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

Sovereignty or Standard of Living?

Notes for a speech by Hassan Yussuff 

The ‘deep integration’ or NAFTA-plus agenda – the so-called ‘big idea’ – is gathering force.

It is being very actively promoted by the same folks who brought us ‘free trade’: Tom D’Aquino and the Canadian Council of Chief Executives are busy lobbying government on both sides of the border. The CD Howe Institute and other business-friendly think tanks are releasing study after study. Even Brian Mulroney has been resurrected from the politically dead, promoting a new Canada-US deal in both Washington and Ottawa.

The deep integration agenda is being taken very seriously by the federal government. A recent House of Commons Foreign Affairs Committee report called for active exploration of a NAFTA-plus arrangement. Canada-US relations are at the very top of the agenda of the Department of Foreign Affairs and International Trade. And, Paul Martin has indicated that rebuilding Canada-US relations will be one of his top priorities as the next Prime Minister, even though he has provided few details of where he wants to take us.

What do the ‘deep-integration’ crowd want?

Above all, they want the ‘holy grail’ of Canada – US trade relations, secure access to the US market.

As with the FTA, the starting point of the new agenda is defensive.

There is actually very little interest in the big idea in Washington. The big idea is supposed to capture their interest. It is a proposal designed to be so enticing that they can’t turn it down.

The big idea is defensive in a second sense.

Already complicated border procedures because of rules of origin and regulatory differences have been compounded by much tighter US security since September 11.

And, the FTA and NAFTA have clearly not really created a ‘single market.’ The US still manages trade in their own interests when they want to – as with softwood lumber and wheat, and now beef.

To get enhanced and more secure access to the US market, the deep-integration crowd have put forward the ‘big idea.’ What we are supposed to get is exemption from US countervail and anti-dumping laws, and far fewer border controls. What they are prepared to offer up in return is what they think the US wants from Canada – much higher levels of "co-operation" in non-economic areas like defence, security, and immigration, PLUS enhanced US access to Canadian energy.

Deep integration is not just an economic agenda. It is really about falling into line with the US, from a position of weakness. In fact, the main argument is that we really have no choice because we have become so dependent on the US. And, of course, our economy is indeed heavily dependent on exports, some 90% of which now go to the US.

Some in Canada – the Canadian Alliance, the National Post – enthusiastically support deep integration because they love the George W. Bush vision of the world. Others, the more pragmatic and less ideological crowd which tends to dominate the public service and the Liberal Party, think we have little choice.

It is interesting to note that Sylvia Ostry – former head of the economics department at the OECD and certainly no raving leftist – recently argued that we have become too economically dependent upon the US for our own good, and too dependent to retain sovereignty in foreign and defence policy. She noted that US trade representative, Robert Zoellick, has said quite clearly that the US will expect its trade partners to be co-operative on the broader US agenda for the world.

As Ms Ostry noted, this runs totally against the basic principle of the multilateral post-War trading system – that countries should treat each other equally in terms of trade, regardless of their political differences. To her credit, Ms Ostry said that it was time for even enthusiastic free traders like herself to rethink tight integration with the US, and to consider how to reduce our dependency.

Proponents of the ‘big idea’ like to talk about their agenda as purely economic – preserving our sovereignty in key areas while building on NAFTA to secure our standard of living. But, this is a myth.

Given the crystal-clear statements of Mr. Zoellick, and the current political reality in Washington, we should be under absolutely no illusion that the US government neatly parcels the world out into economic arrangements on the one hand, and political arrangements on the other.

The real issue facing Canada is not what kind of technical changes we should make to NAFTA. It is what kind of relationship we are going to have with the US in the years ahead. This issue just cannot be neatly separated into economic and political dimensions.

The deep-integration crowd’s ‘big idea’ is that we should move to a customs union, which they try to pretend is a simple evolution of NAFTA which does not imperil our sovereignty in important areas.

This is nonsense.

In the first place, the deep integration crowd and the US are clearly linking trade and investment issues to other issues which go to the heart of our political independence. They explicitly endorse new US security proposals – everything from Star Wars II, to stringent new limits on refugees, to supporting US unilateral action against any state they deem to be a threat to their security.

If there is any Canadian of note who favours deep integration who also publicly opposed the war in Iraq, I don’t know who it is. The main message from Mr. Mulroney and Mr. D’Aquino has been that we should not rock the economic boat by speaking up on issues like war and peace and human rights.

Everybody knows that our principled opposition to war in Iraq has had a big impact of Canada-US economic relations, and that the US has more than hinted at so-called linkage between economic and political issues. The message is that if we don’t play ball, we won’t get any favours, like an invitation to the ranch in Texas.

In the second place, the deep-integration crowd wants us to fall into line behind the US in their demands for further access to Canadian energy. George W. Bush and Cheney know that the US is more and more dependent on imported oil and gas, and even electricity. They, and the giant energy corporations they represent, hardly see conservation and renewable energy as the answer. They want guaranteed supplies of Canadian energy to offset their dependence on the Middle East.

The US got a lot from the FTA in terms of secure access to our oil and natural gas. Half of our gas production is now exported to the US, and supplies are now running short. When they start to run out and prices soar, we won’t be able to turn off the tap because of the proportional sharing provisions of NAFTA (which, by the way, Mexico refused to sign on to). Now, the US is pushing for much more rapid development of our Arctic gas reserves and oil sands, building new gas pipelines and access to cheap Canadian hydro electric power.

Deeper integration in the energy sector means even more rapid export-driven development of the oil sands and frontier reserves. This is totally at odds with taking global climate change seriously, and imperils our commitment to Kyoto. Again, it is no accident at all that the deep-integration crowd opposed Canadian ratification of Kyoto.

In the third place, the ‘big idea’ is about a customs union. This has technical aspects which tend to put most people to sleep – common tariffs against other countries, common rules of origin, and common regulatory standards, some of which may not be terribly contentious. But, hidden in the ‘big idea’ of a customs union are a lot of very serious issues.

A customs union, like that of the European Union, means a common trade policy, and speaking with one voice at the WTO.

This is profoundly dangerous. Trade and investment policy is no longer about narrow economic issues. The US agenda at the WTO is to push for free trade in services – including public and social services like health and education. US transnational corporations see health as a multi-billion dollar growing market.

The Canadian tradition has been to support a publicly paid and mainly publicly delivered health care system. The US reality is a privatized health care system, run by private insurance companies, and delivered through for-profit hospitals and long-term care homes.

In his recent report, Mr. Romanow said that we should limit privatization to preserve universal access to high quality care, and he also said that moving down the road to a US-style system would be a one-way street given the reality of the trade and investment rules.

The deep-integration crowd has no big problem with going the private health care route – look at what is going on in BC and Alberta. But, those of us who support Medicare know that we, and the Bush Administration, cannot possibly speak with one voice at the WTO when it comes to talking about trade and health and social services.

Similarly, the US agenda is to dismantle national measures to preserve space for an independent culture – in everything from motion pictures and TV to music and book and magazine publishing. The Canadian agenda has been to preserve our own cultural space through subsidies to Canadian artists and cultural businesses, and through restrictions on foreign ownership.

Canada has joined with other countries, like France, to fight for a cultural exemption to the trade and investment rules. This is being strongly fought by the US media giants who see the whole world as one big market, for them. Can we really expect Sheila Copps and Jack Valenti to speak with one voice on trade and culture?

The key point here is that we just cannot neatly separate out economic issues from the social and cultural issues which go to the very heart of what we are as a country.

In approaching this debate, I and the Canadian labour movement start from the position that we need to secure and widen the space for Canadians to build a society of our own choosing, a society based upon Canadian values.

The values of Canadians are quite different from those of Americans, and even more from those of the current US administration and the wealthy corporate elite which dominates US political life.

Canada remains a more equal society than the US, with smaller gaps between rich and poor, lower rates of poverty, a stronger labour movement, and a more highly developed set of public and social services. Most Canadians recognize and value this difference.

It is also clear that the majority of Canadians are deeply concerned about US unilateralism when it comes to the international community. Most of us opposed the war in Iraq, and want a strong United Nations role to build a better and more peaceful world.

We also have different values and goals when it comes to immigration and refugees. Most of us see immigration not as a threat, but as a means to build a more vibrant and more economically prosperous future.

Putting Canadian values first does not mean a narrow defence of Canadian sovereignty. We support building strong international institutions. Promoting Canadian values means taking effective measures to deal with environmental issues through treaties, such as the Kyoto Accord. It means promoting common security through the United Nations, and promoting human rights through bodies like the International Criminal Court and the International Labour Organization. It means dealing very seriously with global development issues through a reformed set of international financial institutions.

Canadians have long believed in being active partners in the international community. We could and should be doing much more. But, we won’t be able to play that role if we resign ourselves to being the junior partners of a US which has its own vision of the world – a vision which is, to be frank, imperialist.

Neither does building a society based on our own values and goals mean that we oppose trade. We know that trade is an important source of jobs and economic well-being. I know that hundreds of thousands of good union jobs depend on exporting to the US, and having a mutually beneficial two-way trading relationship.

Labour is not against trade, but against one-sided trade and investment deals which tie the hands of governments in terms of social policy, and tilt the scales against workers when it comes to bargaining with giant transnational corporations.

If we are to build a society of our own choosing, a democratic society committed to the shared progress of all citizens, we must be open to the world while also retaining some capacity to shape our own economic and social future.

A key issue for Canadians to discuss is this: to what extent has growing economic integration with the US imperilled our ability to maintain and build a different kind of society than the US?

I am not one to argue that trade and investment inevitably leads to harmonization of values and of public policies. It is clear that, in many ways, the Canadian and US societies have remained very different in the era of so-called free trade. Our values are not converging, and may be growing further apart.

However, there has been a downside to integration on the FTA and NAFTA model. There is clear evidence not just of pressures to fall into line with the US global agenda, but also of pressures to harmonize down to the US social model.

Business argued in the free trade debate that the FTA was a purely economic arrangement, and that higher growth from trade would lead to better wages and working conditions, and better social programs.

Workers soon learned that the greater ability of manufacturing businesses to move production or new investment to the US or Mexico increased their power at the bargaining table. Over the past decade, real wages in manufacturing have stood still while productivity has increased, and union representation has fallen significantly. Manufacturing has done quite well in terms of production and exports since the early 1990's, but the benefits have not been shared equally between workers and corporations.

The same is true of social programs and public services. The ink wasn’t dry on the FTA when business began to demand tax cuts for competitiveness. The argument was that, to be successful in North America, corporate executives and shareholders had to pay lower taxes in line with US levels ... and they didn’t really care if that meant cuts to our social programs.

Under the FTA and NAFTA, levels of public spending in Canada have been harmonized down to US levels as tax rates – particularly for corporations and the affluent – have been harmonized down. There is still an important Canada-US difference in terms of social programs and income inequality and poverty, but it has been eroding.

The economics of the tax cuts for competitiveness argument are wrong-headed. Many high tax/high social standard countries, such as Denmark and the Netherlands, have done very well in terms of growth and productivity and job creation in the 1990's. High productivity comes from good education, good health and equal access to opportunities, not from high poverty and divided societies. Canadians like and support our social model. But, the fact remains that, under free trade, the corporate argument has been given greater weight than it deserves, because of the threat to move.

The FTA and NAFTA have divided Canadians increasingly along class lines, and undermined a sense of a common community. Most big Canadian corporations have become US corporations in all but name – many have even moved their head offices to the US. Our corporate elites compare their salaries and stock options and tax rates not to those of ordinary Canadians, but to those of the American corporate elite. And, our affluent corporate elite see no big problem in moving to an American-style social system, because they can afford to pay for high quality, private education and health care.

I still think the great majority of Canadians are committed to a fairer Canadian social model, and value our distinctiveness. Free trade and the greater ability of business to vote with their feet has undermined our distinctiveness, and will continue to do so unless we are very careful in the years ahead.

This lead me to a few final comments. What are our options moving ahead? We know that we are in a very close economic relationship with the US, and that will not change quickly.

In the first place, I think it is a profound mistake for us to deepen an already one-sided economic relationship through some kind of NAFTA-plus arrangement. I am no big fan of the World Trade Organization. The current GATS negotiations threaten public and social services, and WTO rules are already a problem in terms of cultural policies, and setting environmental standards, and promoting genuine economic development around the world. But, at least at the WTO, the US agenda is less dominant, and Canada could work with like-minded countries for better rules.

There is a better chance of building a social dimension to trade – including protections for workers and the environment – than there is in a NAFTA context. In short, labour supports a profoundly reformed international trading system, not a retreat to national economic self-reliance, and not deeper integration with the US.

Second, we need to be more realistic about our relationship with the US. Yes, we are tied together, but we need to retain as much room for manouevre as we have under NAFTA. And, we need to seriously examine if we can’t get back some of the bargaining chips we have traded away, such as control of our energy resources.

Third, we must be confident that we can build an economic relationship with the US without slavishly imitating the US model. We already have an economic advantage because of Medicare. We live two years longer than Americans, and we don’t load health care costs onto employers. Greater equality is an advantage. We have fewer young adults with very low skills and qualifications, and Canada is a destination of choice for many highly educated immigrants.

We can be economically successful while remaining a more equal and inclusive society.

Finally, we need to strengthen our ties with progressive forces in the US, in the hemisphere and, indeed, around the world. In the past few years, one-sided trade and investment deals which put the interests of corporations first have been seriously challenged. Trade can lead to development and jobs and new opportunities, or it can lead to greater inequality and marginalization.

To conclude, we in the labour movement, and our friends and allies in Canada and around the world, are not opposed to trade, or to a good relationship with the people of the United States. What we are opposed to is locking Canada and Canadians into a subordinate relationship to a United States whose Administration and corporate elites reject our goals and our values.

We cannot pretend that deep integration is only about economics. It profoundly threatens what we are as a country, and what we would like to become.

Thank you very much.