Download Political Science 3170 The Politics of Canadian Trade Policy

Political Science 3170
The Politics of Canadian Trade Policy
September 9, 2010
Introduction, Context for
Canadian Trade Policies
Poli 3170
The Politics of Canadian Trade Policy
Welcome back!
 Geoffrey Hale
Office – A-516  E-518 (sometime this month)
E-mail – [email protected] (easiest contact)
Office Hours – 11:00 – noon or 3-4 (Tu / Th)

Introductory Class
1) Why trade policy matters?
* economic
* historical
* contemporary
2) Context
* a dynamic global economy
* Canada’s integration within North America
3) Trade policy as “multi-level game”
4) Course outline / objectives
Why Trade Policy Matters I
Canada is small, open economy
 Trade, investment vital to econ. well-being

Exports – 35.3% of GDP (2008)
(1st or 2nd among major industrial economies in most
years since 1990)
 Two-way trade - 69% of GDP (2008)
 Most provinces export more to other countries than to
other provinces
 Not clear whether major drop in 2009 recession
reflects mainly cyclical or structural factors.

Why Trade Policy Matters II

Comparative Advantage

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Canadian market too small to support full range of
internationally competitive industries
Specialization (between AND within industries)
contributes to greater efficiency, higher living
standards
Secure access to large markets facilitates economies
of scale, efficiency, competitiveness.
Growing trend towards internationalization of
production, distribution through continental, global
“supply chains”, “value chains”
Why Trade Policy Matters III

Legal factors shape trade and investment flows
Politics of trade generally requires “reciprocity” to manage
trade-offs between export expansion, greater import
competition for domestic producers
 Rules-based trading system (regional or global) safer for
small, trade-dependent countries than one based on
power politics
 Large countries (U.S., EU, Japan, China, Russia) have
greater freedom to engage in power politics at expense of
neighbours unless constrained by int’l rules to which they
have consented.
 Technical details of rules heavily influenced by interest
group politics, trade-offs (Colgin – “managed trade”)

Why Trade Policy Matters IV

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Long-term trend towards integration of trade,
investment processes, capital markets with those of
major trading partners, esp. U.S.
 Growth of economic interdependence
Trade and investment policies increasingly reinforce one
another
Canadian direct investment abroad (CDIA) greater than
foreign direct investment (FDI) in Canada since 1997.
Canadian firms have major stake in openness, stability of
international trade system.
Healthy employment, social service, retirement income
systems depend on profitability, growth of private sector
Why trade matters - Historical
Canadian economy historically dependent on
foreign capital to finance economic development
(net capital exporter since 1997)
 Historic dependence on commodity exports to
finance costs of foreign capital makes Canada
“price taker” in global markets
 Major domestic debates (regional, ideological)
over competing strategies to enhance economic
well-being, domestic political discretion / choices

Why trade matters (21th c.)

Canada increasingly integrated into dynamic int’l
market networks for goods, services, capital,
and technology – BUT

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Canada not “unitary actor” in trade policy 
competing regional, sectoral interests
-- “fragmegration” (Rosenau)
Challenges of economic adjustment
-- “creative destruction” of capitalism (Schumpeter)
-- shifting dynamics of international markets
Isolation not an option!
Economic Dynamics and Trade

Shifts in macro-economic environment

Major fluctuations in global commodity prices
creates major uncertainties in global markets
 Major
factor in economies, domestic political
environments of Western provinces

Exchange rate shifts affect “terms of trade”
(prices of goods, services net of exch. rates)
 Affects
competitiveness of many industries, distribution
of economic activity, power within Canada

Impact on investment, corporate takeovers
Economic Dynamics and Trade II

Canada, the United States and Mexico
 Asymmetrical
dependence
trade relations / economic
 Extensive
integration BUT Cdn. vulnerability to
unilateral trade actions as by-product of US
domestic politics
 Dual
bilateralism
 Limited
Canada-Mexico relationship; U.S. relations
with Canada, Mexico subject to different historical,
contemporary trends, pressures.
Economic dynamics and trade III

Rise of China and India
 “outsourcing”
investment access
 human rights & trade
 access to, price & supply of major
commodities, especially energy
 state trading companies / sovereign wealth
funds / national security

North American Integration I
Globalization || North American Integration
Canada
U.S.
Exports : GDP
35.3%
12.6%
(2008)
(2008)
Exports to US/Can 77.6%
20.5%
(Goods & Services)
N.A. Integration: Dual Bilateralism
Limited Canada-Mexico relationship
 U.S. relations with Canada, Mexico subject to
different historical, contemporary trends,
pressures.

% of Canadian,
% of U.S
Mexican Exports 2008 Exports
US-Canada Trade
78%
20%
US-Mexico Trade
81%
12%
Economic Dynamics and Trade III
 U.S.
focus on expanding market access in
global, regional markets, dealing with
strategic economic threats (structural trade
deficits, China, energy)
 Result
– North American trade, other crossborder issues often dealt with as subsets of
U.S. domestic politics, increasing
complications for Canadian governments,
economic interests
Implications for Trade Policies

Trade policies segmented
 Foreign
and domestic
 Sectoral and/or regional (in Canada)

Contributes to two-level game of policy
development
 Need
to build complementary coalitions of
domestic, international interests to legitimate
trade policies, secure against external
challenges.
Implications for Trade Policies II

Multi-level governance
 growing
feature of international economic
relations
 the distribution of responsibility for policy
development and implementation across more
than one level of government, and often
across national borders
 often includes private sector and/or nongovernmental actors
 Includes elements of “hard” and “soft” law
Framing the Course I
i)
Foundations for Canadian trade policies 
economic / historical / political / international
ii) Contemporary int’l / regional environment for Cdn.
trade policies
(WTO, NAFTA etc.)
iii) Evolving structures, processes of NAFTA, WTO
iv) Major sectoral issues (investment, procurement,
climate change, intellectual property, agriculture)
Framing the Course: Assignments

Five “mini-assignments” (30%)
 Weekly

topics available from class website
Research paper (30%)
 Suggestions
on topics encouraged 
 English requirement 
 Due Dec. 7/10

Take-home final (25%)
Expectations
Be here! (Participation – 15%)
 Engage!
 Readings done before class will enhance
learning experience

Getting to Know You
1) Name / Program / Year
2) Where are you from?
3) Why are you taking this course?
4) What would you like to get from this
course?
Framing the Course - SHIFT
Domestic
Political
Sectoral
Micro
International
Domestic political Int’l cooperation /
competition
competition (bilateral,
(national, regional) multilateral)
Domestic
Market access,
competitiveness
int’l competitiveness
-- overlap with other sectors
-- sector-based case study analyses
Firm-specific;
Intra-firm trade;
Consumer impact dispute management.