Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
DISEQUILIBRIA However, the role of government in markets differs. In the United States, government is seen in an ideal sense as an impartial referee, ensuring that everybody plays by the same set of rules. In Canada, the accepted role of government is broader, with government acting as more of a player-coach to ensure that everyone plays, that injuries are healed, and that each team is ready to play next season. As a result, frustrations mount as each country by David Freshwater, Leonard Apedaile, perceives the other to be violating the spirit, if not the letter, of agreements like CUST A. and Philip Ehrensaft These differences affect the perception of what a level playing field is. In the United States the meaning relates primarily to the Market-based systems and free trade are two of the basic tenets refereeing of the game. The focus is on enforcing fairness by makof economic policy in Canada and the United States. Yet at a time ing everyone play by the same rules and disciplining those who when market forces are sweeping the world and when Canada, violate the rules . That one team may have accumulated more Mexico and the United States are contemplating a larger free resources and skills- and therefore has better odds of burying the trade zone, it is important to recognize that North Americans not opposition- is not seen as the appropriate concern of government. only attach different weight to the benefits and costs of markets, By contrast, Canadians' concern with a level playing field is they also have a different understanding of the nature of markets. more about whether all particiAnd of government itself. Words pants in the game begin with have different meanings for dif»- Canada and the United States may be the two countries "reasonable" odds of success. ferent people and the word with the greatest degree of cultural similarity and degree of Government is expected to par"markets" and the phrase "level economic integration in the world , yet they continue to ticipate as a partner to even the playing field " mean one thing in have significant trade problems. Many of these problems odds and to ensure that outthe United States and something involve commodities important to rural areas, such as lumcomes are not inimical to social different in Canada. And the difber, grains, and livestock. Despite similar policies to assist objectives for the game. ferences go well beyond semanrural areas, at the root of the trade problems between the These differences in meaning tics, because they relate to subtwo countries, there are fundamental differences in how increaSingly get in the way of tle differences in the approprieach society perceives the role of markets and the role of efforts to harmonize the rules ate role of government. government in those markets. With domestic rural policies for trade between the two counDistinct, but subtle differbeing challenged as inconsistent with formal trade agreetries, through formal agree ences attached to the nature of ments, these ph ilosophical differences are becom ing ments. As continental and globmarkets and the appropriate role increasingly clear. To reap the full benefit of trade liberalal competition increases, each of government affect the accepization, these differences must be resolved. nation examines the policies of tance of poliCies and rules other countries for unfair applicable to trade. They also advantages. It is here that subtle differences lead to conflicts. account for, at least partially, why both Canadian and U.S. citi. The U.S. considers Canadian government assistance to less zens express disappointment with the results of the Canada-Unitwell-endowed communities or companies incompatible with the ed States Trade Agreement (CUSTA). People in both countries U.S. notion of a level playing field . But, having the U.S. governexpected the agreement to lead to a greater dependence on marment simply referee "away" games for Canadian teams does not kets and a more level playing field that would benefit both jibe with the Canadian idea of a level playing field either. Thus, nations. But, because these concepts have different meanings in while citizens of both countries praise market forces and level each country, the people of each country expected something playing fields, they aren't necessarily talking about the same fundamentally different. thing. What looks like normal competition to the United States The Same Words Mean Different Things looks like predation to Canada. And in reverse, the U.S. views Canada's joint government-private sector activities as unfair govCitizens of each country use the same words to describe differernment market-distorting subsidies, that tilt the playing field. ent mixes of market and government forces. Yet, words and man- RURAL AREAS, LEVEL PLAYING FIELDS AND RULES OFTHEGAME ners of speaking are deeply rooted in the heritage and memories of each society, so much so that the same phrase can have significantly different meaning in Canada and in the United States. In both nations the predominant role of market forces is widely accepted, and on both sides of the border a "level playing field" is seen as necessary and desirable. Both sides see unencumbered markets as the primary means to increased prosperity. David Freshwater is Associate Professor, Department of Agricultural Economics, University of Kentucky; Leonard Apedaile is Professor, Department of Rural Economy, University of Alberta; and Philip Ehrensaft is Professor, Department of Sociology, University of Quebec at Montreal. 18 • CHOICES Rural Implications Rural areas have an important stake in how these differences are resolved. Rur'al areas in each nation produce primary products that compete directly with each other either in third markets, or increasingly, within North America. Both nations subsidize these resource extraction and transformation processes, but in characteristically different ways. Canadian policies important to rural areas include: fishing quotas, provincially determined stumpage charges, freight subsidies, import restrictions, marketing boards and supply management programs, all of which are characterized by the U.S. as unfair competition. Subsidies in the Second Quarter 1992 United States include: commodity support prices, "buy American" programs, subsidized credit, and export subsidies. Lumber is one example. In Canada, provincial governments establish a maximum allowable cut and then allow companies to bid for rights to harvest the trees. Resulting stumpage charges are lower than the cost of growing trees on private forests in the United States. Lumber companies in the United States rely primarily on private forests for access to timber and argue that Canadian policy constitutes an unfair subsidy; Canadian producers and the Canadian government argue it reflects different relative costs. Also, Canadians see U.S. commodity programs and the Export Enhancement Program (EEP) as unfair. They argue that far more government resources support agriculture in the U.S. than in Canada, and EEP in particular is being used to displace Canadian grain from traditional markets. Similarly, Canadian manufacturers view the large domestic U.S. consumer market as conveying a major advantage to U.S. producers that requires some form of government assistance in Canada to make Canadian manufacturing competitive. The recent fight over the North American content of Honda cars is seen by Canadians as much as an attempt to ensure that future foreign investment only takes place in the United States, as an effort to protect the U.S auto industry. Urban America Pollutes Rural America The vitality of rural places in both countries is rarely the dominant consideration when major policy changes are debated, or when market exchanges are consummated. Large companies do not locate home offices in rural areas. Rural communities have relatively "upstream" types of economic enterprise, remote from the markets that determine final product prices. They also experience unintended consequences of decisions by urban consumers. Consider, for example, the issue of bargaining power related to "external costs" associated with urban-oriented public policies and with global market-based decisions. Rural people typically experience lower wages, rents and returns to capital; and they absorb significant adjustment costs, caused by changes in technologies, shifts in consumer preferences and economic restructuring, that originate in urban areas. Rural communities process industrial waste and pollution with their crops , grasslands, forests, lakes, streams and marshes. Rural space is used for landfills and golf courses. Rural people and places must also take on the stress and institutional dislocation of serving urban people who take over their communities with second homes, tourism, hunting, and fishing. Thus, the rural people produce public goods for which the consumer is amorphous, remote, and often unpaying. In today's world there is simply no working market for trading these goods; and with the exception of some major agricultural commodities, there are no government institutions to provide compensation to rural people. To a considerable extent the magnitude of the problem of externalities is a reflection of different levels of economic power. Rural economies are forced to bear the costs of these externalities because the opportunity cost is low: for the natural resources themselves, for the capital committed to developing the resources, and for labor and business organizations in the rural community. As rural communities embrace local control, enter into new offshore partnerships and accept the predominance of market forces, a level playing field becomes critical for economic survival. Other than under the narrowest interpretation of the government as umpire, it is at best unethical to promote market-based rural economic development initiatives when there are radically different qualities of information, different degrees of bargaining power Second Quarter 1992 and widely divergent resources. It is fairly clear that where government is only an umpire, bargaining and market processes will be biased to the better endowed. Pure reliance on the market in these circumstances is for rural economies like playing poker with a marked deck in the hands of a professional gambler. Moreover, while the United States holds to an ideal of government as umpire, in both the United States and Canada rural intervention by government goes well beyond this minimalist role, recognizing the precarious nature of rural communities. Government: Leveler or Disequilibrater? Global market signals to rural economies in each country are filtered and transformed through complex policies that influence decision making on a regional and commodity basis. Three main policy sets can be identified-sectoral, social, and macroeconomic. To many people, sectoral policy for agriculture is synonymous with rural policy. Yet such policy is increasingly ineffective in dealing with difficulties in rural areas. Global economic integration blunts opportunities to use commodity policies. In addition, politically there is currently a greater willingness to accept market driven outcomes even if these markets are driven by firms with overwhelming size and economic power. Social policies shift risk from individuals to the collective population. Examples include unemployment insurance, medical care, education, cultural affairs, and social welfare programs. While these programs do not directly boost economic development, they do provide income transfers and support functions that can enhance development activity. They reduce the capital needs of firms since important resources are collectively provided, often quite efficiently. Social policy, however, is not particularly rural in its orientation. Neither is macroeconomic policy. Yet macroeconomic policy covers the broad set of fiscal and monetary policies and external trade relations that determine the broad economic environment for the rural economy. Though it tends to be applied uniformly across regions, the results may be disparate among regions, economic sectors, and rural places. More importantly the particular policies chosen are selected with an eye to meeting the needs of powerful economic interests. An example of this disparity is the impact of a high interest rate monetary policy period on Western Canada and its agricultural export earnings between 1988-1991. The manufacturing-based economy of southern Ontario was overheating during the 1980s and federal policy was chosen to counter inflation in Ontario. This reflected the larger political and economic importance of this region relative to the west. Rural Areas and Public Policy In North America Although farm policy is primarily associated with rural areas , the reality is that social and macroeconomic policies have a greater influence on rural areas in both countries. Current controversies over open markets and government intervention point this out. While the arguments between the two nations on the surface are over sectoral policies, the basic causes of the controversy are differences over broader policy goals and differences in the philosophy or culture of government. Despite real differences over the meaning and nature of market forces and competition, the fundamental similarities between the two nations and a recognition of the benefits from growing integration are leading to a search for common ground. However, integration of the two economies will require revised social contracts that will have to pay attention to different interpretations of common terms in each country, and accommodate corresponding differences in style. While rural issues will not be focus of these negotiations, it is important for rural areas that they be an integral part of the agreement. . CHOICES • 19