Clarksonian Mega-Challenges for Canada and North America Michèle Rioux

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Stephen Clarkson

This is the final essay in the PEF series to commemorate the life of Stephen Clarkson.  It is fitting that it is written by Michèle Rioux, a colleague in Quebec.  Stephen worked closely with many in Quebec and the relationship between Quebec and Canada was an important part of his analysis of North America.

Michèle Rioux is a Professor in the Department of Political Science, UQAM and Research Director at the Center for research on integration and globalization (Centre d’études sur l’intégration et la mondialisatieon).  Stephen loved Quebec and Montreal and was frequently invited to the Centre to speak, including attending the event to mark the 20^th anniversary of NAFTA at la Maison du Développement Durable.

Clarksonian Mega-Challenges for Canada and North America

by Michèle Rioux

The Neoliberal Trade Agenda @ Bay

North America has been an experimental model of trade and integration for at least the last 25 years. Stephen spent his life understanding North America and how the region shaped the Canadian political economy and society. An excellent, innovative researcher, he kept asking questions, many without clear-cut answers that led to a dozen high impact publications. Always kind and generous, intellectually challenging, he had an engaging personality and a very contagious smile. In this short article, remembering his critical influence he had on my research and in the field of Canadian political economy, I will specifically explore three topics that are central to his many contributions:
• The singular importance of the world economic system and the emergence of powerful multinational corporations as pivotal actors in diminishing the role of state everywhere.
• The asymmetrical growth in social inequality from new market access and free trade in North America and their “capture” of the public policy process.
• The transformative impact of regional economic integration models on the dynamics of state sovereignty and comparative international political economy.

Burned At The Stake Of International Competition

Stephen’s first major influence is to be found in his contribution to the most important debate on the highly controversial role of US MNCs and their impact on Canada’s economic sovereignty. Stephen had a leading role along with other experts stressing the dangers of a globalization process in Canada that left unchecked, would lead to economic domination by the US capitalism and the eventual loss of Canadian sovereignty through what Kari Polanyi has called a “silent surrender” in her book with the same title.

The debate on trade and industrial policies took place in the 1970s under the government of Pierre Trudeau and did not lead to a very successful interventionist state- centered Canadian policy ‘independentiste’ model. What was called the Third Option never went anywhere as a policy idea requiring Canada to reduce its dependence on the American market through targeted diversification. Instead, successive Liberal governments did exactly the reverse and opted for closer integration with the United States, along with an aggressive policy of deregulation and privatization of the Canadian economy, its primary policy orientation of the 1980s and 1990s.

Nowadays, the dangers of this economic domination are still significant for the Canadian state and a range of public policies. As Clarkson stated at the end of his book Uncle Sam and Us:

Rather than proposing yet another big idea to achieve still further leaps of integration with the United States on the dubious assumption that erasing the economic border will magically increase the standard of living, the Canadian state needs to recommit itself to its historical task of strengthening its own democracy.
The issue of the role and rights of foreign investors in Canada is still of great significance and has played a central role in the debates surrounding the Comprehensive Economic and Trade Agreement (CETA) and the renegotiation of NAFTA. Foreign investors are powerful agents in the world economic system, They have gained economic, political and legal authority with few binding obligations in terms of protecting the public interest. This can be viewed as the continuation and exacerbation of the ‘silent surrender syndrome’ .

The globalization process has undermined national and international regulatory frameworks and in their place supported the emergence of new ‘globalist’ institutional and normative frameworks. Such frameworks are much more complex than those from the past since they deal with issues like investment, competition, services, public procurement and intellectual property; all of these areas that were outside of international negotiations in the past. This structural shift from national economic space towards a global economy has enormous implications on societies and on the behaviour of international relations. A long-term momentous shift in competitive strategies between global corporations for market share in regional markets the world over has given them unprecedented leverage to control where production is located and investments are made to support the unprecedented growth in global value chains, one of the key organizational principles of the crisis-ridden global economy. Stephen was one of the early Canadian researchers to analyze the important role of free trade agreements in the shift from Keynesian to a globalized economic policy model.

NAFTA, Neoliberalism and The Trouble with Bad Ideas

Clarkson did not agree with orthodox trade policy. He labelled them as ‘economic constitutions’ and described how they shape societies economically and politically. In an article entitled Apples And Oranges: Prospects For The Comparative Analysis of the EU and NAFTA as Continental Systems, he develops the idea of NAFTA as a comprehensive constitution setting the rules and regulations of state-market relations and as an American mode of regulation.

This is a very powerful idea and was highly provocative at the time. Nowadays, it is very clear that if trade agreements are not constitutions, they have great implications not only at the border but also behind borders. We now understand that these trade deals have developed into a very powerful intrusive legal instrument that affect policy and regulatory systems at different levels of the political order. The relation between states and markets, for Stephen, was at the very core of his perspective.

He critically understood the North American integration model as a reflection of changes in the relationship between states and markets in the region and compared with integration models elsewhere (see, for instance, his article Apples and Oranges). Indeed, North America emerged in the 1990s as a strong and influential regional model of integration. As such, it brought about new regulatory and strategic instruments deployed at multiple and diversified levels of governance. From the US point of view and, to a lesser extent from that of Canada, one of the initial and most important objectives of the North American Free Trade Agreement (NAFTA) was to improve the competitiveness of the region by relocating in Mexico, especially in the area of border production, where production functions were low-tech and labour intensive in auto assembly, light manufacturing and other industries that benefited the American consumer at the checkout counter. It was the ‘trump card of the United States’ both before and after negotiations (Rioux et Deblock, 1993). NAFTA has spread beyond North America, and we can agree with Stephen’s most important insight that neoliberal trade governance has entertained a complex relationship with globalization.

One very important factor and structural element shaping governance and regulation of economic integration in North America is the importance of Asia and more specifically of China for the region. The now defunct Trans-Pacific Partnership (TPP), was to meant to transform NAFTA beyond the original three countries involved. This would have been a de facto renegotiation of NAFTA. The last time I met Stephen was at a conference on “NAFTA at 20” and the TPP negotiations were perceived as a way to ‘modernize’ NAFTA on the Trans-Pacific front. The TPP allowed the three countries to negotiate new trade related regulatory issues with the strategic goal in mind to deal with inter-regional issues linked to the development of new global value chains. It meant that, instead of being a ménage à trois, North America was immersed into an intense model of coopetition shaped by global value chains across the Pacific.

In this new context, the conference participants saw emerging transnational regulatory responses accelerating the disappearance of the boundary between the public and private spheres at various levels ?local, national, international and global? giving way to a complex system of networks between authorities endowed with overlapping rights and obligations from the perspective of the trade deal. The exact relationship between national sovereignty and transnational trade governance was never clear in a third generation of regional/interregional trade agreement. Does this contribute to the convergence of regulation and governance models or to the hegemonic diffusion of the US regulation model? Of course, once Donald Trump scrapped the TPP, challenged NAFTA and TTIP, the US regulatory model was no longer in the driver’s seat even have it remains a powerful force in its own right. Yet, this might also be a strategic move to ensure that the contested US model is accepted in exchange for access to the US market. Since the 1930s, the United States always promoted trade liberalization based on a system of legal rules and principles “organizing” the trading system and their relations with trading partners.

I want to quote from the preface of the conference proceedings to emphasize this point:
“The tragic misrule in North America’s three-state space and in most of Latin America over the last few decades has undermined the significant achievements of the post-World War II Keynesian state which achieved high rates of economic growth while developing publicly financed education, health, employment, and pension policies and consequently reducing the inequality between rich and poor. Neo-liberalism’s populist, anti-government rhetoric has blinded public consciousness to the costs of empowering market actors freed of responsibility for the destructive environmental and social consequences of their corporate actions.” (Préface in English, Rioux & al. 2016).

North American trade deals have increasingly shaped our societies and they can, as Clarkson suggested, be considered like new global trade constitutions empowering multinationals and constraining governments.

The Contradictory Impacts of Regional Economic Models

The third Clarkson narrative concerns regional integration models. He compared regions mostly North America with Europe and how both regions differed in their approach to integration processes. As regions are increasingly negotiating trade agreements with one another, he contributed to the development of the concept of inter-regionalism to explain both the dynamics of convergence and divergence across highly dissimilar regional economies.

When comparing the North American regionalism with the broader European model, Stephen was evidently disappointed. In North America, regional integration is a less ambitious project. It has developed as a mainly contractual and essentially strategic model, oriented on economic issues. In North America, there was no plan for a gradual and incremental process leading to a single market or to a monetary and political union. The goal is primarily opening up markets and adopting rules for markets in an attempt to boost competitiveness. Partners work to eliminate restrictive policies and regulations rather than to build a common and supranational approach in a multidimensional perspective; i.e. taking into account the public good in economic governance as part of a wider social and political integration project. Nowadays, the European Union is an economic, legal, monetary and political reality, even though an imperfect and contested one. Fiscal and social policies and the pressures linked to the 2008 economic crisis and the management – or the lack of – of the migration issues in the recent past have paved the way for new risks of institutional implosion such as Brexit, which is underway, and in the recent past, the forced upon departure of Greece or Grexit.

Clarkson was pragmatic about how far he could take this comparison. Even though, he liked the European model, he also knew that it could not be adopted in North America. He distinguished between the two models of regionalisms, the first developed in Europe and a second generation type emerging in North America in the late 1980s and early 90s. In the European case, the economic dimension would be completed by adding a very elaborate supranational legal and political institutions evolving over time. There is a strong sense of community and identity that speaks volumes about the national and sub-national layers of governance in the European Union. Like Robert Pastor who, in the United States, deployed much time and energy to define and promote the concept of the importance and value of an emerging North America community that existed beyond the free trade ideal, Clarkson also pushed the idea that a sense of community could and should emerge in North America.

More recently, CETA, the negotiations of TPP and the Transatlantic Trade and Investment Partnership involving the United States and the European Union, have launched a new process of inter-regionalism that would incorporate and articulate a developed regional integration models of regionalisms. Stephen also sought to grasp these new realities of integration processes in his later writing and research.

When Canada and the EU negotiated an ambitious agreement like CETA, how does this agreement compare to the regional integration processes underway on both sides of the Atlantic? What does it mean for their respective lives of citizens and for their interactions with government and nonstate actors that will increase over the next years as the Agreement become a living experiment and eventually take a life of its own. For some, this indicates the emergence of a third generation of integration processes that is increasingly interregional in nature. Recent trade agreements are very ambitious, more ambitious than NAFTA, but there are no plans or possibility of creating a single unit like the EU. New words, like comprehensive and partnership, combine to define what Christian Deblock depicted as an ‘interconnection’ model that is essentially geared towards regulatory cooperation and governance. He writes that:

In the current decade, two trends closely related to the new issues of globalisation have begun to emerge. First, trade negotiations increasingly revolve around cross-border trade, digital trade and value chains. Second, they are characterised by their interoperability. Today’s globalisation does not so much integrate as connect. And with interconnection, the problem of international regulatory cooperation arises. This issue is now at the core of discussions within the OECD, APEC or new trade agreements, according to terms and principles very different from previous negotiations. (Deblock, 2016, p. 9)

CETA involves regulatory co-operation in many domains and certainly has the potential of significantly changing national regulations. The intent of the TPP also placed emphasis on regulatory co-operation across the Pacific. The Transatlantic Partnership (TTIP) negotiations between Europe and the United States also involved such far reaching regulatory cooperation. The EU negotiator for the TTIP made no secret of it. Important issues are the investor-state dispute mechanism, electronic commerce, norms and standards, including labour standards and rights. Undoubtedly, this interconnection model does not imply loss of sovereignty, but it certainly will have a great impact on many policies and regulations. This raises several questions, including that of the democratic legitimacy of a new and further shifts of power and regulatory authority between states and markets.

Pessimist or Eternal Sceptic?

Building on the fundamental complex relationships between states, markets and North American integration, Clarkson identified the powerful and often dangerous dynamics unleashed by globalization, Clarkson always paid attention to power relationships and asymmetries in the light of Canada’s relations with its continental global neighbour. He was critical but never pessimistic about North America. Yet, I think he wished for more cooperation and more balanced relations between countries and between states and markets. At that time of pessimism and national retreat, we will miss his insights but we are lucky to have such a rich legacy of scholarship and intellectual research to draw on.

It is hoped that trade deals will also strike new balances between states and markets. Transparency, more participatory process during negotiations and enforcement, and more balanced agreements taking into account the social and environmental dimensions are key elements for the future of globalization. North America has to invent new types of cooperation and governance, regulatory schemes in this world of transnational and global networks. In my view, this is the biggest challenge we have before us and one that Stephen was always motivated to undertake with boundless energy. He believed that Canada would find a way to provide answers to the complex challenges of North American integration. Perhaps the trump card of NAFTA is the Trump Presidency which has triggered a wider discussion on North American regional integration. Canada is now promoting a new progressive trade agenda in North America with its trading partners around the world. Last May, Ed Broadbent challenged the perspective and its depth in these words:
“One part of a response to growing inequality is to change the rules of the game in international trade. The Liberal government has suggested it wants such change. It claims to believe in “progressive trade.” However, in the recent negotiations with Europe, the government signed on to a pact, the Comprehensive Economic and Trade Agreement, that pays only lip service to labour rights.”

It is also the case that Canada is intent to negotiate several new trade agreements, particularly with China and Mercosur, and has started NAFTA re-negotiations. The interaction between globalization and social progress is becoming increasingly important in the public debates. Many international instruments exist; however, they remain largely ineffective to produce a socially responsible globalization process. More ambitious social and environmental clauses in trade agreements might be elements of a wider solution, but significantly there is a deeper questioning of the social and political significance of what states are attempting to achieve while multiplying trade agreements.

In these new conditions unquestionably Canadian political economy will be subjected to powerful and volatile structural forces determined by the wider North American political economy. But there is no doubt that Clarkson also believed in Canada and its potential in playing a key role within the international system as well as in the world economy. Yet, for this to occur, one must learn from history and understand how to steer collective action nationally and internationally towards a better life in North America. In this regards, it is important to end with the one more quote from Clarkson:

Whatever label one uses to describe the centrality of the past in limiting the options available in the present which determine the shape of the future, it is important to keep it in mind since, because world power relations are in such a constant flux, so much analysis has focused on immediate happenings that “change” is typically presented with little attention being paid to the historic roots of the reality experiencing change. (Préface in English Alena conjugué au passé, présent et futur. Rioux &al. 2015.)

It is in this context that Canada faces numerous challenges. Not only regional integration has changed, but Canadian economic productivity has also lost ground to American industries and lags further behind the US commanding presence in new global value chains and digital trade. Clearly, Canada also needs to move towards a more innovative and progressive trade agenda. In this new setting, Stephen Clarkson’s contribution to the study of political economy of North American regionalism and globalization has much to teach us

REFERENCES
Ed Broadbent, « Let’s make human rights central to a new NAFTA » The Globe & Mail, May 5th, 2017.

Stephen Clarkson, Uncle Sam and Us: Globalization, Neoconservatism, and the Canadian State. Toronto; Washington: Toronto UP and Woodrow Wilson Center Press, 2002

Christian Deblock, “From regionalism to cross-regionalism”, Great Insights, December 2016, p. 8-9.

Michèle Rioux, Christian Deblock et Laurent Viau, L’Aléna conjugué au passé, au présent et au futur, PUQ, 2015.

Michèle Rioux, Mathieu Ares and Ping Huang (2015), Beyond NAFTA with Three Countries: The Impact of Global Value Chains on an Outdated Trade Agreement. Open Journal of Political Science, 5, 264-276. doi: 10.4236/ojps.2015.54028.

Michèle Rioux and Christian Deblock “NAFTA: The Trump Card of the United States?”, Studies in Political Economy, no. 41, 1993, pp.7-44.

Douglas A. Ross, “Clarkson, Stephen. Uncle Sam and Us: Globalization, Neoconservatism, and the Canadian State”, International Journal, October 1, 2004.