Overview: Canada - US Relations



Overview: Canada - US Relations

prepared for

Alpha Beta Consultants

Consulting City.

by

Peter Beeching,

Toronto.

June 18, 2001

Revised, June 25, 2001; June 27, 2001.

Overview: Canada - US Relations 1/23

This overview presents a multi-layered and interwoven discussion of issues that comprise important aspects of Canada - US relations. The time horizon is approximately 2000, with historical perspective provided where possible. [1.]

Critical Aspects of Canada - US Relations:

Foreign Policy:

With a shared UK based historical heritage, Canada has historically been a “state of sovereign ambiguity” for the USA, perceived as a European nation. The countries first exchanged legations in 1927.

From the Canadian side, two traditional dynamics have characterized Canadian policy differences from the United States;

- Ottawa’s foreign policy autonomy from American foreign policy while being

subordinate to United States in economic relations;

- Ottawa’s focus on keeping Canada together as a properly functioning national entity -

since the late 1960s, this meant Quebec separatism, but in recent years, possibilities

of “western Separatism” has emerged as a periodic issue.

Through the 1960s and 1970s, Canada had strong nationalist sentiments: Trudeau proclaimed the end of special relationship with the USA in 1971. (President Nixon responded in kind, saying that Canada

would be treated equally; the same as any other country.)

Though when Trudeau learned that the US government concluded an independent Quebec would not benefit the USA, he cultivated the US government.

Trudeau‘s National Energy Policy (NEP) expanded the Canadian oil industry at expense of US companies, but suffered bad timing with price drops. Similarly, the Foreign Investment Review Agency (FIRA) - established to promote Canadian economic independence, weathered a strong recession - taking

the wind from Canadian economic nationalists.

But the 1988 federal election was a turning point, marking a proAmerican Canada. The election was fought on the Free Trade agenda, which Mulroney won...Mulroney then steered Canada into the USA/

Mexico Free Trade Agreement (FTA)/North American Free Trade Agreement (NAFTA) orbit - declaring that Canada was “open for business.”

During the 1993 election, the Liberals were careful not to copy Trudeau’s strong Canadian nationalism as equivalent to anti-Americanism.

Over the past decade, Prime Minister Jean Chretien has deployed an approach of “calculated ambivalence.” That is, maintaining Canadian independence for the United States more positively than Pierre Trudeau’s harsh approach (e.g., NEP & FIRA).

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1. As a general discussion, however, it is noted that no technical analysis of economic performance within and

between each country has been included here.

Overview: Canada - US Relations 2/23

Essentially, issues where US and Canadian interests coincide (e.g., FTA and NAFTA), have been depoliticized - while making it a point to steer clear of the Mulroney era’s “coziness.”

Despite Chretien’s “ambivalence,” he in fact had close relationships with President Clinton. The posture under President Bush is still evolving.

Operationally, Chretien’s management style has been described as a “Courtier government,” allowing a select group of ministers in the centre to have independence to run side shows (Sheila Copps and split

run magazine editions; Lloyd Axworthy and land mines), while maintaining tight control over the main

show - Canada -US relations. Here, administration has been de facto handled from Washington,

where nephew Raymond Chretien has been ambassador...

Since the end of the “Cold War” new issues have evolved as factors in Canada - US relations. Interna-tionally, with the United states shifting from internationalism to localism, the question has been

posed, “is Canada inside or outside of the perimeter of American interests?” Should there

be a customs union...should dollarization be pursued...How far should Canada agree

with US contemporary perceptions of security?

Said the US ambassador in 1998: The menu is no longer a la carte: it is now necessary to take the whole meal.

Within the United States, two factors affect Canadian policy toward America. The first is historic; localism is entrenched in the American political system; power and decisionmaking authority is diffused throughout its structure; creating competition and an uncoordinated approach to Canada. Ambassador Chretien said

“I can push the envelop very far in Washington - as long as I can convince the politicians...that what I am proposing has something in it for their own interest.”

So what is “the” Canada policy within the US? There are a wide array of policies. E.g.: foreign policy to Canada by the federal government? Michigan’s policy toward Ontario? etc. In short, uncoordinated. Example: The US Environmental Protection Agency (EPA) could enact new groundwater quality

standards that do not address run off and other pollution from Canadian sources - encouraging

polluters to relocate to the Canadian side of the border...

Policy is not only made by governments but also by influential private enterprises and Non Governmental Organizations (NGOs) which may have Canadian memberships: companies present in Canada, universities, civic organizations, etc. They can all adopt policies affecting Canada. Example: Florida’s legislature passing state legislation denying nonresidents medicare will adversely affect Canadian retirees and tourists with medical problems who believe that reciprocity payments will be made through Canadian medicare coverage.

A relevant note: local officials (government and private) in the US may pay attention to federal policy toward Canada in determining their local directions and options...

Thus, on larger trade and diplomatic issues, Canadians had little luck engaging the Americans. American representatives had little patience with external diplomatic intricacies - whether they be Canadian complaints about wheat trade (1950s); uranium (1960s), or lumber (1980s - and continuing). These were primarily a matter of congressional politics - outside the realm of diplomatic horsetrading.

Overview: Canada - US Relations 3/23

In short, in the USA, there is no central location of responsibility for Canada policy. At the State Depart-ment, the Bureau of Western Hemispheric Affairs now covers Canada - this change taking place

in 1998; except for border and security concerns, Canada is not high on US radar screen.

And in Canada, one Department of Foreign Affairs & International Trade (DFAIT) official noted that the FTA marked the apex of US interest in Canada. But since NAFTA, Mexico has displaced Canada in US attention. This is generally viewed as a good thing; it has been noted that with the imbalance of

power, smaller powers usually win. Reason: a larger state has too many relationships to manage.

With a generational change of guard, the traditional power centre from the liberal North East that fought in WWII with Canada and was sympathetic to its’ issues has shifted to a younger, more conservative population from the South and South West. Being more familiar with Latin America (President

George W. Bush calls it “the neighbourhood”), this new power group questions why Canada

should be treated differently to any other country.

Trade and Security Regionalism has been a dominating characteristic of international affairs since the end of the Cold War.

Trade and Canada US - Relations:

The 1989 Canada-US FTA followed by the 1994 Canada-Mexico-US NAFTA reflected the increasing

integration of North America into an economic unit.

With the 1994 Miami Summit of the Americas, Canada was faced with a de facto policy reversal;

To emphasize Canada‘s foreign policy independence from the United States, in 1972 “The Third Option” was devised under Prime Minister Trudeau; Canada would diversify its economic partners and

diplomatic initiatives away from the United States, as not to become subject by American dominance.

Brian Mulroney reversed this, symbolized by the FTA.

So despite Jean Chretien’s “calculated ambivalence” and the heritage of The Third Option (Chretien was in Trudeau’s cabinet), since he became PM in 1993, his administration has evolved a foreign policy more aligned with Western Hemispheric - and American - interests.

Economic reflection of alignment, with the USA as Canada’s most important trading partner:

Since the 1989 FTA, $1.5B+ crosses our border daily:

Summary of Canadian - USA Trade, since FTA:

1989: Canada exports - total: $108,024 (74%) - 1999: $309,663,000 (86%)

1989: Canada Imports: total: 97,298,000 (70%) - 1999: 249,173,000 (76%)

Canada’s 30 million consumers purchase more from the USA than the European Union’s 300

million + population.

Overview: Canada - US Relations 4/23

Direct Foreign Investment (DFI) is as important as trade linking the Canadian/US economies.

Over 66% of all DFI in Canada is from USA; at the end of ‘98, US DFI in Canada was over

$147 billion - nearly 50 % of this in manufacturing; finance (other than banking, insurance,

and real estate: 21%, petroleum: 12%).

Eleven per cent of US FDI is in Canada,[*2.] a sum exceeded only by US DFI in the UK.

While Canadian companies must be globally competitive for success, cross border investments proceed apace: Nortel...JDS Fitel...Weyerhauser/McMillan Bloedel. The economic pattern is increasingly continental.

In respect of economic performance, the US recession recovery from early 1990s has been more robust and rapid than Canada’s, with lower US unemployment. Canadian living standards have also fallen lower than American.

The 1999 World Competitiveness Yearbook ranks Canada 10 overall - ahead of Ireland, but behind USA,

Hong Kong, Singapore.

Meanwhile, private sector voices like the Business Council on National Issues/BCNI (and John Roth, C.D. Howe Institute) urge that Canada should continue intensifying US integration; reduce further barriers to flow of goods, services, people, but first become more competitive by reducing

personal and corporate tax rates. Tom D‘Aquino states that integration generates pressures for policy conversion/harmonization, while Canada must retain its’ distinctive social policies.

BCNI President Tom D’Aquino feels that Canada must “move forward” with US and international integration - building upon precedents as FTA/NAFTA. Incidents like the Seattle World Trade

Organization (WTO) meeting of 1999 are seen essentially as a Luddite backlash, not the wave of the future.

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2. *No breakdowns relating to sectoral DFI was received. Pursuant to the Corporations Returns Act (CRA, formerly

CALURA), the latest summary, which was released in May, is for the year 1998. (Note that "1999" in the second

paragraph should read 1997. From the annual report, that there is no breakout for petroleum companies - companies

included under "Energy".

More information is collected by Statistics Canada than is released in the report. Statistics Canada advises that

“insufficient resources’ are allocated to provide a more complete analysis. This is probably a case where they feel

that insufficient requests are received to justify the allocation of more people to the analysis of this data.

The Annual Report shows Asset Value and Revenue and provides break outs by Industry and by Country of

Ownership. It does not divulge tally of the foreign owned assets by Industry and Country of Ownership..

Data about the number of enterprises in Canada under foreign control is available, but this does not disclose the year

to which the data applies.

Who owns what tells nothing about the economic impact of various corporations.

Overview: Canada - US Relations 5/23

Paralleling Court Government has been adoption of a functional rather than a geographic approach to foreign affairs at the DFAIT; the ADM for American relations (as during negotiation with FTA) has been replaced by an ADM for the Americas - said to create greater flexibility in policy responses.

Canada-US Trade and Investment Relations: Dispute Settlement

Overview: The deepening political and economic integration in North America is adding to the challenge of managing relations between the USA and Canada.

During Clinton’s administration, there was economic drift in 1996 -97...The US presided over its third trade policy failure in three years...Clinton was unable to gain fast track trade negotiating authority...He then threw in towel over on multilateral investment negotiations with the OECD (1998/9).

While this American drift should have been of concern, newspaper articles over 1998/9 suggest stability by concentrating upon familiar issues ( lumber, split run magazine editions, etc) - so creating an impression of general tranquility from the Canadian side.

If current US prosperity cycle ends, Canadians would be reminded of how ugly US trade policy can become (protectionism, parochialism). ..

Meanwhile, for Canada, binding dispute settlement procedures under FTA, NAFTA, WTO - benefitted Canada; Ottawa claimed settlement procedures had strengthened rule of law in Canada/US trade relations.

Differences in the Canadian government system (emphasizing consensus) and the American (diffusion of authority) were accentuated by the competitive and adversarial nature of trade relations.

America’s separation of powers accentuates this “international anti social behaviour” [sic], since assign-ment of trade policy making authority to Congress - ensures it will be sensitive to narrow interests.

International trade agreements, rules, and institutions tend to stabilize and smooth over disruptive tendencies between trade partners. Trade dispute resolution calls for transparency, consultations, objective support, mediation, and adjudication.

Under FTA/NAFTA dispute settlement rules & procedures, there is

- mandatory notification of any measure affecting trade/investment;

- compulsory information to other party on matters not previously notified about

- consultations request of either party re: operation of the FTA referral to the

Canada - US Trade Commission;

- dispute settlement procedures - for mutual satisfaction; and

- compulsory arbitration .

FTA/NAFTA Chapter 19 created binational panels substituting binational panel review over domestic judicial review in disputes under FTA. This was generally satisfactory, so Mexico adopted the

procedure under NAFTA.

Overview: Canada - US Relations 6/23

FTA Chapter 18 & 20 established general dispute settlement procedures, modeled on GATT procedures , with innovations. It provides a mechanism for resolving conflicting conflicting interpretations of the agreement. Settlements created controversy, but it has generally been working well. [3.]

NAFTA Chapter 11 sets out the three countries’ rights and obligations, re: Direct Foreign Investment, and provisions to address disputes between foreign investors and the host government. Unlike state to state provisions of Chapters 19 & 20, Chapter 11 provides for mandatory arbitration between investor and government.

After slow start, investors beginning to have confidence in these procedures - particularly re local regulations discriminating against investors. It is still too early for firm conclusions on Chapter 11.

Canada and the USA have used these dispute settlement procedures to their mutual satisfaction. Officials in both countries view these mechanisms positively - reducing the number of festering bilateral issues and increasing the number of conflicts resolved on the basis of mutually accepted rules...

Between 1989 - 2000, Canada and the USA used general litigation procedures of GATT/WTO and FTA/NAFTA (Chapter 18 & 20) 17 times; more specialized provisions of Chapter 19, 55 times.

This frequency suggests a very high level of mutual confidence.

Basic Obligations and Procedures under WTO auspices require that laws and policies be made publicly so traders investors and other governments find all necessary information. -

General Agreement on Trade and Tariffs (GATT)/WTO Disputes: Despite the creation of the FTA in 1989, Canada and the USA retained GATT rights. When GATT was superceded by the WTO in 1995, with the entry into force of binding dispute settlement provisions of the WTO, Ottawa and Washington have

shown preference for these procedures to settle general trade disputes between themselves. Similar

to FTA & NAFTA, Chapter 20 provides that the complaining party has the right to choose the

forum for issues covered by both agreements.

Canada and the USA have used these dispute settlement procedures to their mutual satisfaction. Officials in both countries view these mechanisms positively - reducing the number of festering bilateral issues and increasing the number of conflicts resolved on the basis of mutually accepted rules.

Between 1989 - 2000, Canada and the USA used general litigation procedures of GATT/WTO and FTA/NAFTA (Chapter 18 & 20) 17 times; more specialized provisions of Chapter 19, 55 times. -

This frequency suggests a very high level of mutual confidence.

By end of 1999, Canada invoked WTO procedures twice; the USA, three times, to address bilateral issues.

As a general impression, Canada and the USA are both committed to rule of law in trade disputes. Each has succeeded and failed in pressing its’ claims. But both continue to use them.

The new, more binding procedures have helped manage Canadian-US relations, and established a better basis for resolving disputes. However, there are limits to governments’ willingness to cede control to international rules and procedures.

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3. For challenges to free trade dispute resolutions process and general benefit of free trade to Canada, see Pp. 20 - 23.

Overview: Canada - US Relations 7/23

Some examples:

Soft Wood Lumber Agreement.

The Softwood Lumber conflict is perhaps the longest running dispute so perhaps has the highest profile of Canada - US trade difference. Softwood lumber was originally left out of FTA; in 1996, Canada agreed to restrain exports in a side agreement. The Softwood Lumber Agreement expired March 31, 2001.

The Canadian government has consulted extensively over the past 18 months with Canadian stakeholders and interest groups on the future of the lumber trade with the United States. The U.S. lumber industry is threatening to launch another countervailing duty investigation of Canadian practices absent a new agreement. Canada is fully prepared and committed to defending the interests of the Canadian industry against these unfounded allegations. Softwood lumber shipments to the United States were valued at $10.7 billion in 1999.

In the past year, Canada and the United States reached a negotiated settlement for a dispute based on the U.S. unilateral reclassification of rougher headed lumber to bring it under the Canada-U.S. Softwood Lumber Agreement. In return for terminating the arbitration case on this topic, Canada received 72.5 million board feet of additional quota. Canada's challenge of U.S. reclassifications of drilled and notched lumber continues, and a decision is expected soon.

Canada also launched a WTO challenge of the U.S. law respecting the treatment of export restraints in future countervailing duty investigations. While not related directly to the softwood lumber dispute, the United States found that log export restraints did confer a countervailable subsidy in its 1992 investigation. A successful challenge will reduce the risk of a similar outcome in any future U.S. investigation involving export restraints.

Electricity.

U.S. Congressional efforts to restructure the electricity sector appear stalled in disagreement over federal and state jurisdiction. In the absence of federal legislation, focus will shift to states which may proceed with

initiatives inconsistent with the trade agreements and potentially affecting access for Canadian exporters. As with earlier federal legislation, Canada remains concerned with requirements to provide reciprocal access for retail sales and provisions excluding Canadian-origin products and hydro-electric power from U.S. renewable energy markets. The Administration may act by regulation in 2001 to establish continent-wide systems reliability standards and regional transmission organisations (common carriers), two issues that could affect Canadian sovereignty and jurisdiction. Canadian advocacy in this sector has raised U.S. awareness of a North American electricity market and the impact that discriminatory measures could have on this market.

While this industry restructuring may create risks for Canadian electricity suppliers in the U.S. market, opportunities for increased trade are also available, influenced by new markets and market structures, innovation in services and expanding energy demand.

PEI Potatoes:

As recently as October 31, 2000, the United States Department of Agriculture (USDA) closed the border to imports of potatoes from Prince Edward Island (P.E.I.). - following confirmation by the Canadian Food

Overview: Canada - US Relations 8/23

Inspection Agency (CFIA) of the presence of potato wart in one field in P.E.I. The CFIA responded quickly

by putting controls in place to prevent the spread of the disease and to protect the disease-free status of potatoes in the rest of the province and in other provinces.

The CFIA held extensive discussions with the USDA in an effort to remove the ban. On December 13, 2000, the USDA wrote to the CFIA, providing assurances that the border would be open to imports from P.E.I. Unfortunately, the USDA did not implement the terms of this letter. Following further discussions, USDA officials wrote again to the CFIA on December 29, 2000, establishing more restrictive conditions that those described in the December 13 letter.

On January 2, 2001, Canada requested NAFTA consultations with the United states on the USDA restrictions. These consultations were held on January 17, 2001. Canada's position is that the U.S. restrictions have no scientific justification, constitute an unjustified barrier to trade, and violate the

United States' international trade obligations. Canada has made high level representations to the U.S. Administration to remove the restrictions.

Wheat

In response to a petition by the North Dakota Wheat Commission, the U.S. Trade Representative (USTR) initiated, on October 23, 2000, an investigation under Section 301(b) of the U.S. Trade Act regarding Canadian wheat trade policies and practices including those of the Ca nadian Wheat Board (CWB). The investigation can take up to 12 months to complete. Previous allegations have been found to be without substance, despite numerous investigations by U.S. agencies. Indeed, Canadian wheat is purchased in the United States by customers who value its quality and consistency. Canada has made it clear to U.S. authorities that we will not restrict wheat exports.

Canadian wheat exports to the United States are an important part of a mutually-beneficial, highly integrated North American agriculture and agri-food market. The Canadian and U.S. governments are committed to a regular exchange of information on bilateral and international grains trade, as a means of dispelling misper-ceptions about the impact of Canadian exports on the U.S. market, and of dealing with other issues such as trade practices in third-country markets. In addition, Canada continues to encourage increased consultation and cooperation among industry groups on both sides of the border.

Exports of Meat

In 2000, bills were introduced in Congress requiring country of origin labelling (COL) for beef, lamb and pork, which would have had potential negative consequences for Canadian exports. These bills did not become law. Last year, the United States released two studies which concluded that country of origin labelling of meat is certain to impose costs on producers, processors and consumers and is uncertain to produce benefits. Canada and the United States agree that country of origin labelling requirements on

agricultural and food products should be consistent with obligations under the NAFTA and the WTO. Canada will continue to oppose legislative amendments that would require mandatory country of origin labelling requirements for imported meat.

The U.S. Department of Agriculture (USDA) is under strong pressure from domestic producers to discon-tinue its official grading of imported beef and lamb carcasses. This would adversely affect Canadian exports and impact the highly integrated North American meat industry. Canada will continue to oppose the cessa-tion of USDA official grading for imported beef and lamb carcasses.

Overview: Canada - US Relations 9/23

In July 2000, North Dakota published proposed regulations to implement changes to its animal health legis-lation that were enacted in 1999. The proposed regulations would have imposed additional certification

requirements that would have adversely affected Canadian livestock exports. Canada considered that

these requirements would be inconsistent with U.S. international trade obligations. Canada made

several representations to the U.S. Administration and North Dakota objecting to the requirements.

In December, North Dakota decided to revise the proposed regulations. According to North Dakota

officials, the changes are intended to resolve the issues raised by Canada. North Dakota officials

have indicated that they will be publishing the revised regulations for a further 60 day public

comment period in early 2001. Canada will have an opportunity to review the revised regulations

once they become public and to determine the need for further representations.

Uranium

Following intervention by the Government of Canada and the Province of Saskatchewan, and extensive consultations with various U.S. government agencies, the Department of Commerce withdrew a proposed Amendment to the Uranium Suspension Agreement that would have increased the U.S. quota on imports of uranium originating in Russia from 4 million to 10 million pounds per annum. The amendment would have further depressed prices in the uranium market and impaired the ability of Canadian uranium producers to compete in the U.S. market, putting at risk recent domestic investments.

Security and Canada-US Relations

Overview

Transcending operational and process issues of Canada - US relations is the central question of new realities in a more inward looking, post Cold War USA:

Is Canada in or outside the orbit? There is less room for compromise. For if Ottawa chooses not to make a clear choice, Canada will likely be faced with a fait accompli in which its’

wriggle room for negotiation is substantially reduced. Particularly with the new

admixture of nontraditional security issues and economic issues:

- loose Canadian border and movement of illegal migrants is seen as a threat to

domestic US security (Ahmed Ressam)...money laundering and drug

trafficking...lax financial reporting of Canadian financial institutions...

poor interdiction and light sentences for offenders.

- Canadian “looseness” has also raised questions of sensitive US military techno-

logy falling into possession of rogue/restricted states. Link in the sieve: Canadians

with dual citizenship - solution: proposal that they have special permits for access

to such technology.

With American concerns shifted to nontraditional security and economic priorities in the post Soviet era, US (SW) politicians want tighter border controls, and do not see why Canada should get treatment

different from Mexico.

Overview: Canada - US Relations 10/23

As Unilateralism takes hold in America, US neglect may become negligence; some US thinkers believe that Canada should be dealt with in power terms at a ratio of 10:1 - and no more.

i. Outside the Western Hemisphere

Despite surface cordial relations with the United States, in security matters Canada has traditionally been the subordinate partner.

During the Cold War of the 1950s, for example, if the Warsaw Pact attacked the West, the US answer was clear; A nuclear response in days or hours. Consultation with Canada would not really have been practical. As Prime Minister Diefenbaker learned during the Cuban Missile crisis - just five years after establishment of the North American Aerospace Defense (NORAD).

While the USA believed in a strong, healthy Europe (which meant a strong NATO), Canada felt that a strong Europe would be exclusionary - discriminating against the United Kingdom.

On Asian policy, Canada generally deferred to US policy positions; Canada had traditionally bowed to US pressure to vote against Communist China’s admission to UN.

But this changed during the Trudeau years; in 1969 the Prime Minister Trudeau entered into negotiations with Beijing. Despite opposition from Washington, Trudeau was anxious to end China’s isolation, convinced that it made little sense to ignore rather than deal with a major power in international affairs.

Official recognition came on October 10, 1970 - two years before the “ping pong tournament“ diplomacy between the US and China. And at a time when Western nations still acknowledged instead the claims of the Nationalist regime on the offshore island of Taiwan, which occupied a disputed seat as a permanent member of the UN Security Council.

In the post Cold War world (for Canada marked by Gulf War participation and Mulroney‘s troop withdrawal from Europe as transition points), inter-state/alliance conflicts have been replaced by intra-state conflicts. New issues ([imported] terrorism...crime...drug trafficking) have emerged. With no modalities for handling them, differences over management of these issues has the potential of spilling into other aspects of the bilateral [and/or multilateral] relationships. Example: American views to “rogue states“ could impinge upon Canadian economic activities abroad. e.g., Sudan and Talisman Energy: providing hard currency for the Sudanese government.

ii. Within the western Hemisphere:

Although the OAS was formed in 1890, Canada joined in 1990. Thereafter, Canada turned a telescope toward the region:

Soon after the 1993 Liberal victory, Jean Chretien created a Secretary of State for Latin America and Africa - (under Christine Stewart, MP, who had previously founded an NGO in Central America)...Lloyd Axworthy and Roy Maclaren began visiting Latin America to implement a Western Hemisphere agenda...Canada attended the 1994 Miami Summit of the Americas conference, which was committed to establishing the Free Trade Area of the Americas by 2005...and led two “Team Canada” initiatives (1995, 1998) into the region...Chretien’s commitment to host 6 events between 1999 - 2001 (including the 1999 Free Trade Agreement of the Americas/FTAA Ministerial in Toronto) was unprecedented.

Overview: Canada - US Relations 11/23

And as an important “side show,“ Roy MacLaren pushed for Chile into NAFTA; when the US congress refused to fast track Chile, Canada proceeded with a side agreement: the Canada - Chile Free Trade Agreement, which was “NAFTA compatible.”

For Canada, the FTAA held forth three benefits; market access, investment protection and a clear dispute settlement process.

Parallel developments:

U.S. Side: Since the end of the Cold War, contrary pressures have been generated on American borders by economic activity (requiring open borders) and security (requiring tighter controls). In January, 2000, the US House of Representatives Subcommittee on Immigration warned of frequent dangers/threats of terrorists entering the USA through Canada... As noted in the discussion on Nuclear Missile Defence (NMD), economic and security/defense issues - historically unlinked - could become easily joined.

Canadian side: With the international growth of regionalism, focus upon the Western Hemisphere brought out NGO activism on social issues in tandem with private sector demands for a more transparent business environment in the rest of the hemisphere. -

Under Trudeau, the “Third Option“ strategy evolved: diversifying away from America, multilaterally and bilaterally. This was also the early basis of Liberal opposition to the

FTA and NAFTA.

Based on “Third Option” thinking, in opposition Lloyd Axworthy and Roy MacLaren authored “Part of the Americas: A Liberal Policy for Canada in the Western Hemisphere.“ as a comprehensive alternative to Tory policies of the day:

“If Canada’s foreign policy until now was based on three pillars (USA, Europe, Asia),

we must now define Latin America and the Caribbean as/the fourth pillar.”

(Axworthy/Maclaren, 1991)

Background: Canada had fostered better [political] relations with Latin America and the Caribbean for over 20 years. And Canadian business had been interested in the Caribbean/Latin America since the 1960s; some companies (especially banks) have been present in the region. But generally, restrictive business practices, limits on foreign investment, and easier opportunities in Europe and USA always limited opportunities there.

Yet since 1984, Canada had drawn closer to the US orbit. Thus, time has come for Canada to play a more significant role in hemispheric affairs as one means of redressing the balance in our foreign policy and providing Canada with better balance in the politics of the Western Hemisphere. These themes were incorporated into the 1993 Liberal Red Book.

And percolating within Canada since the mid 1960s, domestic NGOs (e.g., The Inter-Church Committee for Human Rights in Latin America -ICCHRLA; the Latin American Working

Group - LAWG; Canada-Caribbean-Central America Policy Alternatives - CAPA) have

been increasingly active in Latin America, creating a new relationship amongst:

civil society, parliament, the press, government.

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By the 1980s, the Nicaraguan Sandanista revolution is said to have given interested

Canadians what they felt was a political, economic, and social model for other Latin

American nations (re: end of oppression elsewhere and preservation of Sandinista

Revolution).

The Sandinista election loss in 1989 took the took wind from Canadian NGOs. Over the

next decade, they refocussed. For example, in 1994, CAPA submitted for a foreign policy

review urging greater use of OAS to promote Human Rights and democratic development.

It also called for Canada’s ratification of the American Convention on Human Rights;

Cuban reintegration into Western Hemispheric political-economic affairs; a code of

conduct for multinationals; and the continuation of Canadian peace keeping.

In essence, the Liberals accuse the Tories of failing to take advantage of new multilateral and regional opportunities by having moved Canada too close to American influence....“Global trade is preferable

to Canada over being in a regional trade bloc; a “North American Free Trade Zone is...the worst case scenario.”

MacLaren, wanting to diversify Canadian trade and avoid narrowing trade relations, favoured negotiating a Free Trade agreement with Chile....The more diversified Canadian trade agreements were abroad, the more insulated Canada would be from arbitrary trade actions of the USA.

With private sector NAFTA participation, a regional breakthrough came into focus. Three

business organizations were critcal to this process; the BCNI; the Canada Council for the Americas (CCA); and the Alliance of Manufacturers and Exporters Canada (AMEC).

They pressed for liberalized trade regulations.

New dynamics for Canada’s relationship with the rest of the western hemisphere are a result

of three inter-related forces:

i. Private sector demands for more transparent business practises, coinciding

with NGOs pressure for Human Rights and better governance.

ii. Canada’s ever deepening and widening economic relationship with the USA,

with a parallel desire to balance this by diversifying its‘ trade partners and

projecting its’ foreign policy principles/values into the rest of the hemisphere.

iii. Complex structural changes in international system: A more interdependent

world in which Canada is becoming a major player through projection of

“soft power.”

Irony: coinciding with the historic Liberal imperative of moving away from American dominance by looking (in this case) to Latin America for closer ties was the external convergence of regionalism across the globe and growing integration within the Americas. Consequently, the Liberal “Third Option” merged with the closer free trade thinking and related policies from within the United States. Thus, the conundrum of dependence on US is clear: efforts to diversify trade have not been too successful: having negotiated

two free trade agreements, we are back to what Mitchell Sharp criticized in 1972...

An assessment of these activities indicate that Canadian exports to the region have not

yet been altered - or brought FTAA closer to being - or guaranteed more trade

Overview: Canada - US Relations 13/23

liberalization. However, it has made Canada more engaged in Latin America and the

Caribbean. [Daudelin and Dosman, 1998]

For example, Canada is a major investor in Peru and Chile.

Regardless of Canada’s exercise of its’ “Third Option ,” the disproportionate influence

of the USA persists. Today, Canada is forging close relationships in the hemisphere

and the inter - American system.

In its National Report on Canada and the Summits of the Americas

(Quebec City, April 2001) FTAA Conference, Ottawa acknowledges that

“Canada's future is inextricably linked to that of our partners in the Americas

— geographically, economically and politically. Together, we stand at a

significant moment in our common history as we face the collective challenge

of transforming the region's political, economic and social promise into a

more prosperous, secure and freer future for all citizens...”

In fact, “since the First Summit of the Americas held in Miami, Canada has

worked to address issues dealt with in the Summit mandates, both at home and

in the Hemisphere. Canada is committed to monitoring the implementation of

Summit plans of action and to reporting on their activities...”

As one of 34 democratic countries of the hemisphere engaged in negotiating the Free Trade Area of the Americas (FTAA), Canada has been actively involved in FTAA negotiations since their launch in April 1998. The FTAA holds the potential to create the world's largest free trade area, with 800 million people and a combined gross domestic product of nearly $17 trillion. The FTAA would build on Canada's free trade ties with the United States, Mexico and Chile and its expanding links elsewhere in the hemisphere, allowing Canada to take full advantage of emerging hemispheric markets.

Canada’s more active relationship with the rest of the Western hemisphere will satisfy the demands of business and civil society (NGOs, etc.).

However, business interest will wane if trade liberalization and investment protection agendas do not significantly advance -especially the establishment of transparent business practices, laws, and judicial procedures.

Regional economic and political instability will also adversely affect business interest and participation - making governance and economic agendas both important.

But these scenarios remain to be seen. Using trade figures from 1990 as a barometer, it appears that economic performance based on stable democratic governments are evolving in a manner

consistent with the FTAA vision.

Overview: Canada - US Relations 14/23

Based on DFAIT figures, trade with the Latin American community growth has been healthy:

Canada’s Merchandise Exports to Key Latin American Economies, 1989 - 1999 (Cdn $ - in Millions) [4.]

Country 1989-92 1993-96 1999

Mexico 673 1082 1632

Argentina 67 198 211

Brazil 575 1123 1.038

Chile 155 333 360

Colombia 204 401 255

Venezuela 356 656 524

Total 2029 3792 4025

On balance, though, in terms of aggregate trading between Canada and Latin America, Canada still imports far more than it exports to the region:

Aggregate Two way Trade (Latin America, including Mexico, Central Ameroca, and Caribbean markets,

Cdn $ Billion) [sic] [5.]

Latin America South America Central America & Mexico

Caribbean

1990 7.34 3.58 1.36 2.4

2000 24.70 7.55 3.03 14.12

Isolated Figures:

Exports, 1990 4.50 1.39 2.45 0.66

Imports, 1990 4.58 2.19 0.65 1.74

Exports, 2000 6.3 3.05 1.21 2.04

Imports, 2000 18.47 4.5 1.89 12.08

Looking first at total trade between Canada and Mexico under the 1994 NAFTA accord, two-way merchan-ise trade between Canada and Mexico grew by 27 percent, reaching $14 billion in 2000. Two-way services trade between Canada and Mexico has grown at an impressive annual rate of 10.8 percent, to reach just

over $1 billion in 1998.

_________________________________________________________________________________

4. Trade Update 2000; First Annual Report on Canada’s State of Trade, 2nd Edition, Pg 21;

dfait-maeci.gc.ca

5. “Canada's International Transactions in Services, "(Catalogue 67-203-XPB), Statistics Canada.

Overview: Canada - US Relations 15/23

By year end 1999, Canadian direct investment into Mexico reached $2.8 billion - more than five times the 1993 level (primarily made in then energy, mining, financial services, and manufacturing sectors). Conversely, investment from Mexico reached $500 million - over three times more than in 1993.

In the rest of the Americas and the Caribbean regions, Canada is committed to the Free Trade Area of the Americas realized by 2005.

For example, the Mercosur countries (a regional Common Market agreement amongst Brazil, Argentina, Paraguay and Uruguay agreed upon in the 1991 Treaty of Asunción) addresses the needs of 240 million people (compared to 380 million in the NAFTA) this customs union is Canada's largest export market in Latin America. In 2000, two-way merchandise trade between Mercosur and Canada was valued at $3.3 billion, an increase of 8.1 percent from 1999. Imports from Mercosur increased 11.7 percent in 2000 over 1999.

In 1998, the Canada signed the Canada-Mercosur Trade and Investment Cooperation Arrangement (TICA), which laid the foundation for enhanced bilateral trade and investment and established a framework for collaboration in the Free Trade Area of the Americas and the World Trade Organization.

Some say Chile is the Benchmark for South America’s rediscovery of democracy and free markets. Canada recognized this early; The Canada-Chile Free Trade Agreement (CCFTA) and its two parallel agreements on environmental and labour co-operation are now nearly four years old. On July 5, 1997, under the CCFTA, tariffs were eliminated on the majority of products that make up Canada-Chile bilateral trade. For products on which tariffs are being gradually eliminated, the fourth and fifth round of cuts were made on January 1, 2000 and 2001. Tariffs on most other industrial and resource-based goods will be phased out by 2003.

Some say Chile is the Benchmark for South America’s rediscovery of democracy and free markets. Canada recognized this early; The Canada-Chile Free Trade Agreement (CCFTA) and its two parallel agreements on environmental and labour co-operation are now nearly four years old. On July 5, 1997, under the CCFTA, tariffs were eliminated on the majority of products that make up Canada-Chile bilateral trade. For products on which tariffs are being gradually eliminated, the fourth and fifth round of cuts were made on January 1, 2000 and 2001. Tariffs on most other industrial and resource-based goods will be phased out by 2003.

The implementation of the Canada-Chile Free Trade Agreement has precipitated a new era of bilateral co-operation with Chile. The total value of two-way trade in goods between Canada and Chile reached $1 billion in 2000. Canada's exports of goods totalled $445 million and imports reached $555 million in 2000.

Canada foreign direct investment in Chile was $4.6 billion in 1999. In the past two years, over 70 percent of Canadian investment has been in the mining sector, resulting in spin-offs for Canadian companies in other manufacturing and services sectors. Significant Canadian investments were also directed to the energy and information technology sectors. While it is too early to assess the impact of the Canada-Chile Free Trade Agreement on the bilateral trade and on investment, clearly the short term trends have been very encouraging.

Looking now to Argentina, bilateral trade between this important country and Canada increased markedly during the 1990s. From $173 million in 1989, two-way trade reached $642 million by 1997 and totalled $602 million in 1998. Reflecting the economic recession in Argentina in 1999, trade retracted to $515 million in 1999 but reached $596 million in 2000.

Overview: Canada - US Relations 16/23

Argentina is an important investment location for Canada. In 1999, Canadian direct investment in Argentina totalled $2.465 billion, relatively unchanged from 1998 ($2.496 billion). In 1990, Canadian investments in Argentina amounted to a mere $123 million. Canada now ranks as the seventh most important foreign investor in Argentina.

In the Caribbean basin , with few barriers to trade, English as a common language, legal codes and

business practices similar to Canada's and Canadian banks well-established in the region, the Caribbean Community (CARICOM) is a welcoming market for Canadians and can be a good starting point for new exporters. The 15 members of CARICOM are: Antigua and Barbuda; Bahamas; Barbados; Belize; Dominica; Grenada; Guyana; Haiti (all but ratification); Jamaica; St. Kitts and Nevis; St. Lucia; St. Vincent and the Grenadines; Suriname; Trinidad and Tobago; and Montserrat (U.K. dependency). The Bahamas is a member of CARICOM but not of the Caribbean Common Market.

Annual two-way merchandise trade between Canada and CARICOM countries amounted to $937 million in 2000 with Canadian exports totalling $354 million and imports $583 million. Potential for services exports also continues to grow as over $200 million in Canadian consulting, engineering and contracting sales are awarded annually.

Totalling at least $25 billion, Canadian investment in CARICOM countries as a group exceeds our invest-ment in all other countries except the United States and the United Kingdom. The leading area for investment is financial services (e.g. banking, insurance), particularly in Barbados and the Bahamas. Canadian investment diversified in the 1990s to include Trinidad and Tobago's energy sector and

Guyana and Suriname's mining sectors.

In Central America proper, Canada is advancing progress toward bilateral and Free Trade Agreements (FTAs). Canada is currently negotiating FTAs with Costa Rica and the Central American four (El Salvador, Guatemala, Honduras and Nicaragua) - as well as holding discussions with the Caribbean Community and Common Market (CARICOM) towards the negotiation of a free trade agreement. These bilateral FTAs will remove unnecessary barriers to trade while respecting the ability of all parties to regulate in the public interest. This will open markets for Canadian exporters, while at the same time, moving forward negotiations of the Free Trade Area of the Americas (FTAA), itself an important component of the Summit of the Americas process.

Cuba

Cuba remains an outstanding side issue in “Americas” Canada - US relations. While Canada has maintained diplomatic relations with Castro, the Americans have had a longstanding economic

embargo against Cuba.

To reinforce the American embargo against Castro’s Cuba, the US Congress in 1996 passed the Helms-Burton Act, which applied penalties against foreign businesses doing business on expropriate

properties in Cuba.

The international community came out strongly against the U.S.’ attempt to apply extraterritorial penalties. Canada and the EU have introduced legislation to countermand the Act, but its impact is being felt nonethe-less. Although a crime in Canada for subsidiaries of U.S. firms to abide by the act, there have been a num-ber of those which have stopped doing business with Cuba, or divested their assets to avoid contravening the U.S. law. While this is illegal under Canadian law, proving the connection is difficult.

Overview: Canada - US Relations 17/23

Generally, the Cuban economic embargo is seen as counterproductive, in that it has not weakened the Cuban government and has created hardships for the Cuban people. As well, Cuba is free to trade anywhere else it so chooses.

Another perspective (Yvon Grenier) maintains that Canadian support for Cuba is flawed; reputable third party Human Rights organizations have documented human rights abuses and repression under Castro; further, given its‘ historical culture (caudillo tradition), Cuba would likely have had a dictatorial

government anyway.

Whether Canadian support for Cuba is a matter of conviction or not, it reflects Ottawa‘s independence from American influence.

As for investment there, Canadian commercial enterprises have not shown healthy returns relative to similar investments elsewhere. Sherritt International’s Ian Delaney has conceded that returns have not been up to internal expectations.

Of course, expanded trade between Canada and Latin America has not been without its’ problems and challenges. Canada’s Bombardier claim that Brazil’s unfair subsidies to Ebraer hurt sales of Canadian

made commercial jets is a high profile case in point.

But there is a lot more happening than meet’s the media’s eye. Under NAFTA, the Mexican government last year responded to concerns expressed by Canada on delays being encountered by Canadian suppliers for quota certificates for importation of beans by implementing an auctioning system (three auctions a year) for the allocation of TRQ for dry beans. This management of the tariff rate quotas ensure for Canadian exporters a more predictable and transparent mechanism.

And in 1996, Mercosur established a common external tariff - already resulting in each of the member countries exceeding their bound tariff rates for certain products. As part of this process, Brazil raised the tariff for barley malt to 14 percent, 4 percent above its WTO binding at 10 percent. This situation was exacerbated in the fall of 1997, when the Mercosur common external tariff was increased by 3 percent on almost all products, resulting in an even higher tariff on barley malt of 17 percent - now 7 percent above its WTO bound rate.

Canada has also raised concerns about the imposition of duties and charges on imports that are not notified in Brazil's WTO schedule, such as the Merchant Marine Renewal Tax and its potential trade restricting and distorting effect. The amount of this tax is 25 percent of the ocean freight of imported goods. Since this tax does not apply to domestically produced goods, nor to goods imported over land from neighbouring countries, Canada considers that this tax violates both the national treatment and most-favoured-nation obligations of the GATT.

Axworthy Doctrine and its’ place its’ ironic convergence (from the American perspective) with Canada - US Relations:

Lloyd Axworthy’s contemplations in opposition under Mulroney led to evolution of the Axworthy Doctrine, whose tenets appear very applicable to the post Cold War world. Briefly, it comprises of the following elements:

1. Peacebuilding: since the end of cold war, middle powers are more influential. Canada is

using diplomacy, persuasion, international public opinion to close divides between sides.

Overview: Canada - US Relations 18/23

2. Human Security: The perspective of the individual as well as the state has a place- especially

in the era of globalization, with the individual much less protected than in the security of

the state.

3 - “Soft Power:“ In the post cold war world, conflict is primarily within states, not between

them. So peace building/keeping is important.

Within the Western Hemispheric context, the Axworthy Doctrine has three objectives:

- confidence building between USA & Cuba - bring Cuba back into the hemispheric fold;

- promote peace/security in Central America; and

- arms control protocols - esp. as they related to drug trade.

US National Missile Defense, Canada, and the Future of NORAD

Development and deployment of NMD has come an urgency in the USA. The combined effect of hostile “rogue states” (particularly North Korea, Iraq, Iran) with nuclear missile capabilities emerging and

the de facto obsolescence of bombers have fed this urgency.

In 1999, the US Senate endorsed NMD by 97:3; the House of Representatives, by 317:105.

Unlike Cruise missile testing, the USA does not need Canadian participation - Canadian airspace is not involved. So in theory, Washington will not need to pressure Canada for co-operation.

With the obsolescence of bombers, NORAD becomes functionally obsolete as well. But in 1999, NMD was placed under NORAD command. Canada saying no to NMD could mean saying goodbye to NORAD - the most important part of Canada-US bilateral defense relations. NMD & NORAD would then become all American controlled and commanded.

So Canadian involvement is potentially symbolic and face saving (continuation in NORAD), with benefits of technology information sharing by the US government if Canada participates.

On the other hand, every Canadian administration has endorsed the 1972 ABM treaty as critical to minimizing growth of missile numbers and refinement of missile technology. While the USA sees

NMD as a complement to the ABM Treaty, Canada could be in the position of reneging support

of the 1972 ABM treaty if it endorses the NMD initiative.

Strategic Defense Initiative (SDI) to NMD

Reagan’s vision of rendering nuclear weapons “useless and impotent“ under his SDI program devolved from exotic space based interceptors to limited but global protection with a combination of space and

ground based interceptors for the USA and allies under President George Bush Sr.

President Clinton downgraded SDI funding to “technology readiness” but set no goals for deployment.

But the 1994 Republican takeover of Congress 1994 changed Clinton’s direction. The Republican

“Contract with America” saw a bill adopted to deploy missile defense by 2003.

Overview: Canada - US Relations 19/23

Co-incident with this, and contributing to American anxiety; in 1998, N Korea tested a multi stage rocket, the Taepo Dong 1. That same year, a Donald Rumsfeld committee reported that “concerted efforts by a number of ...potentially hostile nations to acquire ballistic missiles with biological or nuclear payloads pose[d] a growing threat to the US...These newer, developing threats in North Korea, Iran, and Iraq are in addition to those still posed by the existing ballistic arsenals of Russia and China...they would be able to inflict major destruction in the US within five years of a decision to acquire such a capability (10 years for

Iraq). During several of those years, the US might not be aware that such a decision had been made...”

Clinton’s Defense Secretary Cohen invoked the Rumsfeld Report and Cohen announced an NMD deployment date: from 2003 to 2005 if authorization were given in 2000.

There were unfounded charges against Mulroney that through NORAD, Canada was allowing its’ forces to be linked to SDI. Mulroney’s response: he endorsed SDI research but would not participate in it.

However, Canadian citizens and private companies were free to do so...

The current Chretien administration, as noted, supports the 1972 ABM treaty - and so is opposed to the NMD initiative. There has been no incentive for the Chretien administration to tip its hand if the ABM

treaty were to be abrogated. Nor has it taken a public view on rogue state threats to US security...

While policy and principles may be one thing, events could take their own course; The accuracy of rudimentary [rogue state missile] systems is such that Canadian territory could become the unintended point of impact of an errant missile targetted at the U.S. Moreover, population centres could well be affected by the nuclear fallout or biological/chemical effects even if a warhead impacted deep within the U.S. Canada is not immune to the threat, however small. [6.]

Economic implications to not participating in NMD:

In the NMD era, supporting USA is key to Canadian forces interest in

new technology available only from USA; NORAD’s temination would

have an impact upon the defence economic relationship - an important

segment of the Canadian economy. Since 1945, Canada and the USA

have had unrestricted trade in defense products; Canada sells $5B of

hardware to US annually. And Canada has a sweeping exemption to US

military exports. This could change with no NMD participation.

As well, security clearance for personnel working with US contractors could

be brought in...Under the International Traffic in Arms Regulations (ITARS)

agreement 1999: US restored Canada’s exemption from restrictive military

technology exports. In return, Canada would impose more stringent guide-

lines in export controls of companies using US technology.

In June, 2000, US Secretary of State Madeleine Albright and Foreign Affairs Minister Lloyd Axworthy renewed the NORAD agreement for five years to 2006...

It is noted that before NORAD’s creation in 1957, there was Canadian -American air force co-operation.

Why would this not continue if NORAD ceased to exist?

_____________________________________________________________________________________

6. ”NORAD and National Missile Defence: A Perspective of the Deputy Commander in Chief,” by Lieutenant-General

George E. C. MacDonald, Canadian Military Journal, Volume 1, No. 2, Summer 2000; dnd.ca

Overview: Canada - US Relations 20/23

Energy Crisis and Canadian response

US Vice President Dick Cheney has long called for greater contributions to meeting growing American energy demands by greater volumes of petroleum supplies from Canada and Mexico; in a 1999 speech

to the London-based Institute of Petroleum, Dick Cheney - then out of office - stated that the demand

gap will need to be met by perhaps double digit growth rates and Canadian imports...

This business opportunity is within memory of the NEP and FIRA regime under Prime Minister Trudeau 20 years ago; there is skepticism both in Canada and the United States about the legitimacy of this [pending] “crisis.” Wrote former President Jimmy Carter in the May 16, 2001 edition of the Washington Post:

"No energy crisis exists now that equates in any way with those we faced in 1973 and

1979," Carter said in an op-ed piece in the Washington Post.

"World supplies are adequate and reasonably stable, price fluctuations are cyclical,

reserves are plentiful, and automobiles aren't waiting in line at service stations.

Exaggerated claims seem designed to promote some long-frustrated ambitions

of the oil industry at the expense of environmental quality."

And according to Alberta political scientist Larry Pratt,

“Canadians are very good at coming up with ideas before the Americans even

have to ask.

“We're being panicked by the Americans with their so-called energy crisis to adopt

things not under consideration a year ago,'' said Pratt, adding, “it's more Canadian

sovereignty down the drain.''... (The Toronto Star, March 10, 2001)

For its part, the Canadian Association of Petroleum Producers has positioned itself to meet American demand as a business opportunity of benefit to Canada, and argues that free market rules of supply and demand rather than government regulation should govern crude energy sales under the auspices of the

FTA and NAFTA - with hydro-carbons treated as just another commodity.

There is an understandable background of domestic concern about leaving Canada short for future energy needs and ceding sovereignty in energy matters to the USA.

According to the Canadian Association of Petroleum Producers, however the remaining petroleum potential for Canada is:

crude oil - 73 years

natural gas - 85

oil sands - 1370 years. [sic]

Of parallel relevance is an unofficial estimate by a CAPP official that at present, 44% of the Canadian petroleum industry (based on a criterion of shares times production) is American controlled; this compares with 1974, when it was 77%. No tables or statistics relating to this were furnished by CAPP.

According to Canadian Energy Minister Ralph Goodale, Canada will continue to promote conservation and environmental sustainability in discussions with the United States about a continental energy plan: "From the Canadian point of view, energy conservation, energy efficiency, are very important qualities and

Overview: Canada - US Relations 21/23

characteristics,” adding that American energy demand may lead to Canadian mega-projects - but will be subject to environmental assessment. (National Post)

However, no suggestion of any return to NEP like policies by the federal government has been identified.

Expanded Energy Consumption and the Environment

With the United States having pulled out of the Kyoto Protocols on the Environment, it is not known at this time how increased American hydro-carbon fuel consumption may adversely affect the North American and Canadian environments.

While Canada remains a signatory to the Kyoto Protocol, Energy Probe’s Executive Director Tom Adams is ambivalent about Canada’s “commitment” to this: “Canada’s federal government is doing so much to undermine the agreement: subsidizing roads, allowing flow through shares for the Tar sands, etc. [sic]”

As of this writing, no information has been received from any source corrolating expanded North American energy production/consumption patterns with regional or international environmental degradation.

Closing Observations:

Despite a framework for dispute resolution under the FTA and NAFTA, issues continue to arise which are of critical concern to Canada. Input from Civil Society involvement in the state to state governance process is accepted as important. But what about Civil Society input from within the jurisdiction of its’ home

government, with positions critical to its’ administration? Are they to be included or excluded from

domestic policy consultation?

Here in Canada, the free trade process is not without its’ critics. The Canadian Centre for Policy Alternatives (CCPA)...David Orchard’s Citizens concerned about Free Trade (CCAFT)...Maude Barlow’s Council of Canadians (C of C). Where do they and other domestic critics fit within the framework of creating domestic policy within Canada for Canadians.

The canvas of issues is large - too large for consideration here. There is room here for only a few examples:

Recently, CCPA’s Scott Sinclair wrote critically of this government’s retreat, under American pressure, from clarifying interpretative language under Chapter of the FTA/NAFTA regarding host government regulatory authority over DFI where this could be in the host country’s national interest - reversing Trade Minister Pettigrew’s statement to the Globe and Mail late last year on this matter. [7.]

Maude Barlow maintains that The General Agreement on Trade in Services (GATS) being negotiated at the World Trade Organization (WTO) threatens the traditional fabric of social programs in Canada:

“The Free Trade Area of the Americas (FTAA), currently being negotiated by 34 countries

of the Americas, is intended by its architects to be the most far-reaching trade agreement

in history. Although it is based on the model of the North American Free Trade Agreement

(NAFTA), it goes far beyond NAFTA in its scope and power. The FTAA, as it now stands, __________________________________________________________________________________

7. CCPA, Briefing Paper Series: “Trade and Investment. Canadian government retreats on NAFTA Investor-state

concerns,” Scott Sinclair, June 11, 2001. policyalternatives.ca

Overview: Canada - US Relations 22/23

would introduce into the Western Hemisphere all the disciplines of the proposed services agreement of the World Trade Organization (WTO) - the General Agreement on Trade in

Services (GATS) - with the powers of the failed Multilateral Agreement on Investment

(MAI), to create a new trade powerhouse with sweeping new authority over every aspect of

life in Canada and the Americas.

The GATS, now being negotiated in Geneva, is mandated to liberalize the global trade in services,

including all public programs, and gradually phase out all government "barriers" to interna- tional competition in the services sector. The Trade Negotiations Committee of the FTAA, led

by Canada in the crucial formative months when the first draft was written, is proposing a similar,

even expanded, services agreement in the hemispheric pact. It is also proposing to retain, and perhaps expand, the "investor-state" provisions of NAFTA, which give corporations unprecedented rights to pursue their trade interests through legally binding trade tribunals.

Combining these two powers into one agreement will give unequalled new rights to the transnational corporations of the hemisphere to compete for and even challenge every publicly funded service of its governments, including health care, education, social security, culture and environmental protection.” [8.]

Of the FTA and NAFTA, David Orchard (writing in 1997) wrote:

“Having implemented NAFTA, the Liberals then adopted the rest of Mulroney's policies,

including the GST ­ the free trade tax which replaced the manufacturers' sales tax and tariff revenue lost under the FTA. The role of government was no longer to create jobs, but to "stand aside" and leave the economy to the private sector, Finance Minister Martin announced.

In the first three years of the FTA, Canada lost 25% of its manufacturing jobs. The

industrial heartland collapsed; commercial real estate values in Toronto plummeted by

two-thirds.

...Eight years into the Agreement, 58.5% of Canadian adults [were] employed; the official

unemployment rate [was] twice that of the U.S. Instead of recognizing NAFTA as the

cause of reduced revenue, governments of every stripe are cutting, slashing, downsizing

and offloading.

As one example, the government of Ontario, citing "loss of business and industries," rather

than challenge NAFTA...suspended local democracy for 2.3 million people and placed the

six cities of Metro Toronto under provincial trusteeship to impose a U.S. style megacity

amalgamation ‘to keep them here.’

Promotional rights to the RCMP were sold to Disney Corporation. Canada even issued a

stamp bearing the Disney name and logo.

Ottawa recently agreed to ‘test burn‘ U.S. high level nuclear waste. The announcement was

made in Washington...

______________________________________________________________________________________________

8. “The Free Trade Area of the Americas and the Threat to Social Programs, Environmental Sustainability and

Social Justice in Canada and the Americas,” Maude Barlow, President, The Council of Canadians, Ottawa.



Overview: Canada - US Relations 23/23

Glowing NAFTA promises for Mexico have proved equally false; its unemployment rate has doubled, its wages cut in half since January 1, 1994.”

Taking his analysis overseas, Orchard noted (same article):

“Norway voted to stay out of the European Union (EU); its economy has since performed at twice the EU rate; its unemployment rate is less than half. There is no talk of downsizing and cutbacks. Stat Oil, government owned (as Petro-Canada was), contributes substantially to the national budget.

Switzerland also stayed out of the EU, seeing it as a threat to its standard of living and independence. Its unemployment rate is less than half of Canada's.

In the 1930's, Japan "invited" the American auto giants to leave. Since then, Japan, with a fraction

of Canada's resources, has built itself into a rival of the U.S. Foreigners cannot take over its key

industries. Its unemployment rate is 3% (and considered high).

In 1960, South Korea's per capita income was $110. Rejecting the free trade model, Korea has

built itself into a major economy with a per capita income over $12,000.

There is a simple remedy for Canada's problem. Article 2204 of NAFTA (FTA Article 2106) states that each country can, at any time, give the others six months notice to withdraw, without penalty, from the Agreement.” [9.]

Continues Orchard on energy:

“...Raw resources are being stripped out of the country as if there were no tomorrow. Canada's

oil and gas are being poured in record volumes across the border for a fraction of their value

(the royalties on petroleum from the Alberta tar sands range from 0-1%, for example) while the

West has only 6-10 years of drillable oil left in the ground and, according to National Energy

Board figures, within 15 years Canada's entire known reserves of natural gas will be extinct at

the current rate of extraction. Yet huge new pipeline proposals are underway, or being planned, which will dramatically increase the over 50% of Canada's natural gas already going south.

(Under the FTA whatever proportion of any good the U.S. is taking before a shortage occurs

it will continue to receive regardless of Canadian needs.) [9.i.]

To the question again: Critical input from the Civil Society in respect of foreign policy issues have been embraced by the federal government; are inward focussed critics part of the domestic Civil Society in respect of domestic policy issues? Or are their respective positions merely contradictory to the

popular will mandate of elected officials?

Democracy is not static; it embraces differences Historically, if opposition is not addressed by those in power, they are often repudiated at the polls.

Is it in Canada‘s interest to listen more carefully to people such as Maude Barlow, David Orchard, and the CCPA?

__________________________________________________________________________________

9. “Through the Valley of the Shadow,” by David Orchard. articles.html

9.i. “Ten Years After,” by David Orchard, ibid.

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