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History Table of Contents
1994 Summer Conference
Summer Conference 1994
Globalism and Tribalism: The New World Disorder?

Governanace: How Will Democracy Surivive the New Politics?

BILL GRAHAM, Vice-Chairman, Standing Committee of the House of Commons on Foreign Affairs and International Trade

I'd like to talk about some of the problems in terms of globalism from the point of view of the evolution of international institutions.

The interdependence that is occurring because of globalism has produced certain interesting things.

For instance, local politicians, like myself, have to take political responsibility locally for a great deal of events and occurrences which occur outside the borders and over which we have very limited control. Monetary policy is one of those areas.

Local institutions are more and more unable to deal individually with many problems, whether we're looking at the environment or anything else. As a result, there is a plethora of international institutions to deal with that.

In a complicated federal state like Canada, there is an additional matter that we have to look at: and that is that the transfer of jurisdiction, or the transfer of power-making, to international institutions impacts as well in our own constitutional framework in relation to the provinces and federal government. And, there is the question of how Canadians are going to adjust to this.

Let me illustrate some of the problems that we're trying to deal with in the international area.

I got a call the other day from a former student of mine in Calgary, who is involved in trying to determine how the company he works for could get a tax break for buying part of the Amazon jungle which they we're going to trade against part of their Co2 (emissions in Alberta.

There is an international agreement that came out of the Rio Summit. It allows someone to acquire a piece of property somewhere else in the world which will balance against their Co2 emissions here in Canada. This is the type of thing going on one level.

On another level, we are seeing decisions being made for totally independent, domestic policy reasons in other countries which have directed consequences on us. We have just lived this weekend with the durham wheat issue.

Why are Canadian farmers no longer able to send durham wheat to the United States?

The reason? There are three Congressmen on the committee that Mr. Clinton needs for his health bill who want this done and,

virtually, Canada's trade minister has been told the Canadian wheat grower is going to have to pay the price of the U.S. domestic health policy. It's as simple as that.

Now, can we craft an institution to deal with it?

We are now going to ship the durham wheat that would have gone to the United States to Turkey, where it will be turned into pasta and sent back into the domestic American market.

That's what's happening...and we are paying a political price for it. Mr. McLaren is being told by Canadian farmers: You didn't defend us. You didn't actually stand up for us. You didn't solve this problem for us.

We've got ourselves side-swiped into an American domestic issue over their health plan and the American domestic policy.

That's happening all over.

Take the domestic European policies in terms of fur imports. You know they don't want to import fur anymore into Europe because Bridget Bardot doesn't like the idea.

The Inuit and the native in the Northwest Territories, who depend on the fur trade, consider it a form of cultural genocide that some people have been able to fabricate a myth around that in Europe in a way that is destroying their ability to survive in a way in which we believe they should be able to survive.

This is a very serious domestic political problem for us in Canada that's been produced by a domestic political situation in Europe.

Where are the institutions? Do we have the trade institutions? Can we make this not happen? Have we built a world community sufficiently intelligent and responsive that we can actually have a response to that? This is the big problem.

The other big problem is of course the enormous linkages between everything today.

International trade policy is so linked to domestic issues that now, when we are talking about the environment, we are talking about trade policy and the environment; we're taking about human rights and trade policy, both internationally and even domestic. We're also talking about education.

In travelling across the country with the committee, we were told over and over and over again by the university people that came before us, that we are not going to have a competitive Canada in a global environment if we don't improve the quality of education in this country and, what's more, remove some of the inter-provincial trade barriers that are interfering with a truly Canadian educational policy.

When Mr. Axworthy is conducting his social policy review, which is being done, a great deal of this is being driven because of trade policy, because of a need for competitiveness, and its a response to the whole problem of the movement of labour and everything in a global marketplace.

We're undergoing an exhaustive overhaul of our domestic system to some extent as a result of influences that come from outside. And interestingly enough, the G-7 is now going to be talking about labour policy

So, the distinction between domestic and foreign policy has gone; it's split. Everything is integrated. Everything is related.

What the problem is – what it seems to me has happened in the world – is that we do have in many ways a global village in terms of communications, in terms of trade, in terms of movement of goods, and certainly of services and to a much lesser extent, peoples. But we don't have the institutional framework to manage that.

We probably have an economic integration. But, even with the United States – on a scale of one to 10 – it's only about maybe a seven or even eight. The institutional framework of the NAFTA is more on the level of about a three, compared to the European Community.

And on a global scale we're still at a very embryonic level with the world trade organization, although economic integration has gone on at a pace to the point where everybody understands the global marketplace of securities and finance is totally and utterly integrated; yet, completely without any serious international institutions to manage that extraordinary integrative process.

That's not to say there are not international institutions out there.

There are literally hundreds of them in which Canada participates and they are multi-lateral, bi-lateral, regional, sectoral, global, like the United Nations. Some have very complex arrangements with juridical facilities in them to make them work.

Others, like the Trade Commodity Agreements that we're members of, have no institutional arrangements around it.

The purpose of these institutions, as I see it, is twofold:

The first is they are to draft rules which will harmonize or create a level playing field if you like, or harmonize the conditions under which we conduct our business. And it can constrain the possibility of states to act in a way which harms the legitimate rights of others.

And the second thing is to create an institutional framework to apply these rules, interpret and enforce them.

Michael Ignatieff's point about the need for an enforcement and fairer rules for the existence of a civil society applies as much to the international community in which we live, as it does to the domestic communities in which we live.

There are some very big problems are associated with the creation of the international rules and the international institutions. And I'd just like to reviewa couple of consequences that we've been able to look at of this globalism.

One of the consequences is that control is moving away from domestic political institutions to these other institutions with several very important consequences.

The first is that the norms that are being created by these institutions tend to be either regional, or universal. And, therefore, tend to be lower, or at least different, or not so responsive to the local tribe to which we belong – to use the tribalism example.

That's what the nature of the debate over the NAFTA was all about.

The environmentalists we're saying we'll lose control of defining our own environmental standards. The internationalists were saying we don't have any control over those environmental standards anyway, we better get into an institution, an international institutional framework with the Americans and the Mexicans, so we can define it in a way which will make it meaningful.

In the context of our committee's work; trade with China.

We had Bob White appear before us the other day and he was complaining about labour standards. I asked him, should we not trade with China? And he said, no, of course we've got to trade and deal with China, but we've got to try to bring them up as well.

What is going to happen if China comes into the world trade organization? We, as Canadians are not going to be able to define the labour standards, as we see labour standards, if we are dealing with the Chinese on the other side,

Those labour standards are going to be defined on a universal level, which is going to be at a lower level.

That, of course, is why there is a push for regional trade organizations which can reflect better the sort of the standards and the homogeneity of a smaller group of people.

And that's why the European community is perhaps as successful as it is.

There's a second consequence of this and that's the problem of what we in the trade call the race to the bottom of the standards. The consequence is that there is a loss of local democratic control over our own destiny by this movement to these international institutions.

And that is a serious problem.

When we were elected in November of last year, we walked into a horrendous local political problem.

And it was all about the preservation of the Marketing Boards here in Eastern Canada. It all revolved around Article 11 of the GATT. Suddenly everybody was talking about Article 11 of the GATT. And nobody had even heard of Article 11 of the GATT before.

But I'm telling you there were about 60 members of the House of Commons, elected from rural constituencies, some of whom believe sincerely that if we didn't preserve Article 11 of the GATT, we should get out of the GATT. Imagine Canada withdrawing from the GATT! It's like saying we'll become Albania or become North Korea. We're very dependant on the GATT.

But there are people, there were people who believed that strongly about that. The only problem was of the 115 countries in the GATT, 114 of them didn't want to keep Article 11. So, we had a serious problem on the international level and we had a domestical political problem as a result of it.

In the end, we have a temporary solution to that problem. We did fight that issue and I think we got an effective solution from a Canadian domestic political point of view.

But, we have to recognize that in today's politics, more and more the level of discussions and the issues that we have to grapple with, are going to be determined in organizations like that where we are one of 114, and if we are going to control our destiny, we are going to have to co-operate with other states and manage our relationships in such a way as we can do this.

And it is going to become more complicated; more difficult, because the world trade organization and other trade organizations will necessarily acquire more jurisdiction and naturally have more and more power or over your and my life.

I think you have to recognize that the level of development of many of these institutions is not where we want to see it. That they are not in many ways democratically responsive.

This is particularly true of the International Monetary Institutions. You're not ever going to see a democracy in the IMF or the World Bank, where every country gets a vote so that Grenada has the same vote as the United States.

This just doesn't make sense. So we're not talking democracy in that sense of one state, one vote. Many of these organizations are extremely opaque and far away from you and me and any form of democratic control or understanding.

Take the Bank for International Settlements. Nobody even knows about it. It exists in Geneva, It's just a bankers' institution. It's kind of a technical thing, it arranges for settlements between banks.

About 10 years ago, the BIS got concerned about liquidity and how much the banks were over-extended. There was a threat to the banking system, because the banks were over extended.

They quietly got about getting an an international agreement.

Banks, up until that time, had been able to lend 20 times their capital. That is, for every dollar you put into a bank, the bank could then turn around and put out $20 in loans. It was felt that this was too generous and, therefore, was threatening the integrity of the banking system.

So, the bankers and the world governments quietly arranged that this would be reduced from to 13 from 20. This was a sensible decision in many respects.

I know many bankers are of the view that the recession of 1991 and 1992 was to some extent provoked by this tightening of money supply.

In fact, what the world community decided to do was to wring out about 35% of the world's money supply – by a group of people, not necessarily democratically elected or anything, but operating in an international institution which very few people even know about – except those arcane experts.

Unless you read the Wall Street Journal, you probably wouldn't even know the BIS existed. And yet this incredibly important decision was taken with important consequences on your and my and everybody's lives. So there is a problem of these institutions we have to now examine.

The Europeans have dealt with this. They've got two solutions to what I'm talking about.

It was felt that Brussels was too far away from people; making decisions which affected peoples lives, but it was not responsive. So, they've tried to create institutions like the European Parliament and others to make it more responsive.

This is what they call the problem of the democratic deficit.

The other solution is what they call subsidiarity, which is that decisions should be made at the level which is most appropriate for that institution and as low as possible, as close to the people as possible to retain as much democratic control as possible.

But the trouble is in an integrated world, this is becoming more and more difficult to do because it is more and more necessary to make decisions at a higher institutional level.

I want to introduce one further complication about this institutional globalism that affects our lives directly in this country.

And that is that it is affecting to some extent the constitutional framework under which we operate.

The provinces can't exercise jurisdictions, if you like, in certain respects in areas which are given to them under the British North America Act, or now the Constitution Act of 1982, because the NAFTA and other agreements have made these subject to international constraints and rules.

And that of course is the origin of the present Ontario government's constitutional challenge to the NAFTA.

So, these international agreements not only have the effect, if you like, of moving decision-making outside our borders, but they also have the effect of impacting on the constitutional arrangements within our own borders and this is something we have to be conscious of.

It's only by operating as a united Canada in this international context that we are going to be able to survive.

We have to understand how to respond to it and Canadians have to have their input into how to deal with it.

While I am concerned as a lawyer and as a politician about the complexity of what's happening out there, I am enormously challenged and encouraged by the wealth of talent we have in this country.

If we just could get our own domestic act a little bit better in order, I think we could really get out there and make a contribution.