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CANADA-US: Customs Union Could Have Big Political Price - Experts
By Paul Weinberg
TORONTO, Mar 3 (IPS) - A possible customs union between this country and the United States, dismissed as the speculation of technical feasibility studies by Canadian government bureaucrats, could have enormous economic and political implications, warn some observers.
For critics of the current North American Free Trade Agreement (NAFTA), which includes Canada, the United States and Mexico, the exercise signals that Canada's business lobby has succeeded in pushing its agenda of placing Ottawa even further into the orbit of the United States, its southern neighbour and largest trading partner.
"There is a long tradition of business having jettisoned any adherence to a separate and sovereign Canada, secondary to its own sort of interests," says Bruce Campbell, an economist and executive director of the Ottawa-based Canadian Centre for Policy Alternatives (CCPA).
Customs union, which involves setting preferential rules of origin on imports between the member states, harmonising standards and regulations of products and services and a common trade policy in a bloc like NAFTA, is just one ingredient in the "deep integration" mix that is being promoted by groups like the C.D. Howe Institute.
But in the run-un to a probable national election this year, a Canadian government spokesperson denies the new government of Prime Minister Paul Martin has decided to move in that direction.
"We are not talking customs union; we are talking about updating our economic and security partnership," says Scott Brison, a Canadian Member of Parliament and parliamentary secretary for Martin.
Yet the fact that the Policy Research Initiative (a Canadian government think tank) and the powerful federal departments of Finance, Foreign Affairs and International Trade are researching the subject of customs union and consulting outside experts is "significant", says Tony Clarke, director of the Ottawa-based Polaris Institute, which opposes corporate globalisation.
"The machinery of the Martin government is gearing up for what will be a new era of relationships with the United States. There will be some new bargaining going on," Clarke told IPS.
Martin took office in December promising to repair the bruised relations with Washington that had developed under his predecessor - also from the ruling Liberal party - Jean Chretien. Notably Chretien, who retired to make way for Martin, refused to support the U.S.-led attack on Iraq in March 2003.
Martin is also following through on negotiations Chretien began with the United States to define Canada's role in the controversial U.S. missile defence plan for North America.
But his government has not spelled out if it is willing to head in the direction of what is also called ''NAFTA-plus".
With Martin and his advisors embroiled in an unrelated scandal, Canada-U.S. relations remain "below the political radar" of the public, adds Clarke.
Historically, Canadians have told pollsters they value being separate culturally and politically from their southern neighbours. At the same time, the weekly Macleans magazine reported late last year that 61 per cent of Canadians are willing to accommodate U.S. concerns about terrorism by sharing the administration of immigration and border crossings.
By offering to "reinvigorate" a security, military and energy resources pact with the United States, Canada will succeed in convincing Washington to agree to a new trade deal, argues Thomas d'Aquino, president of the Canadian Council of Chief Executives (CCCE), which represents the country's major companies.
One of the failings of NAFTA is that U.S. companies are given considerable leeway to use U.S. trade law to legally harass Canadian exporters and impose duties on their products, he adds.
To avoid this problem the CCCE is advocating some form of customs union or European Union (EU)-style single market that would eliminate any rules on both sides of the Canada-U.S. border that impede commercial trade and labour mobility.
D' Aquino wants to use the model of the International Joint Commission (a Canada-U.S. body that monitors trans-border water issues) for new structures that would govern the already highly integrated economies of the two countries.
"Let's take control of (integration) and manage it in the interests of Canada, but at the same time making a contribution to North America," he said in an interview.
But University of Toronto political economist Stephen Clarkson doubts that would succeed for a number of reasons. For instance, protectionist politicians in the U.S. Congress are in no mood for a deal that would involve surrendering U.S. trade and economic sovereignty to a EU-style tribunal, he says.
Also, "I just think that is wildly unrealistic, now that Mexico is more important to Washington then Canada, politically speaking".
"There is a tremendously nostalgic quality to the big business thinking, which is based on (the idea) we can somehow maintain or get back to the special Can-Am (Canadian-American) relationship, which we thought, anyway, characterised the 1960s," says Clarkson, author of 'Uncle Sam and U.S. Globalisation, Neoconservatism and the Canadian State'.
Also, the Canadian business community and the Policy Research Institute are unrealistically studying a Canada-U.S. economic link, minus the participation of Mexico, adds Clarkson in an interview.
"How can you do a customs union without Mexico, given NAFTA? It is essentially very hard to work out. And how do you it anyway if Mexico has its own trade agreement with the European Union?"
Not included in the PRI research is any analysis of Canada's political sovereignty if its economy further integrates with the giant U.S. economy. "My sense is that it is not our role to assess political costs. Most of us are economists," says Andre Downs, a senior project manager at PRI.
But those political concerns are valid and they are being discussed inside and outside government, says Andrew Jackson, a senior economist with the Canadian Labour Congress who attended one of PRI's roundtable discussions.
"I don't mind saying, having been at that (PRI) seminar, that it was kind of clear to me that there were serious disagreements in different parts of the federal government (regarding customs union)," Jackson told IPS.
The tendency in customs unions is for the regulations of the larger country to predominate, says Marc Lee, a Vancouver-based economist with the CCPA.
In some areas where the United States has tougher regulations (the environment, for instance) Canadians might benefit in the short-run, he adds.
But Lee warns that other distinctive and worthwhile Canadian policies involving culture, refugees, agriculture, intellectual property rights and foreign ownership restrictions would disappear in any enhanced economic deal with Washington.
"The whole issue is about democracy. It is about the scope that Canadians have to set their own domestic regulations according to their own needs," he adds.
(END/2004)
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