakens the ef- other “free market” policies—from business fectiveness of the exemption and increases the tax cuts to labour market deregulation— possibility of a challenge from foreign inves- Canada’s productivity performance has been tors. The Chapter 11 investor-state dispute less than impressive compared to other indus- mechanism poses the most dangerous imme- trialized countries. The Canada-U.S. manu- facturing productivity gap, which was sup-

From deep integration to reclaiming sovereignty 5 posed to narrow, has in fact widened—sig- country. Our national transportation and nificantly. There has also been a disconnect communications infrastructures have also between productivity increases and wage in- weakened. When combined with the coun- creases, reflecting the intensification of low try’s weakening social bonds due to federal wage competition, the decline in union bar- cutbacks and decentralization, the question gaining power, the weakening of social and needs to be asked: How much, or to what labour market programs and institutions, and extent, has North American economic inte- the still relatively high unemployment rate. gration, which has clearly produced national Seventh, Canada has been losing out to economic dis-integration, weakened national the other NAFTA partners, especially Mexico, social, cultural and political ties? as the preferred location of foreign investors that want to produce for the North Ameri- Alternatives to deep integration: a can market. (It should be pointed out that, strategy of small steps when new direct foreign investment is in the form of takeovers of Canadian companies So, how can the current course be altered? In [and most of it is], it often means the loss of an ideal world the three enlightened North high-tech and managerial jobs. How can this American governments would renegotiate be good?) NAFTA, transforming it into a trade and de- Eighth, although the U.S. has grown as the velopment accord in which citizens’ rights destination of 85% of Canadian exports, up prevail over those of corporations, where the from 75%; and although exports now account mandate of government prevails over the im- for 43% of GDP, up from 25%, Canada’s peratives of the market. A noble aspiration, share of U.S. imports (18.5%) is about where but unrealistic (except perhaps in the long it was at the outset of free trade. Thus, Canada term, where all things are possible), given the has become even more vulnerable to U.S. change in the configuration of political power trade sanctions, without having improved its that would be necessary to dislodge the inter- share of the U.S. market. ests embedded in the current agreement. Ninth, there has been no significant di- Another scenario would be for a progres- versification of Canada’s industrial base. The sive Canadian government to abrogate weight of resource and resource-based manu- NAFTA and conduct the bilateral economic facturing is still about where it was at the out- relationship within the WTO framework, as set of free trade.(Jackson, 2003) Although well as through sectoral and functional bilat- there has been some high-tech sector growth eral mechanisms. The changes (however trou- (at least until the telecommunications implo- blesome) in the multilateral trade architec- sion), the trade deficit in high-tech products ture—the completion of the Uruguay Round remains high. And Canada’s poor record in and the creation of the WTO in 1995—mean private sector R&D continues. that Canada, by abrogating NAFTA, would Tenth, the large increase in north-south sacrifice little in terms of market access and trade has, as anticipated, weakened east-west regain important policy tools. Tariffs have commercial linkages. Only P.E.I. now trades largely disappeared. Anti-dumping and more with other provinces than outside the countervail disputes can be dealt with more

6 Canadian Centre for Policy Alternatives effectively in the improved WTO dispute vironmentally sustainable manner; manage its resolution system. The NAFTA social serv- economic relationship with the United States ices and cultural exemptions, though far from roughly within the existing NAFTA frame- adequate, have been reproduced in different work; and do it in such a way as to slow down, forms in the WTO; and last but not least, the reshape, or reverse the integration process highly problematic investor-state process where feasible? I would suggest an approach would be eliminated. The groundwork for that might be invoking the abrogation clause could be laid characterized as I would suggest an ap- by a government prepared to both challenge the deliberate proach that might be and demand renegotiation of the agreement’s pursuit of small most harmful features. steps—but with a characterized as the This scenario, though desirable, would be coherent vision of deliberate pursuit of politically costly. It would cause an uproar reclaiming na- small steps—but with a within the powerful business community, and tional policy free- coherent vision of re- among neoconservative provincial govern- dom and flexibil- ments. It would also likely trigger retaliation ity—whose cu- claiming national policy from the U.S. government. The resulting dis- mulative effect freedom and flexibility— ruption and instability would be extremely may over time be whose cumulative effect difficult for a national government to with- transformative. stand, even if it had overwhelming public sup- Specifically, as the may over time be port. government re- transformative. Nevertheless, government should under- claims sovereignty take a pragmatic analysis of the costs and ben- it would gain the confidence to challenge efits of NAFTA before deciding whether to NAFTA, if necessary, in key areas where na- go down the road toward deeper integration, tional interests take precedence and be pre- including examining the option of abrogation. pared to take the consequences of its actions. John Ralston Saul has deplored our unwill- First, I do not suggest reclaiming sover- ingness to honestly evaluate the FTA and eignty for its own sake, but rather to enable NAFTA: us to flourish as a society on the North Ameri- can continent with a unique social contract “We seem unable to allow ourselves the and cultural identity, one that values good dignity of engaging in this sort of government and a balance between individual straightforward consideration of our and community. Sovereignty implies the ca- actions. . . Questioning is the great pacity to take measures democratically that strength of democracy: the ability to give expression to these values. Otherwise they doubt without losing face. Instead we are hollow. go on chanting ‘free trade = prosperity’...” Second, it cannot be emphasized too much that trade is a means, not an end. Trade is a What should a progressive Canadian gov- tool, and equitable, sustainable development ernment do to improve the economic and is the goal. Free traders always confuse the two. social well-being of its citizens in a more en- They automatically assume that international

From deep integration to reclaiming sovereignty 7 trade and investment are unconditionally self, or jointly with other nations. The list is good, and more is automatically better. This not exhaustive. is not necessarily so. Trade may bring ben- efits, but it may also do great harm. It de- • Reassert and rebuild the capacity of gov- pends on the nature of the products, on the ernment as an active manager of the terms and conditions of the exchange. A pro- economy, rather than as a bystander to the gressive government must always keep this dis- excesses and failures of the market. tinction in mind as it considers policies to Strengthen the national economy and the enhance the well-being of its citizens. national demand through a variety of mac- Furthermore, it must recognize that the roeconomic, labour market, and industrial path to a productive and prosperous society policy tools. Though constrained, there is does not lie in a still substantial national policy space re- It cannot be emphasized vicious interna- maining under NAFTA. It should iden- tional competi- tify and maximize that space: and test the too much that trade is a tive cycle of cut- limits of that space where appropriate. Spe- means, not an end. Trade ting taxes, wages, cific measures might include: is a tool, and equitable, standards, and ba- • Assert forcefully that it will not allow sic public services. trade agreements to constrain domestic sustainable development Rather, the path policy in social services. Follow the is the goal. Free traders lies in a strong Romanow Commission recommenda- always confuse the two. public commit- tion that halting the privatization of ment to invest in health care (and other basic public serv- social, environmental, transportation, com- ices) will help to shore up the NAFTA munications, research, and cultural infrastruc- social services exemption and reduce the ture. It lies in measures that reduce inequality threat of challenge by foreign investors. and strengthen social cohesion. • Rebuild the environmental regulatory Third, although seemingly unrelated to the capacity gutted over the last 15 years. It issue at hand, a progressive government would was neither mandated by NAFTA nor be well advised to do two things: curtail the does NAFTA prevent the reinstatement dominant influence of business over political of effective environmental regulations. life, and break up the big corporate-owned • Use the remaining policy freedom in en- media conglomerates. These steps will bring ergy to assert and ensure that security back a measure of democracy to politics, en- of domestic supply and the needs of do- suring that business perspectives do not domi- mestic consumers take precedence over nate to the same extent as they have in recent exports. decades. The Chrétien government is taking • Implement a ban on bulk water exports. a significant first step in this direction by cur- • Reduce monopoly protection provisions tailing the corporate financing of political for the big pharmaceutical corporations parties, but there is a long way to go. and bring back compulsory licensing What follows are examples of steps that a (still legal under NAFTA and the progressive government could pursue, by it- WTO) to help reverse the skyrocketing

8 Canadian Centre for Policy Alternatives drug prices that have greatly strained our • Seek ways to prune back the most egre- Medicare system. gious aspects of NAFTA. Work with • Make aggressive use of remaining indus- NAFTA partners to strengthen social serv- trial policy tools to, for example, add ices and cultural exemptions, and elimi- value to our natural resources in an en- nate the investor-state dispute mechanism. vironmentally sustainable manner, and Ensure that the work of the myriad make Canada a leader in green tech- NAFTA committees is open and publicly nologies. accountable. • Make aggressive use of the public sec- Where har- Follow the Romanow tor investment funds, procurement and monization Commission recommen- Crown corporations to further national of standards economic and environmental objec- and regula- dation that halting the tives, including regional and commu- tions is being privatization of health care nity economic development. negotiated, (and other basic public • Ensure that foreign ownership and other ensure that services) will help to shore regulations in key sectors such as broad- harmoniza- casting, banking, and basic telecommu- tion moves up the NAFTA social serv- nications are maintained and strength- upward to ices exemption and re- ened. the highest duce the threat of chal- s t a n d a r d , • Deal with Canada-U.S. issues and irritants and that it lenge by foreign investors. on a case-by-case basis. Remember, U.S. serves as a harassment of key exports are, like Cana- floor allowing jurisdictions to adopt higher dian winters, a fact of life. The emphasis standards. Where mutual recognition of should be on cooperation to solve prob- standards is being considered, make sure lems without compromising policy flexibil- that this is not a back-door way of exert- ity. Where possible, disputes should be re- ing pressure to lower standards. Strengthen solved through existing trilateral or multi- the ability of existing institutions to more lateral mechanisms. For example, in the effectively counter market pressure to softwood lumber dispute, government weaken standards and protections. should resist, despite business pressure, the temptation to resolve it outside these • Favour multilateral forums, where power- frameworks by restructuring the manage- ful counterweights to American domina- ment of our publicly-owned forests along tion can be created, and where Canada, U.S. lines. And finally, work with like- working with like-minded governments, minded individuals and groups in the U.S. has a better chance of achieving its objec- Congress and civil society, nationally and tives and containing U.S. unilateralism. For at the state level, to further common in- example, the WTO dispute mechanism, terests. (This applies as well to working in with its separate body of law and common international arenas.) rules (and definitions) on subsidies, is an

From deep integration to reclaiming sovereignty 9 improvement on what was achieved trilat- FTA was supposed to be a testing ground, erally in NAFTA. a springboard to the world market for Ca- nadian entrepreneurs. It hasn’t turned out • Work in multilateral forums to forge agree- that way. Revisit the third option and try ments in the area of human rights, envi- harder this time to make Canada a real glo- ronment, health, culture, and taxation that bal player. Diversification can be pursued are enforceable and supersede the rules in without more “free trade” agreements. agreements like the WTO and NAFTA. Examples of treaties that attempt to reach Conclusion these goals are the Bio-safety Pro- tocol, the Stockholm Convention on Per- The politicians, bureaucrats, business lob- sistent Organic Pollutants, the Framework byists, think-tanks and media pundits who on Tobacco Control, and the Cultural Di- brought us NAFTA dismiss NAFTA’s nega- versity Instrument initiative where the Ca- tive effects and deny its failed promises as nadian government is taking the lead. they push ahead with their deep integration Canada should also seek international ac- agenda. They claim that we can go down cords to regulate corporate activity in areas this road without compromising our sover- such as transfer pricing and tax havens in or- eignty, but warn of the dire consequences der to relieve the pressure on countries to of being offside with U.S. policy. This path lower business and income tax regimes. promises ever deeper integration (read: as- similation), but with no articulation of what • Work in the FTAA negotiations with other kind of Canada would exist at the end of it progressive governments to overturn some all. of the worst aspects of the NAFTA-based I have argued that further integration at proposals such as investor-state, and pos- the policy or regulatory level should be sibly reshape or even scuttle them. Use the avoided, or reshaped where possible and re- negotiations to broaden relations with the versed where feasible. Where necessary, inte- other countries of the hemisphere. Resist gration should be negotiated under equitable U.S. efforts to forge hub-and-spoke rela- terms that are clearly in the national interest. tionships (through, for example, a prolif- This would rule out customs union-type steps, eration of bilateral deals) and work with which further compress policy space and be- them to challenge the hyperpower’s impe- get further integration. rial excesses. Canada should conduct its economic rela- tions with the United States in a spirit of co- • Revisit the 1972 Trudeau “third option” operation and mutual respect, as befits to diversify trade, economic and cultural friendly neighbours with deep interlocking relationships with other nations—India, interests. The key word is cooperation, not ca- Japan, Korea, Europe, Brazil, etc. It failed pitulation. Canada should act like a proud because there was no real follow-up effort sovereign nation, not like a colonial suppli- to make it work and because of resistance cant. from a continentalist bureaucracy. The

10 Canadian Centre for Policy Alternatives I have outlined an approach that might be References characterized as the deliberate pursuit of small steps, but with a coherent vision of reclaim- Clarkson, S.: Uncle Sam and Us; Globalization, ing national policy freedom and flexibility for and the Canadian State, University the purpose of improving the social and eco- of Press, 2002 nomic well-being of its citizens. I have stressed that trade is a tool that may advance this goal, Dungan, P. and S. Murphy: “The Changing Indus- try and Skill Mix of Canada’s International Trade,” but not necessarily. The point is that trade is Perspectives on North American Free Trade, Industry not an end in itself, and should not be driv- Canada, paper#4, 1999 ing policy. We should not allow ourselves to be House of Commons, Standing Committee on For- duped once again by the self-interested eign Affairs and International Trade: Partners in voices of the influential minority that wants North America: Advancing Canada’s Relations with to take another “leap of faith” that will lock the United States and Mexico, December 2002 Canada ever more tightly into the Ameri- Jackson, A.: Why the Big Idea is a Bad Idea, CCPA, can orbit. The record of the last 15 years (forthcoming) should be reason enough for us not to con- tinue down this path. Kerstetter, S.: Rags and Riches: Wealth Inequality in Canada, CCPA, 2003

Saul, John Ralston: Reflections of a Siamese Twin: Canada at the End of the 20th Century, Viking, 1997

Sinclair, S.: FTAA, A Dangerous NAFTA-GATS Hy- brid, CCPA, Trade Briefing Paper Series, March 2003

From deep integration to reclaiming sovereignty 11