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Updates from the Prairie Centre Policy Institute from Regina, Saskatchewan.
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web posted August 18, 2003
Our relationship with America
By Brian Lee Crowley
Crude nationalists always present free trade with the US as a loss of Canadian sovereignty. What they forget is that the Americans have sovereignty too and can use it in ways that are deeply damaging to us. Free trade is often a delicate balancing of a loss of our own freedom of action in exchange for the Americans accepting the same. It has always been in our interest to attract America into rules-based relationships like the NAFTA and multilateral organizations like the WTO and the UN because both strategies allow us to create constraints on what would otherwise be a relationship based solely on power, and hence one where America would hold all the cards.
The stakes at the border now are as high as they have ever been for Canadians. In my view our top challenge is to make absolutely clear to the Americans that we are a trustworthy partner who is ready to work with them to create a well-policed continental perimeter within which we can all feel as safe as possible. Then we can get on with the business of dismantling the barriers to the movement of goods and services between our two nations on which our mutual prosperity depends. This wall doesn’t have to be loveable, just liveable.
But the problem with the trade-off that is envisaged here is that our bargaining power is a wasting asset. With each passing day, America makes more and more of the decisions about how it will respond to the darker more threatening world it now sees, and Canada has been, to put it charitably, ambiguous and confusing about where it wants to go. On the one hand there has been the excellent Smart Border Accord, and practical things like the presence in Halifax, Montreal and Vancouver of US customs inspectors helping to ensure that containers are properly inspected. Ultimately I hope that this is the precursor to a continental perimeter border where the two countries negotiate mutually acceptable standards for goods and persons entering the continent, and once let in by one country, they then move without let or hindrance throughout the continent.
But how can we reconcile that hope with Canada’s offensive behaviour toward the Americans in the run-up to the recent Iraqi military action? The message sent by our politicians, and, I am sad to say, a distressingly large segment of the population, was that Americans were not our friends, but nasty bullies to be derided, mocked and harried.
It is, of course, right to say that the US benefits from open borders with Canada too, but Canadians are far too optimistic about what that means. Yes, we are the US’s largest trading partner (and the largest trading partner for 38 states), but China and Mexico are growing more rapidly. More importantly, while we export 40% of our GDP (and 50% of our private sector production), and virtually the totality of that goes to the US, the US only exports about 11% of its GDP, and does so to a more diversified range of countries.
It is extremely hard to get the US government even to focus on problems in the US-Canada relationship. And when we have gone out of our way to be disobliging on the Iraq issue in such an egregious way, the US can do us tremendous damage simply by their indifference, by being too busy to notice that there are problems. Yes, they will be quick to take action to protect and defend US interests, but in my view they will be rather less quick to try and accommodate Canada’s concerns. And while we usually have been there for the US, we cannot simply blithely assume that therefore nothing we do can damage what has hitherto been an extremely positive relationship.
I am not saying that there is no alternative to repairing, broadening and deepening our relationship with America. Of course there are choices. But all of the others are ultimately inferior to this one. There are complementary measures, but no substitutes.
They are our friends and allies, not because circumstance forces that relationship on us, but first and foremost because we are very much alike and we believe that that is the right way for us to be.
Brian Crowley is President of the Atlantic Institute for Market Studies, a Halifax-based public policy think tank. Visit the AIMS website at www.aims.ca
web posted August 11, 2003
The Top Public Policy Challenges Facing Canada Today: Our Relations with the United States
By Brian Lee Crowley
All of the world that has hitched on to the powerful trend toward trade liberalization has enjoyed unparalleled growth, while those who have remain aloof have withered. Compare the Taiwans, the Hong Kongs, the South Koreas, the Singapores, with the Cubas, the Burmas and the North Koreas. Compare the Brazil or India or Ireland of today with the same country a mere 10 or 15 years ago. Wherever trade has been allowed to work its magic, it has grown faster than other national economies.
Trade between Canada and the US is the largest in the world, CAD$2-billion dollars worth of trade every single day of the year. Over 300,000 trucks enter Maine alone from Canada every year, about a 50% increase in only 5 years. It was realities like this that drove our two countries to conclude a new Free Trade Agreement for a new century.
It helps to remember why freer trade is such a powerful force for growth. Of course it does help to keep inflation low and keep our industries under pressure to be competitive, but that’s not its primary strength. That primary strength is that it forces everybody to specialize in what they do best.
Free trade relentlessly presses us to discover what we’re good at and to put all our productive efforts there because that’s what most benefits us and our customers around the world. And what we’re good at is a constantly moving target, as producers all over the world jockey to gain a competitive advantage in every field.
So the key to economic success lies in identifying your main strengths, and not holding on to the past. And it is a great strength for Canada that our trading relationship with the US forces us to benchmark ourselves against the most productive society in the world.
But remember that free trade isn’t only about specialization. In particular, trade is about greater competition, which weakens the power of vested interests. It is about greater opportunity for millions rather than privileges for the few. That is why the vested interests will always try to use politics to frustrate competition and free trade, because these two forces move power into the hands of those who are most adept at satisfying consumers. These are not at all the same people as those who wield significant political power.
Even before September 11th, the forces of American politics have been rallying against the forces of free trade. The balance is less decisively in favour of free trade than at any time I can recall since the 1980s. And for anyone who has looked at the US farm bill, or the steel and lumber protectionism, or the US attitude towards Mad Cow disease, it is clear that political forces hostile to freer trade are more powerful in the Washington political establishment than they have been for decades.
To these already powerful trends has been added the devastating effects of 11 September. America already has a powerful isolationist streak – to that has now been added the concrete proof, to their eyes, that the world is a dangerous and dark place, and one where friends are few and far between. This changes fundamentally the atmosphere for Canada-US relations and particularly the deepening of our economic relations. Where before all thoughts were turned to how to make the barriers at the border disappear, suddenly Americans are thinking of reinforcing the wall that separates them from the dark world.
September 11 has driven home to Washington how the institutions of a free society can be turned into weapons to be used against them. Relatively open borders are one of those institutions. The impact isn’t just on the immediate movement of goods. Every delay and border hassle doesn’t just raise costs for existing businesses. It makes potential new investors question investing in Canada when access to our chief market may be subject to unpredictable political risk in the form of strict border controls.
Brian Crowley is President of the Atlanic Institue for Market Studies, a Halifax-based public policy think tank. Visit the AIMS website at www.aims.ca
web posted August 4, 2003
Saskatchewan is not unique
By Dr. Graham Parsons
The following commentary is one in a series excerpted from a report published by the Prairie Centre Policy Institute, entitled, “This Year Country: Creating Wealth in Saskatchewan”. Written by Dr. Graham Parsons, former Chief Economist for Western Canada with the Canada West Foundation, the report examines the potential for economic growth in Saskatchewan.
Over the years many Saskatchewan politicians have been happy to tell the Saskatchewan electorate that they were unique, special and could therefore develop special programs, institutions and infrastructure especially for their needs. The thought was developed through advertising slogans like "the Family of Crown Corporations" on the left and "the Saskatchewan Way" on the right. While the political messages may have been unique, the underlying requirements for wealth creating are not.
In a global, interdependent economy, the production of both goods and services can be extremely mobile. People and businesses will move for both opportunity and to escape an uncompetitive social and economic climate.
Economies similar to Saskatchewan exist in other parts of the world. Grains and oilseeds can be grown in the neighbouring provinces of Alberta and Manitoba, and the U.S. states of Montana and North Dakota. Potash and uranium resources exist throughout the world. Trees grow faster in Georgia and the Carolinas than in Saskatchewan. Many cities have more amenities, larger markets and better infrastructure than Saskatoon and Regina. Saskatchewan is not unique and must compete.
In the new global economy, however, Saskatchewan can become unique by creating an attractive environment for people to live, do business, export and invest. At the present time this is not the case.
Today, the world is a series of competitive markets. Saskatchewan will live or die on the degree to which it can create an environment of institutions, policies, taxes, attitude and infrastructure to successfully compete in that world.
What government does matters. Institutional frameworks, policies, attitudes and taxes based on an earlier era, with different requirements will not work today.
To grow, Saskatchewan must dramatically change the environment for entrepreneurship, investment and trade. The province can pursue those same wealth creating elements that have worked well elsewhere in Canada and around the world. It will require a shift away from the isolationist provincial policies in which provincial governments continually experiment to find some unique Saskatchewan approach.
Solutions to create wealth are today well known. The answer is to follow them. While Saskatchewan does have economic problems, it can also have a bright future. A renewed focus on wealth creation is required to balance an extended provincial pre-occupation with income redistribution.
Dr. Parsons sits on the Prairie Centre’s Board of Academic Advisors.
His report can be found on the Institutes web site at www.prairiecentre.com.
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