CANADA AND THE UNITED
TRADE, INVESTMENT, INTEGRATION
AND THE FUTURE
2 April 2001
TABLE OF CONTENTS
THE SCOPE OF INTEGRATION
A. Trade and Treaties
1. Profile of a
a. Regional Trade Patterns
B. The FTA Effect
3. Has the FTA
Resulted in Tranquility?
C. FTA and NAFTA Trade
Special Status is in Jeopardy
on the United States
and Labour Concerns
6. Influence on
7. Effect on Sovereignty
FOREIGN DIRECT INVESTMENT
A. Integration and Overview
C. NAFTA Side Agreements
CANADA AND THE UNITED STATES:
TRADE, INVESTMENT, INTEGRATION
AND THE FUTURE
Historically, Canadian policy has wavered
between the desire for closer economic ties with the United States, and the desire to
maintain a safe distance from the worlds most powerful country. Three
elections in 1891, 1911 and 1988 were fought on the issue of free trade with
the U.S., and even in relatively peaceful economic times, there is no shortage of concerns
about perceived threats to Canadian sovereignty from the United States.
While this debate is ongoing, the context
in which it takes place is changing rapidly. Over the past decade, Canadas
economic ties to the United States have deepened markedly, first under the Free Trade
Agreement (FTA), later expanded to include Mexico under the North American Free Trade
Agreement (NAFTA). Elsewhere, economic integration is increasing, both
multilaterally under the World Trade Organization (WTO) and regionally through the
European Union, the Asian Pacific Economic Cooperation (APEC), and the proposed Free Trade
Area of the Americas (FTAA).
Canada and the United States enjoy one of
the closest relationships in the world. Over the years, the United States has been a
key ingredient in ensuring Canadas security and prosperity. Although
disagreements and disputes can be found in any relationship, the Canada-U.S. relationship
is very secure, as evidenced by the worlds longest undefended border, across which
more than $1.5 billion of goods crosses daily.
Because of the importance of the United
States to Canadas well-being, it is important even in tranquil, prosperous times
that Canada pay attention to its relationship with its neighbour to the south.
Managing this relationship is becoming more complex, for a number of reasons.
First, the world-wide trend toward
economic integration is redefining sovereignty and the conditions under which nations can
be independent, interdependent and prosperous. This trend has led some policy
analysts to call for increased integration with the United States.
Second, guaranteeing access to
Canadas most important market (and the wealthiest country in the world), always an
important concern, must be accomplished within the context of a changing United
States. The focal point of U.S. power is on the move. Canada has traditionally
had a special relationship with Washington, founded on the common
understanding of leaders and policy-makers who had the same shared experiences of the
Great Depression and World War II. However, as the locus of U.S. power shifts from
the Northeast to the Southwest, Canada may find it increasingly difficult to be understood
by, and plead its case in, Washington.
Third, a new generation of U.S. leaders,
exemplified by President George W. Bush, formerly Governor of Texas, is coming into
power, for whom Canada is only one of many countries with which the U.S. deals. The
focus of the U.S. will increasingly be on a newly vibrant Mexico under President Vicente
Fourth, traditional concerns about
overdependence on the U.S. market for Canadas economic well-being remain.
Worries have also been expressed about NAFTA provisions, such as the investor-state
investment rules under Chapter 11; critics worry that these rules erode national power to
establish environmental and other regulations. Ironically, the framers of Chapter 11
did not foresee this problem with what was supposed to be a tool to protect Canadian and
U.S. investments in Mexico. There is the ever-present concern over protection of
Canadian culture in the face of the allure of U.S. cultural products, as evidenced by the
dispute over split-run magazines in the late 1990s.
Finally, there are the recurring
elements that affect any close relationship, related to implementation of the FTA and the
NAFTA, and the reality of being a small country located next to the most powerful country
This paper is divided into four parts:
The first part introduces the
Canada-U.S. economic relationship.
The second, and key, part examines the
state of the trade relationship and the experience under the FTA and the NAFTA,
highlighting important issues in a context of increased economic integration.
The third section briefly discusses
foreign direct investment.
The paper ends with some concluding
THE SCOPE OF INTEGRATION
In academic circles, some are calling for
deeper integration with the United States, in the form of a truly common market with
full labour mobility, a common commercial policy, tax harmonization, and/or some form of
common currency. Meanwhile, under the NAFTA, trade relationships to take but
one example are turning this vision of increased economic integration into a
Unlike the European Union, which has moved
toward integration through the creation of supranational institutions with clear goals and
priorities for integration, the Canada-U.S. relationship is relatively less formal and
directed. The defence relationship is managed bilaterally under NORAD and
multilaterally under NATO. Trade is managed under the FTA and the NAFTA, and a
number of other bilateral undertakings deal with additional areas of joint concern. For
example, the International Joint Commission has been addressing transboundary water issues
(concentrating on the Great Lakes) since 1909.
Integration has been most obvious in the
economic sphere, but even here the FTA and the NAFTA do not establish any permanent
overarching supranational institutions, nor do they anticipate how the economic linkage
might deepen.(1) Unlike the
European Union, the FTA and the NAFTA are trade agreements, not customs unions.
There is no common currency or common external tariff, only limited labour mobility, and
each national government continues to make its own policy regarding foreign affairs and
large parts of domestic economic policy. Capital, on the other hand, is mobile, and
our financial markets are tightly linked. Unlike the situation in Europe, greater
economic integration was not pursued as a forerunner to greater political integration.
The increasing calls for greater economic
integration come mainly from the Canadian business community, such as the Business
Council on National Issues (BCNI) and John Roth of Nortel, and Canadian think tanks, most
notably, the C.D. Howe Institute.(2)
In basic terms, increased integration would allow firms full access to, and the ability to
rationalize costs over, a large market.
According to another argument, increased
economic integration is needed because the worlds multilateral trading system is
moving toward a three-region system: North America (or the Americas); the European Union
(EU); and Asia-Pacific, led by Japan. Because Canadas most important trading
partner is the United States, it is vital for Canada to guarantee access to the
This argument is countered by concerns
over what this would mean for political sovereignty, and, in the case of the low dollar,
the realization that a low dollar both attracts industry, which pays less for labour than
in the U.S., and makes Canadian exports competitive abroad.
Even with the low dollar, Canada has been
experiencing a net outflow of foreign direct investment. The role of a falling
dollar is controversial: although it can protect an industry in the short term, the degree
to which it shelters firms from having to undertake productivity reforms can hurt an
industry in the long term.
Nowhere can the rise in economic
integration between Canada and the United States be seen more than in trade. In
many ways, trade sustains the Canadian standard of living. Exports account for
approximately 40% of Canadian Gross Domestic Product and, according to the Department of
Foreign Affairs and International Trade, one in three jobs is linked to trade.
In Canadas case, when one talks
about international trade, what is really being discussed is trade with the United
States. Fully 86% of Canadian exports worth 33% of GDP are shipped to
the United States. The importance of the United States to Canadas well-being
does not end there. Canada enjoys persistent and significant merchandise trade
surpluses with the United States in 1999 reaching $60.5 billion that
help make up persistent trade deficits with the rest of the world (in 1999 totalling $26.6
billion). This helps explain why, from the criteria of national interest the
U.S. is Canadas first, second, and third priority.(3)
Canada-U.S. relations in the economic and
political sphere are currently marked by a sense of tranquility and general
cooperation. Occasional disagreements over such perennial issues as Cuba and
softwood lumber have not seriously dampened the relationship.
Although this relationship is more
important for Canada, the U.S. relies to a significant degree on Canada. At 23% of
U.S. exports, Canada is the United States largest foreign market, higher than the
EU, which has almost ten times Canadas population.
The extent of economic integration between
Canada and the United States is even more striking when one examines intra-firm and
intra-industry trade levels. Under the FTA, intra-firm and intra-industry trade has
risen as companies can now locate production facilities in the most efficient areas across
a larger market. In other words, a large part of trade that shows up in Statistics
Canadas international trade statistics is not carried out by independent firms. One
estimate holds that some 70% of our trade is not conducted at arms length
about 40% is intrafirm while another 30% is the result of licensing and other
United States corporations dominate intra-firm trade.(5)
A high level of integration exists among
firms, which no longer recognize distinct Canadian or American
markets. Intra-industry and intra-firm trade has been particularly evident in the
automotive industry, which accounts for more than 30% of Canadian exports to the U.S. and
about 25% of U.S. exports to Canada: This is mostly an incestuous relationship
between the same companies which are located on the two sides of the border in close
proximity to each other. Furthermore, the same trend can be seen in
other sectors as well, for example, in chemicals and pharmaceuticals, industrial
machinery, food products, and telecommunications equipment.(6)
While the United States with its
vibrant economy, huge population base and proximity to Canada has always attracted
a large proportion of Canadian trade, the signing of the FTA caused an already close
economic relationship to draw even closer.
The Agreement lowered tariffs while
instituting rights and obligations covering investment, services, and dispute
settlement. The phase-out of tariffs under the FTA was completed on 1 January 1998,
although some tariffs remain in place for certain products in Canadas supply-managed
sectors (e.g., dairy and poultry), as well as sugar, dairy, peanuts and cotton in the
Consequently, between 1989 and 1999,
two-way trade between Canada and the United States rose by 167%. Financial-services
trade grew at an annual rate of 21%, while computer and information services rose by
almost 30%.(7) As would be
expected, trade in goods that were liberalized by the FTA grew faster than trade in goods
that were unaffected by the FTA. About one-quarter of the total increase in
Canada-U.S. trade was directly attributed to lower tariffs, an amount that implies a
very large change in imports in response to a given tariff reduction.(8)
1. Profile of a Relationship
Canadian merchandise trade with the U.S.
accounted for 81% of our total trade in 1999, up from 72% in 1988. Fully 86% of
Canadas merchandise exports were sent to the United States in 1999. This
accounted for about 33% of Canadas GDP, up from under 20% in 1989.
Source: Statistics Canadas
Although the change has not been
spectacular, there has been a slight decrease in the proportion of resources exported to
the United States. Overall, automotive products are the most frequently traded
goods, accounting for 32% of Canadas exports and 27% of its imports. This is
followed by machinery and equipment (22% exported, 29% imported), and industrial goods
(17% and 21%). Primary products represent another important category, and clearly
illustrate the difference in Canadas trading profile versus the United States: 26%
of Canadas exports to the U.S. are primary products, against only 8% of its imports.(9)
According to Industry Canada,
non-traditional exports such as clothing and textiles, furniture and
fixtures, plastics, and Other Manufacturing are growing rapidly.
As well, the same report remarks that for several Canadian industries, the U.S.
market is relatively more important than the Canadian market.(10)
Source: Statistics Canada
Source: Statistics Canada
Although significantly smaller than
merchandise trade, Canadas services exports to the United States have almost tripled
since 1989, rising from $11.8 billion in 1989 to $31.1 billion. Services
imports from the United States doubled over the same period, rising from $18.1 billion to
$36.9 billion. Although the FTA affected services less than goods, those services
covered by the Agreement rose more than those not covered by the FTA.(11) The U.S. share of imports and exports has
remained relatively constant over this period, with its export share rising from 57% to
60% and its import share holding steady at 63%. Commercial services account for
about half of these totals.
a. Regional Trade
Trade with the U.S. has surpassed
interprovincial trade in importance. In 1988, interprovincial exports of goods, at
$133 billion, were higher than exports to the United States ($101 billion). By 1998,
exports to the U.S. ($252 billion) easily outstripped total interprovincial exports ($177
billion). Between 1992 and 1998, interprovincial trade rose by an average of 4.7%,
far below the 11.9% growth in international exports.(12)
Table 1: Comparison,
interprovincial versus U.S. exports
billion (current dollars)
Canada, Interprovincial Trade in Canada, 1992-1998; 1984-1996,
Catalogue No. 15-546-XIE; CANSIM database; Canadian International Merchandise Trade,
December 1998, Catalogue No. 65-001-XIB. U.S. numbers are current prices, unadjusted;
Canada is the major trading partner of 37
of the 50 U.S. states. According to Industry Canada, Canadian trade accounts for
over 3% of most of the northern U.S. states Gross State Product. These are
Canadas most intensive partners (accounting for 63.4% of Canadian exports to the
U.S. in 1998, down from 70.1% in 1989), although the quantity of exports being diverted to
the U.S. Midwest and South, especially California and Texas, is increasing.(13)
The importance of trade among regions
(states and provinces) has increased. In recent years, trade between the U.S.
states bordering Canada and their Canadian counterparts has grown substantially faster
than national bilateral trade.(14)
This is not surprising given the reduced impediments to trade under the FTA and the NAFTA
and the closeness of Canadian urban centres to the United States. For example,
Southern Ontario, from which most of Canadas trade originates, is within a
days drive of over 100 million Americans.
Source: Industry Canada, Trade Data
Ontario, at almost 60%, accounts for the
lions share of trade with the United States. It is therefore no surprise
that it is by far the most dependent on U.S. trade. Exports to the U.S. accounted
for 40% of its GDP in 1998, compared with 20% in 1989. Quebec and Alberta, whose
U.S. exports account for a quarter of their GDP, follow Ontario. All provinces
posted huge advances in U.S. exports over the 1990-1999 period.
Provincial Share of Exports to
Source: Industry Canada, Trade Data
Table 2: Growth in U.S.
merchandise trade, by province and territory
million (current dollars)
|Prince Edward Island
|Total U.S. trade
Canada, Canadas Growing Economic Relations with the United States, Part 1 What are the Key
Dimensions? 10 September 1999.
The FTA and, to a lesser extent, the
NAFTA,(15) the General Agreement on
Tariffs and Trade (GATT), and the agreements handled by the World Trade Organization
(WTO), have had a strong impact on trade levels and productivity. This effect can be
thought of as having two major components.
First, using the GATT as a jumping-off
point, the FTA reduced tariff and non-tariff barriers to trade in all goods and most
services, as well as many investment transactions and most business travel. The most
extensive obligations covered trade in goods and included obligations regarding tariffs,
rules of origin, quotas, customs procedures, safeguards, unfair trade remedies, government
procurement, national treatment, technical barriers, and exceptions.(16)
Studies have found that these lowered
tariff barriers have generally resulted in increased trade: Other than in
automobiles and parts and petroleum, trade between the two countries has grown more
quickly in those sectors liberalized by the Canada-US FTA than in those not
However, it is difficult to isolate the
impact of an individual trade deal, such as the NAFTA, on a countrys trade and
overall economic performance.(18)
While there is no doubt that the NAFTA has had its beneficial impacts, one can make a very
plausible argument that other factors (e.g., the robust nature of the U.S. economy
compared to our own over the 1993-1998 period, the Canadian-U.S. exchange rate, etc.) have
been equally if not more influential in causing Canadas improved trade and economic
performance. The recent tremendous surge in economic activity would more than likely
have occurred, NAFTA or no NAFTA.
Second, trade has benefited from increased
stability that has resulted from the significant bilateral regime, particularly in
the realm of trade and investment, with its own principles, norms, and rules, as well as
some institutions, that have been put in place to deal with and manage this
increased trade.(19) These have
lowered transaction costs and reduced uncertainty.
Canada-U.S. trade has in particular
benefited from the growth in rules-based regimes designed to strengthen free trade among
countries, such as the FTA, the NAFTA and the WTO. In particular, the FTAs
(and the NAFTAs) dispute-settlement mechanism has greatly strengthened the
rule of law in relations between Canada and the United States.
While there may be
problems to resolve the day-to-day irritants of the rapidly growing trade and investment
flows, Canada has benefited from a more principled approach to resolving conflict.(20) Other trade disputes are
settled at the WTO. This is not to say that there have been no trade irritants
softwood lumber and supply management of the agricultural sector continue to be
sore spots but in a trade relationship as large as that of Canada and the U.S.,
very few have been so difficult as to require formal dispute settlement.
3. Has the FTA
Resulted in Tranquility?
The most common word used to describe
Canada-U.S. trade relations (and the rest of the relationship) is
tranquil. This is partly due to the above-described effects of the FTA.
However, the role of the unprecedented decade-long U.S. economic expansion of the 1990s
cannot be ignored. In good times, trade irritants are more easily ignored than
during recessions. Just as Canada vacillates between greater and more restrained
integration with the United States, so the U.S. wavers between internationalism and
protectionism/isolationism. Protectionism, and with it trade irritants, always comes
to the fore during an economic downturn.
Guaranteeing access to the U.S. market was
the raison dêtre underlying the FTA. The past decade has been characterized
by good economic times which have dampened traditional concerns over trade disputes.
It will be instructive to see whether this tranquil relationship persists when
the economic climate is not so favourable.
A major selling point of the Agreement was
that the increased competition of the larger U.S. market would lead to productivity
improvements; whether this has in fact happened or is starting to happen is unclear.
Among small businesses, one study notes while one might have expected small Canadian
firms to begin growing by closing the productivity gap between themselves and large
Canadian and foreign firms, this has not been happening. One possible
explanation for this is that these firms still face barriers to access in the United
States. This is backed up by findings that the manufacturing industry has posted
productivity gains, especially in industries where tariff barriers had previously been
high.(21) Another economist,
Daniel Trefler, in hearings on productivity held by the House of Commons Standing
Committee on Finance, reported that the FTA did enhance the productivity of those sectors
that saw their tariff protection reduced. According to the resulting report,
He believes that the FTA caused those sectors to see an increase in productivity
growth of one-half of one percent per year. This he thinks is a significant
Regardless, Canada has not experienced a
convergence in productivity rates with the United States, whose productivity growth has
outstripped Canadas, although it seems that productivity increases were most
significant in those industries most affected by the FTA.
Initial hopes for the FTA were high:
Prior to the FTA, studies had concluded that Canadians would see a rise in their
standard of living as a result of tariff elimination between Canada and the United
despite the promises of increased prosperity that would stem from a free-trade agreement,
Canadian income and employment levels have not kept pace with U.S. levels: Living
standards, in terms of real personal disposable income per person, have declined by 5%
over the past decade, whereas Americas have risen by 12%; and Canadas share of
the worlds foreign direct investment has fallen from 6.5% to 4%.(24) As would be expected by an
economy undergoing a period of restructuring, Canada lost over 15% of its manufacturing
employment, following the signing of the FTA (1989-1992).
The role of free trade in affecting income
and employment is unclear. Many economists attribute at least part of the decline in
wages and rise in unemployment to the recession of the early 1990s. According to
Nobel laureate economist Robert Mundell (and echoed by other economists), the Bank of
Canadas tight, zero-inflation monetary policy of the late 1980s and early 1990s kept
interest rates high, depressing growth and exacerbating unemployment: By and large,
the Canadian public has never understood this episode in its history, and the newly-formed
Free Trade Area unfairly got much of the blame.(25)
Economist Daniel Schwanen concluded that
although the FTA cannot be blamed for a loss of jobs, it has delivered fewer jobs than
promised. Other factors, such as the implementation of new technology and the
domestic economic situation, have also played an important role in job creation.(26) As economist John McCallum
summarizes the research,
Although this debate seems unresolved, it
is very likely that there were some transitional job losses as tariffs fell, in some cases
from more than 20% to zero in the short space of a decade. On the other hand, jobs
were undoubtedly created by the FTA-induced export expansion, although credit for the
export boom has to be shared with our depreciating dollar and other forces. Overall,
I dont think that we know whether the FTA led to a rise or a fall in total jobs.(27)
C. FTA and NAFTA Trade
Looking toward the future, there are many
issues that any discussion of further economic integration will have to take into
account. These include NAFTA implementation problems, and geopolitical concerns such
as the ascendance of Mexico and the potential loss of the Canada-U.S. special
relationship. Some of these are discussed below.
The FTA and the NAFTA also promised
increased productivity, lower prices and higher incomes. The extent to which they were
able to deliver on these promises should also be considered when examining further
Special Status is in Jeopardy
Despite attempts to lock up access to the
U.S. market through the FTA, Canada remains vulnerable to its much-larger trading
partner. This, in large part, is simply the reality of being a small country located
next to the largest economic superpower in history. To take but one example, half of
Ontarios GDP is now dependent on exports to the United States. Despite the
FTA, Canada would be hurt by a more protectionist United States, which would likely
exacerbate trade disputes between the two countries.
Traditionally, Canada has had a special
relationship with the United States. This was shaped by several factors: the common
experiences of the Great Depression and World War II; the fact that the locus of
power in the U.S. was adjacent to Canada in the Northeast; and the mutual reliance on each
other during the Cold War, through NATO and especially NORAD. In short, despite the
stereotypical ignorance of Canada that characterizes Canadians perceptions of
Americans, Americans (at least Americans in power) knew Canada, and did not think of it as
simply another country.
However, as the Great Depression and the
WWII generation fades from the scene, and the Cold War into history, this special
relationship is also threatened. Furthermore, the centre of U.S. politics is
shifting from the northeast to the South and the southwest. With less of a shared
experience and a reduced (if not eliminated) need to depend on Canada to defend U.S. soil
from a Russian missile attack over the North Pole, Washington increasingly tends to treat
Canada as a nation just like the others.
For example, only some last-minute
lobbying exempted Canadas defence industry from being subjected to the U.S.
International Traffic in Arms Regulations (ITAR) rules, which would have limited Canadian
companies access to U.S. military procurement contracts, worth $5 billion
annually to Canada. Even now, the ITAR exemption has yet to provide concrete
results, and may prove to be of short duration.(28)
Canada and the United States share the
worlds largest undefended border. Illegal immigration continues to be at the
top of the United States domestic agenda. Although illegal immigration is a
relatively larger problem for the U.S.-Mexico border the U.S. Immigration and
Naturalization Services has 8,000 agents along the 2,000-mile U.S.-Mexico border, compared
with only 300 agents along the 8,895 km (5,000 mile) Canada-U.S. border(29) high levels of cross-border activity,
heightened security concerns, and the desire to treat Mexico and Canada equally (the loss
of the special relationship) is making border crossing an increasingly
A 1996 U.S. border regulation intended to
reduce illegal immigration from Mexico initially contained no exemption for the Canadian
border, potentially strangling trade and limiting access. To
politicians anxious to close the border against Mexicans, there is a pleasing symmetry in
equal treatment for Canadians.(30)
Canada has responded to these
concerns. The February 2000 budget allocated increased funds for border
surveillance; further, Bill C-16 was designed to tighten controls on illegal immigration.
It died on the Order Paper when the November 2000 federal election was
called. Both governments continue to collaborate on border issues, for instance,
through the Canada-United States Partnership (CUSP), a binational forum of customs,
immigration and law-enforcement officials.
This last example demonstrates how, in
trade, security and generally, Canada is increasingly seen as just another nation.
It also and perhaps more importantly signals the increased importance of
Mexico in U.S. eyes. The signing of the NAFTA has accelerated this tendency to focus
on the South and on the U.S. relationship with Mexico.
The numbers suggest a strong reason for
this change in emphasis. Mexicos rapidly growing economy is home to more than
100 million people over three times the size of Canadas population
and Spanish is rapidly becoming the U.S.s unofficial second language. Beyond
the numbers, Mexicos election of businessman Vicente Fox as president, breaking
seven decades of autocratic rule, has the potential to improve the Mexican democratic and
business environment while capturing the U.S. imagination. Furthermore, the
election of Texas Governor George W. Bush as U.S. President has the potential to further
concentrate American sights south.
Under the NAFTA, Mexico has gained an
increasing share of North American trade, rising from 7% in 1990 to just under 13% in
1999. For Mexico as for Canada, the United States has become the overwhelmingly
important market the destination for almost 90% of its exports.(31) Mexicos economic renaissance will
provide greater competition for Canadian companies exporting to the United States.
As the Canada-U.S. special relationship
continues to erode, it will become more difficult to get special exemptions from Congress
and the U.S. administration and to keep previously minor problems from becoming major
ones. As Christopher Sands puts it, Without the Canada-friendly bias in U.S.
Canada policy provided by the former societal consensus, integration will continue to
deepen and Canadian interests will increasingly become subject to the direct and indirect
consequences of U.S. policy-making at various levels.(32)
The possibility of increased
misunderstandings heralds the need for Canada to provide high-quality information to all
parts of the U.S. political system including Congress and the individual states
to understand Canada and Canadian-U.S. interests, for example, explaining why the
Canada-U.S. border is not the same as the U.S.-Mexico border.
Environmentalists are concerned about the
use of NAFTAs Chapter 11 to rewrite domestic environmental law. Indeed, the
investment clause under Chapter 11 of the NAFTA has become one of the most controversial
parts of the deal. It was originally drawn up to protect corporations and investors
from arbitrary regulation and back-door trade protectionism, particularly as they would
affect their investments in Mexico. The Chapter is designed to give firms the right
to sue governments if decisions are made that unfairly damage the firms business
The provisions mean that foreign investors
cannot be made to comply with more stringent rules than apply to domestic companies; they
are also entitled to compensation if their property is expropriated. However, what
started out as a defence mechanism for investors against foreign governments seems to have
become an aggressive tool in the hands of certain corporations to challenge the right of
government to introduce regulations.
Critics charge that Chapter 11 undermines
Canadas capacity to protect health and the environment. In the 1998 case of
Ethyl Corporation versus Canada, which centred on restrictions on the interprovincial and
international trade of MMT, a gasoline additive suspected of being linked to nervous
disorders (and which automakers contend reduces vehicle performance), the Canadian
measures fell well short of the standards set in the agreement.(33) The case was settled out of court. A
U.S.-Mexican case regarding environmental regulations was thrown out as frivolous, setting
the bar high in dealing with alleged harm caused by governments regulating in the normal
course of events.
Ethyl Corporations success was
followed quickly by other suits. Two days after the announcement of the out-of-court
settlement between Ethyl Corporation and the Government of Canada, Ohio-based S.D. Myers
Inc. gave notice that it was launching a challenge under Chapter 11 of the NAFTA
because of the federal ban on the export of PCBs in 1995 and 1996. In November 2000,
the international tribunal appointed to hear the Chapter 11 case found in favour of
Three other corporations are also using
Chapter 11 of the NAFTA to sue the Canadian government for damages.
Sun Belt Water Inc. of California is
claiming $220 million in damages as a result of a ban on water exports from British
Pope and Talbot Inc., an Oregon-based
forest products company, is claiming $US 30 million in damages under the NAFTA stemming
from the softwood lumber agreement between Canada and the United States.
United Parcel Services has filed a
minimum $160 million claim for damages caused by Canadian government support of Canada
Chapter 11 does not prevent a government
from passing regulations that are genuinely designed to protect health and the
environment, although it also allows tribunals to consider only a very narrow spectrum of
concerns in its making its decisions. Even so, the federal government decided to
attempt to delineate more clearly the scope of the investor-state provisions. In
1998, Canada asked the U.S. and Mexico to re-examine Chapter 11. Specifically,
Canada sought an interpretative note to the investor-state clause, which would help narrow
the interpretation of what cases could be brought under this Chapter, thereby ensuring
that governments ability to legislate and regulate in the public interest is
The three NAFTA governments continue to be
stalled over a possible reinterpretation of the expropriation clause, with Canadas
efforts coming up against Mexican resistance. It is ironic that, although the
investor protections were introduced largely to satisfy concerns about doing business in
Mexico, that country now appears to be the stumbling block to refining investor
rights. Mexico is reluctant to change the provisions because it does not want to
alienate potential foreign investors for whom the strict Chapter 11 provisions act as a
signal that Mexico will treat investors fairly and favourably.
In a related development, the Canadian and
U.S. governments seem to be trying to inject environmental concerns into the Chapter 11
process. Both governments are supporting the bid by Winnipeg-based International
Institute for Sustainable Development (IISD) for intervenor status at a hearing into
Vancouver-based Methanex Corp.s $1-billion suit against the U.S. government over
Californias plan to ban by 2002 its controversial methanol-based gas additive MTBE.(34) Mexico opposes IISDs
3. Overdependence on
the United States
Regardless of how one breaks down the
numbers, Canada depends to a large degree on the U.S. economy. This dependence
revisits traditional Canadian concerns about overdependence on the U.S. market and its
effect on the economy and Canadian unity. On the first point, although Canada
benefits from a strong U.S. economy, a U.S. recession would hit Canada particularly hard.
Firms are increasingly seeing not two
separate national markets, but one market, regardless of the border. This point of
view is supported by: Ontarios high level of integration with the U.S. market;
the overshadowing of interprovincial trade by Canada-U.S. trade; and the increasing degree
of intra-firm and intra-industry trade.
Canada-U.S. trade exposes the reality that
Canada is not a global trader: Canadas experience with globalization is largely
limited to its experience with economic integration with the United States.
This is not to suggest that Canada should
ignore the U.S. market while attempting trade diversification, or push for trade
diversification at the expense of the Canada-U.S. relationship. It only makes sense
to take advantage of our proximity to the large U.S. market. Furthermore, the
alternative is unclear. In hearings in Spring 2000, the House of Commons
Sub-Committee on Trade, Trade Disputes and Investment heard that many Canadian companies
use experience gained by dealing with the (relatively) friendly and familiar U.S. market
to expand overseas to the European Union (EU), Japan and other markets.
To the extent that Canadian companies
concentrate on the U.S. market, they may be missing out on faster-growing emerging
markets, as well as already mature markets such as the EU and Japan, which could, not
inconceivably, rise to challenge the economic supremacy of the United States.
However, the size of Canadas relationship with the United States makes it very
unlikely that trade diversification will substantially challenge Canadas U.S. trade
in the foreseeable future.
The dispute-settling mechanisms under the
FTA and later the NAFTA have helped reduce some of the tensions around trade disputes,
although it has not eliminated them disputes are a fact of life in any trading
relationship. Canada is continuing to push for greater cooperation in the use of
trade remedy measures (e.g., anti-dumping, countervail) in North America. Under the
FTA and the NAFTA, binational panels issue binding rulings on whether anti-dumping or
countervail penalties have been correctly applied. However, the NAFTA did not
satisfactorily address these issues (including enforcement, delays, a lack of ability to
set precedents, and the U.S. tendency to ignore international trade rules when they
contradict national interests(35)),
and a number of antidumping and countervail cases have been launched.
While reducing some of the tensions, in
one sense, the FTA and the NAFTA have failed to depoliticize and regularize disputes:
a crucial problem is that disputes may still be addressed through traditional
diplomatic channels, the United States using whatever strategy best suits its interests,
with a disregard for NAFTA provisions.(36) These actions do not seem consistent with the
growth of free trade, and there is room for progress. The real question to
consider, however, is whether or not the U.S. will agree to proposals for change.
and Labour Concerns
As a trade agreement, the FTA deals with
trade issues exclusively, and not with social, labour and environmental
considerations. Moreover, much of the agreements text establishes rights for
commercial actors, but for no one else. This is in contrast to the setup of the
European Union, which as a customs union provides much greater political integration and
deals with these issues. For instance, the EU has a regional development fund
both to offset negative effects of the common market on specific regions and to allow the
relatively less-developed regions to compete on a more even plane, and EU-wide laws
which are binding unless countries opt out.(37)
The FTA and the NAFTA are trade agreements
and not customs unions. Consequently, the areas mentioned above are mostly left to the
respective nations. However, the NAFTA does have an element of commonality in
labour and environmental regulation. Negotiated and implemented in parallel to the NAFTA,
the North American
Agreements on Labour and Environmental Cooperation were designed to facilitate greater
cooperation between the partner countries in those areas and to promote the effective
enforcement of each countrys laws and regulations. The Environmental and Labour
Commissions charged with implementing these agreements have very limited powers to enforce
The jury is still out on the effectiveness
of both commissions. Although they are designed to address issues often ignored
when dealing with economic integration, they are often slow and ineffective from an
enforcement point of view. Both are, without question, subordinate to the main trade
agreement, whose principles are binding.
Canada and the United States also have an
environmental relationship outside the NAFTA, which usually allows them to settle disputes
eventually. In a review of Canada-U.S. environmental relations, Alan M. Schwartz
concludes that the two countries have worked well together to address common environmental
issues. He cites the example of the International Joint Commission, in operation
since 1909, which is responsible for common watersheds and which has been remarkably
effective. Other issues that have been addressed in other fora, he adds, include
acid rain and management of the pacific salmon stocks.(38)
There also seem to be further moves in the
U.S. toward incorporating labour and environmental standards into trade agreements.
In December, then U.S. President Bill Clinton announced the launch of free-trade
negotiations with Chile. The proposed accord includes controversial provisions
regarding workers rights and environmental protection. This came on the
heels of a U.S.-Jordan free trade agreement that for the first time incorporated
labour and environmental standards in the text of a trade agreement.(39) However, it remains to be
seen how a change in U.S. administration will affect this stance, and what it means for
the NAFTA and WTO.
Labour is affected by Canada-U.S. economic
integration in the same way as it is affected by the internationalization of production in
general. Although capital and technology are internationally mobile, labour is not
(though it is in the EU).(40)
Protecting workers from dislocation that occurs as the result of trade liberalization can
sometimes conflict with trade promotion. Two possible solutions to this involve:
international agreements on the
treatment of labour (foreshadowed perhaps in the NAFTA side agreement); and/or
using government programs to encourage
firms to develop support structures that are not tied to any specific jobs or industries.
6. Influence on
At its heart, debate over labour and the
environment and trade is a debate about the linkages between trade and social policy, and
between economic and political integration. One side argues that greater economic
integration will lead to the dissolution of Canada; the other side claims there is little
connection between the economic and political and cultural spheres.
The extent to which domestic policies are
affected by economic integration remains an open question. Convergence seems more
likely in some areas than others. For instance, taxes affecting highly mobile
factors of production, such as capital and well-educated labour, will be under greater
pressure to converge. According to Gary C. Hufbauer and Jeffrey J. Schott
of the Washington, D.C.-based Institute of International Economics in a paper written for
Industry Canada, integration will also entail greater labour flexibility: Unions
that limit workforce flexibility (in terms of job assignments, layoffs and seniority
rules) will be a major negative force in attracting firms to an area.(41)
The evidence suggests, they argue, that
countries can form independent tax policy supporting a socially activist government. They
cite the example of the Benelux countries and Germany, both of which have widely divergent
tax structures and a high degree of economic integration: In short, the smaller
partners were able to carry on with a more extensive social agenda than the largest
Indeed, providing quality social services
good public schools, an educated workforce, a clean environment, safe streets and a
vibrant culture can help attract both firms and workers to an area or a country.
Still, as the two economies become more
integrated, there is likely to be an increase in disputes over differing regulatory
regimes. Such conflict could centre on local content rules to promote cultural
identity or safety regulations for consumer products.(43) Such a conflict has already been foreshadowed in
U.S. challenges to Canadas supply management of agriculture, and banning of
As Julie A. Soloway, Research Fellow with
the University of Torontos Centre for International Studies, remarks, the increasing
influence of the international trade and investment system which is not directly
accountable to the domestic population can challenge the legitimacy of domestic law
if it is seen to render moot domestic law. Failure to manage this interface is
dangerous because of the risk that the domestic consensus in favour of open markets
will ultimately erode to the point where a generalized resurgence of protectionism becomes
a serious possibility? (44)
This is a problem for all trade agreements, and probably requires increased transparency
and public input into such agreements.
7. Effect on Sovereignty
Movement in any way towards further
integration with the United States has always been greeted with concerns about its effect
on sovereignty. When Sir Wilfrid Lauriers Liberals proposed a free trade
agreement with the United States in the 1891 election, the Conservatives suggested such an
agreement was simply a prelude to annexation by the United States (the Conservatives
won the election). Today, the same argument holds that increased north-south
linkages are weakening the east-west axis upon which the country was founded.
It is unclear what the eclipsing of
interprovincial trade by Canada-U.S. trade and the integration of Ontario into the U.S.
market will mean for sovereignty. The fear is that this will result in a series of
autonomous regions especially Ontario closer to the U.S. than to
each other. Queens University economist Thomas Courchene believes we are
witnessing the rise of region-states, where regions trade mostly within their
own area. In Ontario, it is evidenced by the high degree of cross-border trade and
integration. It therefore reacts to the economic and fiscal policies of its
neighbouring states. Because of this increase of trade with the rest of the world at
the expense of trade with Canada, it is increasingly appropriate to view Canada not
as a single east-west economy but rather as a series of north-south (cross-border)
regional economies. This has dramatic implications, one of which is how to mount our
east-west transfer system over an increasingly north-south regional economy.(45)
There is some evidence to suggest that
statistics are exaggerating the U.S. pull and its consequences for sovereignty. To
the extent that north-south trade has improved Canadian well-being, increased prosperity
should make Canada stronger. Furthermore, east-west trade remains significant.
For small businesses, according to the Canadian Chamber of Commerce, interprovincial
trade (and not the sometimes more geographically intuitive north-south pattern) remains a
particularly important expansion platform.(46)
Although the introduction of the FTA and
the NAFTA has led to increased trade with the United States, interprovincial trade remains
strong, when one considers the size and proximity of the U.S. market. As one study
put it, despite the exceptionally strong pull of geography, there is still a
very powerful bias in economic transactions in favour of trading with fellow Canadians.
Because of the exceptionally strong pull of geography, one-third of gross
domestic product is tied up with trade with Americans.(47)
The treatment of culture is also bound to
continue as a perennial trade concern, stemming from fundamental differences in
Unique among countries, the United States
treats culture like a commodity and is therefore concerned about trade barriers, while
Canadas policy is one concerned with cultural identity. In the United States,
culture is the equivalent (basically) to entertainment, and is a good that is properly
allocated by the market. In Canada (as in many European nations), culture is an
expression of national identity and as such is to be promoted and protected as a public
responsibility. To the degree to which culture for Americans is about the
profit-making entertainment industry and for Canadians about the politics of national
identity, there should be little doubt about the potential for mutual misunderstanding
concerning any exempt status for cultural industries in free-trade arguments.(48)
Although culture is exempt from the NAFTA,
it is not under the WTO. Using the WTO, the United States won a decision against
Canadas banning of split-run magazines; the WTO ruled that magazines
were a good, not a service.
However, the culture wars are
not all one-sided. Although U.S. cultural products continue to dominate Canadian
film and television screens, bookstores, airwaves, music shops and magazine stands, Canada
has witnessed a small yet growing volume of cultural goods and services to U.S.
cultural protection is not always an unambiguous matter of reserving a space for Canadians
to tell their stories: improved competition from whatever source can
increase the number of outlets that Canadian artists can use to reach an audience.
Other parts of the treaty have also caused
problems. The amount of diversification caused by the FTA remains a point of
disagreement. Critics of the FTA point out that over 20% of the increase in trade is
concentrated in automobiles, and that the Canadian economy has failed to diversify since
the implementation of the FTA.(50)
Although dependence on natural resource exports has diminished somewhat, there has been
substantial relative growth in end-product exports, mostly in the auto
industry, with some improvements occurring in a variety of technology-intensive sectors.(51)
Because the NAFTA is a trade and not a
customs agreement, it does not provide for the free movement of labour across borders,
although it does allow certain classes of workers such as technology workers and
businesspeople to work more easily in the other country. Although it might be
desirable to open the borders among the NAFTA partners to allow labour to cross as easily
as capital and goods, any such move is likely to be met with strong resistance from the
United States, where officials are concerned about terrorism, the movement of illegal
drugs, and of the huge influx of Mexican workers that would result from such a move.
FOREIGN DIRECT INVESTMENT
In addition to trade, the FTA (and the
NAFTA) greatly liberalized investment flows between Canada and the United States. It
provides national treatment of U.S. investors while excluding investment from certain
sensitive sectors, retaining government investment review mechanisms, and prohibiting
certain performance requirements attached to investments.(52)
The FTA and the NAFTA have seen an
increase in foreign direct investment (FDI) among NAFTA partners. The U.S. continues
to be the largest foreign investor in Canada, with the majority of this investment
taking the form of acquisitions rather than the establishment of new
businesses and tilting toward technology-intensive industries.(53) At the end of 1999, the total stock of U.S.
FDI in Canada was $173 billion, up from $80 billion in 1988. The manufacturing
industry attracted about half of the total, followed by finance (other than banking),
insurance and real estate (21%), and petroleum (12%). Canada is also the
second-largest recipient of total U.S. FDI (11%), behind only the UK.
Canadas CANSIM database and Catalogue 67-002-XIB, Canadas International
Canadas CANSIM database and Catalogue 67-002-XIB, Canadas International
Along with this increase in FDI in Canada,
Canadian investment abroad, traditionally small, has risen to near-parity with FDI in
Canada. However, the proportion of Canadian FDI destined for non-U.S. countries has
been rising, as the FTA makes it more feasible to service the U.S. market from home.
Despite these changes, the U.S. share of
foreign direct investment in Canada has not risen to match trade gains, standing at 72% in
1999, down from 75% in 1985, and far below the high of 82% in 1966. One likely
explanation for this is that firms, no longer facing trade barriers, are investing at the
most efficient sites. The increased integration wrought by the FTA and the NAFTA has
subtly changed the interaction between trade and investment. When faced with tariff
barriers, firms undertake FDI to get around these barriers and serve the domestic
In a situation where companies can locate
wherever they want, this consideration disappears. As a result,
much of Canadas exports are driven
by US direct investment in Canada, and increasingly by Canadas direct investment in
the United States. This is foreign investment by official definition,
but in reality, once Canadas branch-plant mentality was discarded under the FTA,
investment today is now increasingly predicated on the existence of a large North American
Canada is the fifth-largest source of
foreign direct investment in the U.S. market. The amount Canada invests in the U.S.
at $134 billion in 1999, it is the destination for 52% of Canadian FDI is
far out of proportion to what the size of our economy would dictate. Some 35% of Canadian
direct investment in the U.S. goes to manufacturing, followed by insurance (11%), other
finance (10%), and banking (3%).
These increases are taking place against a
worrying background. Canadas share of total world FDI has dropped
considerably over the past decade. As a result of the FTA, Canada was supposed to be
able to sell itself as an attractive place for countries to base themselves in order to
access the world market. Canadas declining share of world FDI suggests this is
not happening. Canada may not be attractive enough to foreign investors because of
the following three reasons:
the domestic atmosphere;
access barriers to the U.S. market; or
in times of uncertainty, the U.S. is
seen as the only safe economy in the world.
John McCallum, in his evaluation of ten
years with the FTA, tentatively concludes that FDI has not declined as a result of the
FTA, although there is cause for worry. Theoretically, he says,
the impact could go either way. On
the one hand, the dismantlement of the tariff wall set up by John A. Macdonald in 1879
allows American and other firms to supply the Canadian market from outside Canada.
The lowering of these barriers makes the argument for attracting FDI less compelling.
On the other hand, the FTA allows
Canadian-based firms to serve the entire North American market, and, given our lower costs
in every industry [according to KPMG (1999)], this should favour more FDI into
the inward stock of FDI has both increased relative to GDP and declined less
abruptly relative to the world stock than was the case during the 1980s.
[His main concern] is that, as the
Canada-U.S. border comes down in economic terms, our deficiencies in terms of tax regime
and non-appearance on the radar screens of multinational companies could exact a mounting
toll. Canadas desire to become a favoured location for both domestic and
foreign investors to serve the North American market could also be thwarted by the
continuation of Canada-U.S. border impediments.(55)
This paper has outlined the general shape
of the Canada-U.S. economic relationship, while speculating on how it will probably
develop. Although economic integration between the two countries is likely to
continue, it will do so in a context of regional and international economic integration.
On the regional level, economic
integration will probably continue by an expansion of the NAFTA to include Chile (with
whom Canada already has a free-trade agreement and the U.S. has begun negotiating one) and
other countries, and the proposed Free Trade Area of the Americas, which would include
every country in the Americas except Cuba. The NAFTA countries, especially the
United States, would dominate any such area, as they account for 85% of all hemispheric
output.(56) On the
international front, the WTO will continue to have an impact on the Canada-U.S. economic
relationship, as evidenced by its decision restricting Canadas ban on split-run
Managing the Canada-U.S. relationship
involves working on all these levels. At the moment, the relationship is tranquil,
the consequence of close relations and good economic times. However, past
experience (gained from living in the shadow of a giant), and the changing context that is
eroding the special relationship, argue for continued vigilance. As for
the shape of future economic integration, one thing that most students of Canada-U.S.
relations can agree on is that even though a regime (or level of integration) may be
appropriate for any given time, this does not preclude the possibility that it should be
changed when conditions change.
A. Integration and
The American Review of Canadian
Studies, Summer 2000. Devoted to the state of Canada-U.S. relations.
Hoberg, George. Canada and North American
integration. Canadian Public Policy, August 2000, pp. S35-S50.
Hufbauer, Gary C. and Jeffrey J. Schott. North American Economic Integration:
25 Years Backward and Forward. Ottawa: Industry Canada, November 1998.
Industry Canada. Canadas Growing
Economic Relations with the United States. Part 1 What are the
Key Dimensions?" 10 September 1999; Part 2 Maximizing our
Opportunities. 8 December 1999.
Molot, Maureen Appel and Fen Osler Hampson
(Ed.). Vanishing Borders: Canada Among Nations 2000. Toronto:
Oxford University Press, 2000.
Britton, John N.H. Is the Impact of
the North American Trade Agreements Zero? Canadian Journal of Regional Sciences. Summer
Canada-U.S. Relations (Canadian Government
website with general information).
Foreign Affairs and International Trade.
Hufbauer, Gary C. NAFTA In A Skeptical Age: The Way
Forward. Institute for International Economics. July 2000.
Hunter, Todd. The
Impact of FTA/NAFTA on Canada: What Does the Recent Literature Say? Department
of Foreign Affairs and International Trade, December 1998. Reference Document No. 6.
McCallum, John. Two Cheers for the FTA. Free
Trade @ 10: A Royal Bank Impact Study. Toronto: Royal Bank, 1999.
North American Free Trade Agreement
(NAFTA). Government website devoted to the NAFTA.
C. NAFTA Side Agreements
The North American Agreements on
Labour and Environmental Cooperation are available on the NAFTA website, as are links
to the Environmental and Labour
Carr, Barry. Globalization from
below: Labour internationalism under NAFTA. International Social Science
Journal 51:1, March 1999, pp. 49-60.
A greener, or browner, Mexico?
The Economist, 7 August 1999, pp. 26-27.
Fen Osler Hampson and Maureen Appel Molot, Does the 49th Parallel Matter Any
More? Vanishing Borders: Canada Among Nations 2000, ed. Maureen Appel Molot
and Fen Osler Hampson, Toronto: Oxford University Press, 2000, p. 3.
Andrew F. Cooper, Waiting at the Perimeter: Making US Policy in Canada, Vanishing
Borders, pp. 39-40.
Cooper, p. 27.
Michael Hart, Whats Next: Canada, the Global Economy and the New Trade Policy,
Ottawa: Centre for Trade Policy and Law, 1994, p. 20.
John N.H. Britton, Is the Impact of the North American Trade Agreements Zero? Canadian
Journal of Regional Sciences, Summer 1998, p. 189.
Hampson and Molot, p. 8.
Gary C. Hufbauer and Jeffrey J. Schott, North American Economic Integration:
25 Years Backward and Forward, Industry Canada, November 1998, p. v.
John McCallum, Two Cheers for
the FTA, Royal Bank, 1999.
Hampson and Molot, p. 4, and Statistics Canada data.
Industry Canada, Canadas Growing Economic Relations with the United States, Part 1 What Are the Key
Dimensions?, 10 September 1999, p. 25.
Marcel Côté, Is Free Trade Good for Canada? Ten Years Later the Balance is
Positive, Cité Libre 26, April-May 1998, p. 51.
Calculated from: Interprovincial and International Trade in Canada, Catalogue no.
15-546-XIE, 1992-1998, 1984-1996; Canadian International Merchandise Trade,
Catalogue no. 65-001-XIB, December 1999.
Industry Canada, pp. N-1-3.
Hufbauer and Schott, p. iii.
The NAFTA, which came into force in 1994, has had a relatively less significant effect on
Canada, because it built on the already implemented FTA.
Hart, The Role of Dispute Settlement in Managing Canada-US Trade and Investment
Relations, Vanishing Borders, p. 99.
Hampson and Molot, Does the 49th Parallel Matter Any More? p. 6.
See Canada, Foreign Affairs and International Trade Canada, The NAFTA at Five Years:
A Partnership at Work, April 1999, p. 7. A similar conclusion was
reached in the U.S. Administrations July 1997 report on the NAFTA and its effects,
which noted that it was challenging to isolate NAFTAs effects on the US
Hampson and Molot, p. 4.
Hart, The Role of Dispute Settlement in Managing Canada-US Trade and Investment
Relations, p. 95.
Daniel Schwanen, Catching Up is Hard to Do: Thinking about the Canada-US
Productivity Gap, Vanishing Borders, pp. 134, 137.
House of Commons Standing Committee on Finance, Productivity
With a Purpose: Improving the Standard of Living of Canadians, 1999.
Schwanen, p. 137.
McCallum, quoted in A New Realism, The Economist, Survey of Canada,
Internet edition, 22 July 1999.
Robert Mundell, Canadas Dollar: To Fix or Not, The Nobel Money Duel,
dialogue between Robert Mundell and Milton Friedman in the National Post, 12
December 2000, Noel Gaston and Daniel Trefler, Labour Market Consequences of the
Canada-U.S. Free Trade Agreement, Canadian Journal of Economics, February
1997, pp. 18-41, from Todd Hunter, The Impact of FTA/NAFTA on Canada: What Does
the Recent Literature Say? DFAIT, December 1998, Reference Document No. 6.
Côté, p. 56.
McCallum, Two Cheers for the FTA.
Stéphane Roussel, Canada-American Relations: Time for Cassandra? The
American Review of Canadian Studies, Summer 2000, p. 149.
Deborah Waller Meyers, Border Management at the Millennium, The American
Review of Canadian Studies, p. 256.
Robert Bothwell, Friendly, Familiar, Foreign, and Near, Vanishing Borders,
Department of Foreign Affairs and International Trade, Monthly Trade Bulletin, November 2000.
Christopher Sands, How Canada Policy Is Made in the United States, Vanishing
Borders, p. 70.
Hart, The Role of Dispute Settlement in Managing Canada-US Trade and Investment
Relations, pp. 112, 113.
Mark MacKinnon, Canada, U.S. support role for NGO in NAFTA, The Globe and
Mail, 24 November 2000, p. B7.
Gilbert Gagné, North American Free Trade, Canada, and US Trade Remedies: An
Assessment after Ten Years, The World Economy 23:1, January 2000, pp. 83, 90.
Ibid., p. 86.
Nancy Riche and Robert Baldwin, Economic Integration and Harmonization with the
United States: A Working-Class Perspective, Vanishing Borders, p. 186.
Alan M. Schwartz, The Canada-U.S. Environmental Relationship at the Turn of the
Century, The American Review of Canadian Studies, Summer 2000, pp.
International Centre for Trade and Sustainable Development,
US launches free trade talks with Chile, BRIDGES Weekly Trade News Digest,
Vol. 4, No. 46, December 2000.
Legally, citizens of the EU can work throughout the EU. In practice, due to
realities such as language barriers, EU labour is not fully mobile.
Hufbauer and Shott, p. 51.
Ibid., p. vi.
Hart, What Next? p. 41.
Julie A. Soloway, Environmental Regulation as Expropriation: The Case of
NAFTAs Chapter 11, Canadian Business Law Journal 33:1, February 2000,
p. 125, quoting Dani Rodrik, Has Globalization Gone Too Far? Washington: Institute
for International Economics, 1997, p. 6.
Thomas J. Courchene, NAFTA, the Information Revolution, and Canada-U.S. Relations:
An Ontario Perspective, The American Review of Canadian Studies, Summer 2000,
pp. 166, 173.
Schawenen, p. 135.
George Hoberg, Canada and North American Integration, Canadian Public
Policy 26, August 2000, p. s41.
Ibid., p. 190.
Kevin V. Mulcahy, Cultural Imperialism and Cultural Sovereignty, The
American Review of Canadian Studies, Summer 2000, p. 187.
Riche and Baldwin, p. 188.
Britton, pp. 181, 182.
These are: export, domestic sourcing, domestic content, technology transfer and
exclusive supplier requirements; and a prohibition on policies reducing
imports or tying imports to export performance. Some performance requirements could be
imposed if they were tied to government subsidies.
Britton, p. 176, quoting Mel Hurtig, How Much of Canada Do We Want to Sell? The
Globe and Mail, 5 February 1998, and A.D. MacPherson, Shifts in Canadian
Direct Investment Abroad and Foreign Direct Investment in Canada, in J. Britton
(ed.), Canada and the Global Economy, Montreal and Kingston: McGill-Queens
University Press, 1998.
Weintraub, p. 474.
McCallum, Two Cheers for the FTA.
Hufbauer and Schott, p. 59.