Tricky politics for Canada as junior partner in international tie-ups

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Source: — Authors: – news/opinions
Published Wednesday, Feb. 16, 2011.   Jeffrey Simpson

Globalization, or at least the remorseless internationalization of the market economy, is changing the nature of Canadian politics, sharpening the cleavage between those who embrace and those who fear the consequences.

The negotiation of a continental perimeter border and security deal with the United States, the proposed merger of the Toronto and London stock exchanges, and the possible free trade and investment treaty with the European Union all dilute Canada’s ability to act alone; that is, to exercise its sovereignty. In exchange, in theory, the Canadian economy will benefit.

These initiatives will require, if implemented, Canada to forgo or modify policies developed over decades. They will change domestic institutions. And they will gore or threaten interests from supply-managed dairy, egg and poultry farmers to high-priced lawyers on Bay Street.

Those who fear change are those generally hostile to or uneasy with transnational capital, whose interests these initiatives are partly or wholly designed to enhance. That capital, it is argued, is increasingly mobile and must be lured to Canada, or assured the fullest measure of encouragement here in order to stimulate economic growth and jobs. It is the argument of governments everywhere these days, and is used to justify ever-lower corporate tax rates.

The perimeter negotiations, for example, are all about advancing Canada’s No. 1 foreign-policy priority, although few Canadians perceive it as such – the least dense Canada-U.S. border possible. That Canadian objective then meets the most important foreign-policy objective of the United States – homeland security.

The pursuit of an open border clashes with the perceived needs of homeland security. The perimeter negotiation aims to reconcile the objectives of both countries, but will definitely mean some dilution of Canada’s ability to act alone. It will mean at least harmonizing with the United States and perhaps more – all in the pursuit of safeguarding the country’s No. 1 foreign-policy objective, the most open border possible.

So, too, the merger of the Toronto and London exchanges will definitely make the Toronto exchange the junior partner in an international consortium. Toronto, and by extension Canada, will lose certain local prerogatives, the putative tradeoff being to become part of a larger international body aimed at attracting capital.

In the Canada-European negotiations, the Europeans are targeting Canadian pharmaceutical patent protection policies, provincial preferential procurement and the mile-high tariffs that protect the racket of supply management. Canada has its objectives, too, such as better access for beef, pork and other agricultural products and improved access for services.

In each of these three cases, Canada is the smaller partner and therefore will probably have to adjust domestically more than the larger partners. Put another way, Canada has less leverage in pursuit of expanding opportunities for capital movement and, one hopes, more growth and jobs.

Politically, therefore, these deals are more sensitive in the smaller place, Canada.

The Conservatives, strong free-traders, do largely accept that greater Canadian participation in and access to internationalized markets requires domestic changes, although whether they would accept even the slightest changes to supply management is doubtful, so powerful are those lobby groups. As we saw in the rejection of Potash Corp. takeover, Conservatives’ preferences can occasionally be modified.

New Democrats do not like big business and internationalized capital, and therefore almost always oppose any domestic changes to accommodate it. They are protectionist in trade policy, preferring something elastic called “managed trade,” skeptical of the free market, deeply suspicious of unfettered international capital movement. They can be counted upon therefore to oppose all three agreements.

Liberals are torn between, on one hand, the practice of “liberalized” trade and the powerful economic theory that suggests such trade does bring long-term benefits, and, on the other hand, their blinkered desire to oppose as the Official Opposition, coupled with their desire to protect domestic interest groups for political reasons.

When their leader, Michael Ignatieff, poses a series of questions about the perimeter deal, he is acting quite properly as leader of the Opposition. The questions he raises are legitimate. But is he asking them because he really wants answers that, if satisfactory, will cause him to support the deal? Or is he asking them as a smokescreen to raise whatever doubts he can about the deal prior to announcing a rejection he has already decided upon?

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