The Bruce Report

With a wink and a nod, the United States may be stumbling ever so artlessly back from the vacuum of trade protectionism which has threatened to suck North America down yet another rabbit hole since the beginning of The Great Calamity.

            Rumblings in Washington last week suggested that a tentative agreement had been reached to lift the embargo that prevents this country’s manufacturers from bidding on projects covered by the $800-billion stimulus bill passed in Congress last year. That nifty bit of legislation angered both Canadian and U.S. firms who argued its explicit “Buy American” provisions threw a wet blanket over an already sodden economy.

            Soon, if the reports are accurate, nothing but fair-market competition between friendly neighbours will stop Canadian companies from selling their wares and know-how in the United States and, crucially, vice versa.

            In one sense, the reversal is a welcome return to business-as-usual for two of the world’s largest partners. Bilateral trade between Canada and the United States amounts to a staggering $560 billion a year. In fact, two-way traffic in goods and service across the Ambassador Bridge between Detroit, Michigan and Windsor, Ontario is equivalent in value to all U.S. exports to Japan.

Conversely, Canada is the leading export market for 36 American States; it ranks in the top three for another ten. That makes us a larger market for U.S. goods than all 27 countries of the European Community combined, whose population is more than 15 times greater than ours.

But the bigger implications are more intriguing and, depending on your attitudes about globalization and national sovereignty, worrying.

The agreement, if ratified, carries a provision of reciprocity. Simply put, if the Americans open up their markets to Canadian suppliers, then our 13 provinces and territories must return the favour, and not just to U.S. states. For the first time since Confederation, an international convention may actually bust down the trade walls between our own regions.

For businesses and policy wonks on both side of the international border, this is marvelous news, promising manna from all points on the world map. “It could be a triple win,” says Robert Wolfe, a political scientist at Queen’s University. “The agreement would be good for U.S. trade, good for internal trade, and good for negotiations with the Europeans.”

Or it could be a triple threat, providing the U.S. – whose buying power and economic might dwarf our own by several orders of magnitude – with unfettered access to our resources, procurement opportunities and capital markets. This could cast a long shadow over several dearly-held assumptions about Ottawa’s legal apparatus regarding industrial subsidies (forestry, agriculture) and regional economic development programs, such as those developed and administered on the East Coast by the Atlantic Canada Opportunities Agency.

Certainly, had this “freest trade agreement” been in place prior to the NB Power/Hydro-Quebec contretemps, Newfoundland and Labrador Premier Danny Williams might have been less concerned about the ramifications to his own province’s fortunes. Quebec’s alleged monopoly of New Brunswick’s transmission grid – and its exclusive access to the fat, lucrative energy markets of the American Northeaat – would have been explicitly disallowed.

For this province, the challenge now is determining what, if anything, the new framework with the United States says about the amended provisions, which only guarantees Quebec’s “priority access”. Does “priority” translate into “unfair” in the new North American order?

Beyond this, the impact on local businesses, workers and communities remains the great unknown. In theory, open markets usher prosperity for both buyer and seller. They vastly expand the flow of capital for job-generating enterprises, which in turn multiply the benefits, including business start-ups, accruing to everyone. In practice, however, they sometimes undermine social and cultural diversity and necessary labour force protections, such as Employment Insurance. Is this an angel or a devil of a deal with our American cousins?

The details lie somewhere down the rabbit hole.

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