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72nd Annual Summer Conference, August 7–10, 2003

Sovereignty or Standard of Living?

L–R: Ambassador Andres Rozental, Robert Fauver, Renée St-Jacques, Hassan Yussuff

Summary by Shawna Novak

Robert Fauver

This discussion began by considering whether Canada will be able to maximize sovereignty and standard of living without compromising either value. Fauver suggests that we ought to challenge the idea that sovereignty and standard of living are mutually exclusive concepts. Indeed, they may be intertwined and complementary. He posits that each may be an improved byproduct of the others evolution. Broader economic integration leads to an increase in living standards. Correspondingly, a broader historic concept of the Free Trade Agreement has resulted in increased competitiveness and efficiency. This has effectively worked towards countering the increasing force of European countries. Fauver suggests that when a country moves towards a competitive economy, which entails job proliferation and indexed increases in quality of life, the population becomes more cohesive and sovereignty is enhanced. Integrating economies can lead to stabilization of all economies involved when an increase in living standards occurs as job opportunities expand.

Pressure to move forward in liberalizing economies exists and is a positive force. National security has been a welcome byproduct of such liberalization. Accordingly, national sovereignty has not been the goal, but is often an outcome. By strengthening economic performance and security, sovereignty is enhanced as it reflects growing confidence in government. Paralleling this confidence is a development of social values with better living standards. Fauver espouses the gospel of NAFTA and other FTA. It is known that NAFTA has been subject to external pressures as populations are frequently resistant to change. Fauver suggests that addressing this susceptibility will reduce national vulnerability within the structure of economic liberalization. An increase in employment is evaluated in terms of relative growth and so one must keep in mind that the measure of success is always purely relative.

One must approach success by first welcoming liberalization of economies. Liberalization has allowed Canada to outperform European nations and Japan. Canada must seek out capital market efficiency with a wider range of financial options to choose from. The current Canadian preference is to address economic integration, as opposed to political integration. Fauver concludes with the notion that focusing on economic integration and broadening NAFTA to include the southern hemisphere and Asia Pacific would be a prudent decision.

Andres Rozenthal

Mexico is at the vanguard of countries defending sovereignty. Recently a majority of surveyed Mexicans responded that if guaranteed a rise in the national standard of living they would willingly join the United States and become the 51st state. Sovereignty is the most promising of discussions in Mexico and has begged some immediate questions. Rozenthal felt the question spawning most debate concerned whether or not Mexico should favour NAFTA. He put forth five points of note:

  1. NAFTA ties in to economic blocks.
  2. Such trade agreements lock in structural changes. A change in the permanent structure of Mexican government and process has already occurred through free trade agreements.
  3. Trade agreements bring order to trade conflict. Order and predictability being necessary components of trade free flow.
  4. NAFTA may lead to growth and prosperity (little growth impact vs. external global recession).
  5. NAFTA increases the number of reasons for countries to support trade and investment growth

How did NAFTA deliver?

The negatives include the negligible “trickle down” effect of trade into large Mexican corporations. There has been a decrease of production in the agricultural sector and a structural problem exists in creating a value added economy with sector specific competition.

The positives include major societal and structural change with harmonization. The government of Mexico has been redefined as a result of world position. Culture has been enhanced by an increase in Mexican population the United States. Yukon to Yucatan is not yet a reality and so there is a strong need for more trilateralization between Mexico, Canada and the United States.

Continetalism: what is in it for us?

  1. Prosperous growth for trade and investment.
  2. Relationship with the united states is simply a reality with benefits so we ought to develop what is inevitable.
  3. Greater security for the north American region.
  4. Investment in future infrastructure to underpin trading relationship for a common and better future.

Renée St. Jacques

Do the FTA and NAFTA equal economic gains? Where is the evidence? Do we chart our own policy? Social programmes need not feel threatened, as there are choices to enhance welfare for citizens. The NA market is important to Canadians as demonstrated by the doubling of trade since the 90s to the amount of 1.3 million per minute. What are the economic benefits to unfettered trade access? There is a definite benefit to choice as the market benefits from increased specialization. We are able to take advantage of tech transfers and spillovers.

Product Gains:

Largest in industry led to tariff cuts in excess of 17%. Adjustment costs are the greatest but the increase in outcome is also the highest. It is not a panacea to all the ills. Free trade leads to an increased production of goods and an upgrade of the standard of living for citizens as income levels rise across the board. An increased product output is the key to standard of living for all citizens. Ms. St. Jacques suggested that we consider whether sovereignty is indeed hampered? And what may it be compared to? Should we use as our primary model the development of technology sectors?

Information technology today is extraordinarily pervasive. Upward trends would have continued without trade agreements. There will always be implicit or explicit constraints of environment that effect sector growth, income generation and the resulting rise in standard of living. Without NAFTA may areas might still have missed many benefits of the global economy. Many areas of commerce in Canada have been deprived of policy tools but have also lead to Canadians being better off.

Since the Canadian way of life includes a generous compassionate approach to social policies one must always be aware of compromising this aspect of standard of living in favour of trade liberalization. With this in consideration there need not be standard of living at the expense of sovereignty or vise versa. Ms. St. Jacques does not foresee a detrimental effect to economic integration. Policy has expanded to include deeper integration and we must take a harder look at efficiency costs. There will be a decreased convergence of redistribution and social protection. We need evidence but evidence suggests a benefit to social programmes through NAFTA (ie. Greater mobility for labour). We need to examine this on a case-by-case basis and craft the next phase to support sustainability. If this is done than the Canadian capacity to improve outcomes is more likely to be enhanced.

Hassan Yussuf

Is there such a thing as a positive customs union? Common rules of origin and regulatory standards are necessary in Canada. Yussuf argues that Canada must speak as one voice with the world trade organization. In addition one must not and cannot separate economic issue from the social issues. It is possible to have different values and goals that the United States and still benefit from trade liberalization. Yussuf warns that to achieve trade harmony one must place Canadian values and goals over the United States.

Trade equals jobs and well-being and is worth investing in. Labour movements are against one-sided trade. However, by remaining open with a capacity to shape our own policy in Canada, Canadians will benefit through stronger sovereignty and a higher standard of living. It is possible to desire a different society with a harmonization of international values while still reaping the economic rewards of liberalization.

QUESTION 1: How can we expand NAFTA?

Follow through with dispute settlement mechanism. This provides countries with the ability to apply countervailing response. It makes more political issue to eliminated trade contingent. Utilize countervailing offset measures.

QUESTION 2: If we are all better off does it mater to give up sovereignty?

This is the crux of the debate. We have been promised access to American market and still wait for the fruits of this relationship.

Need to make pie larger to share in policy gains.