Seismic shifts in geopolitics, in the world economy and in conditions for competitive success, call for a Canadian strategy to position the country in the broader international community.
The trouble with discussions of Canada-US relations is they tend to be confined to Canada-US relations, with all the attendant baggage of national identity, sovereignty, economic and political domination, cultural contamination, erosion of social programs and gun control, for example. Perhaps it’s time to stand back and assess the Canada-US relationship in the context of fundamental immutable shifts that are shaping the global economy, the international community and the environment of an ever-shrinking planet.
From this perspective you see more clearly the challenges and opportunities facing Canada in the decades ahead. And this perspective underscores how the big imperatives of public policy — the pursuit of peace, prosperity, security and environmental sustainability — cry out for North American collaboration. Ultimately, broader international arrangements are called for, but if we cannot get it right in North America, success at the multilateral level is a distant dream.
I refer to the collaboration by Canada, Mexico and the US as the “North American platform.” It’s a platform, or foundation, through which economic, environmental and security gains can be achieved within our continental space, and it’s a platform from which our three countries can advance globally their individual and collective interests. I include in collective interests the “commons,” or the common property resources of our region and beyond.
We are in a world of massive shifts and changes that will shape fundamentally our way of life in the decades ahead. Whether we accept it or not, even preservation of the status quo has become something of an outlier scenario, and is most certainly not to be taken for granted. Similarly, pursuit of isolationist or go-it-alone approaches to air quality, water, ecosystems, energy security, security against nefarious intrusions, security against pandemic threats or economic security and stability will fall short when dealing with continental, hemispheric or worldwide challenges.
Unfortunately, an insular paradise of denial and parochialism often makes for a more comfortable political home in the short term. For example, the American public, aided and abetted by talk radio and television, appears to believe competitive threats and job losses are NAFTA-related on a scale instinctively comparable to China. Similarly, public policy has become protectionist to the point where even environmental and security policies have become thin veils for protectionism.
Ironically, after 145 years of building prosperity through competitive participation in the international marketplace, Canadians, too, remain ambivalent about free trade and open investment. Witness ultraprotectionist supply management, sector-specific investment restrictions and a penchant for protection or support of sectors such as shipbuilding and the automotive industry. These and more represent barriers to Canada forging integrative trade and investment arrangements with the rest of the world.
The basic question is, Can the North American partnership adapt, adjust and take advantage of the potential advantages of a North American platform? Or will we be bowled over by global forces?
Perhaps it’s time to stand back and assess the Canada-US relationship in the context of fundamental immutable shifts that are shaping the global economy, the international community and the environment of an ever-shrinking planet.
For Canada a navigational beacon, or “North Star,” is badly needed. We need a long-term vision to guide Canada’s adaptation to the broad array of opportunities and threats in the new global economy. Such a vision should be broad in scope, and should reflect the goal of eventual North American collaboration on economic, environmental and security imperatives.
Even a series of short-term tactical initiatives, if guided by a long-term strategic beacon, could get us where we need to go. Indeed, it may be the only way to get where we need to go. Much can be done on our own to position the necessary evolution of our relationships within North America and the world beyond. The recent Stephen Harper-Barack Obama initiative on the border and regulatory issues suggests that a window for progress on the Canada-US piece may be in sight.
The technology revolution of the last 20 to 30 years, particularly that relating to digitization and electronic transmission of information, has brought about seismic shifts that are shaking the geopolitical and economic foundations of the world. Today a villager in Africa or Bangladesh can take a virtual stroll down your street and admire your house by use of a widely available hand-held device such as an iPad or cellphone. Almost every field of scientific endeavour, from physics to molecular biology, has gone through tidal waves of transformation and accomplishment, enabled by the digital revolution. Much of the knowledge and information generated in all of human history is now electronically available virtually instantaneously, and at relatively little cost.
Consequential tidal waves abound. In the world of business and economics old concepts of production, distribution, marketing and competitiveness have been washed away in favour of what McKinsey & Company refers to as “global grids” of value creation. Supply chain concepts now embrace grids or networks, where almost any product you buy has significant elements of embedded value originating in a network of countries.
Components come from one set of countries, while the underlying technology, science and innovation originate elsewhere. Advanced transportation and logistics systems are now masterpieces of supply partnerships and just-in-time movement of people and things that permeate commercial value creation from customer to raw material. Even processes such as design, testing, research and marketing have gone through massive change and are often distributed among a variety of countries.
This process of globalization has also driven a massive economic liberation, particularly for countries lower down the development ladder. Much of the world’s economic growth, and the toughest competition, now originate in developing countries. China, India and Brazil are top of mind, but that is far too limiting. A number of the world’s fastest growing economies this year will be in Africa, for example. The fact is the world’s economic centre of gravity is inexorably shifting toward developing countries, with a decided bias in favour of Asia.
The consequences are enormous. The geopolitical order is shaking out to accommodate the weight and influence of emerging economies. Markets that were relied upon to soak up our products in the last few decades are struggling as developing-country markets surge. Competitors unknown to us 10 years ago are bringing established business icons to their knees. Many “upstart” companies from developing economies are now highly sophisticated, with a high-octane knowledge base well beyond the stereotypical of low-skill wage advantage. Countries like China and India are critical markets for today’s international companies, but they are also emerging as sophisticated supply side threats. They are availing themselves of scientists, engineers, mathematicians and other newly educated specialists in numbers many times greater than do companies in Canada or North America. At the same time, state-mandated and -funded science and research is enabling rich harvests of technology that will accelerate innovation, productivity and wealth creation.
Canadians must come to grips with the need for strong linkages to these emerging pools of knowledge, innovation and technology. Canada accounts for only 2 or 3 percent of the world’s scientific discovery and innovation; future success absolutely requires access to and collaboration with innovation clusters around the world.
Another consequential effect of globalization is the role of energy and natural resources, including water. All are vital for economic progress and for developing countries aspiring to reach standards of living similar to our own. But such resources are not evenly shared around the world. The have-nots are at the mercy of the haves, and demand for industrial materials is increasingly leading to scarcity and price spikes in the international marketplace.
Accumulating waves of industrialization stacked upon the development of already advanced economies now threaten the world’s environment as never before. Tensions over how the world adjusts and contains the environmental footprint of man’s activities are profound and will not subside any time soon. Friction over who should bear how much responsibility for possible corrections will play out in a world far less tolerant of grotesque inequalities in wealth, prosperity and living conditions.
Schisms between rich and poor, developing and developed have become real barriers to multilateral approaches to global issues, whether environmental or trade related. Historically effective institutions like the World Trade Organization and the United Nations, where negotiation and cooperation on vital issues such as trade, environment and security once flourished, are increasingly paralyzed by divisions between wealthy countries and countries with aspirations.
Many countries are turning instead to regional and bilateral arrangements where collaboration and consensus require less dramatic adjustment, and where there is less outdated institutional baggage to contend with. Such arrangements are emerging in Asia and the South Pacific, in Africa, Latin America, the Middle East and Europe. But North America has been trending in another direction, in spite of its enormous potential.
Nature has been kind to this continent, if we choose to work with what we have. Canada, in particular, is one of the most resource-rich countries in the world: we have energy, minerals, forests, water and arable land. We are a stable, democratic nation that embodies respect for human rights and the rule of law. Together with our North American partners, we could provide a level of energy, natural resource and food security that would be the envy of the world. We could develop competitive global value networks. We could continue as a world leader in innovation and research. And we could do it while improving our environmental footprint and our collective security.
A common approach to construction of pipelines and electricity grids could ensure the most efficient movement of energy from source to final consumer. A common approach to carbon pricing could lead to lower carbon emissions without leakage from one part of North America to another. A collaborative approach to the “commons” could ensure that species, ecosystems, watersheds, airsheds and the atmosphere are managed in harmony across jurisdictional boundaries. And we could build on NAFTA-induced integration of supply chains and transportation gateways to reach new levels of competitive success.
To some degree we do it now, but progress has stalled and we are falling well short of what could be achieved if governments worked together with more singular purpose.
For 20 years Canada, the US and Mexico have benefited tremendously from the integrative economic effects of NAFTA. Much of our prosperity and competitive success emerged from the North American platform. More recently, however, America-first policies, security initiatives and a general protectionist malaise have eroded the platform, exposing Canadian and Mexican vulnerability to the elephant in the room. Access to NAFTA markets has been compromised and supply chain efficiencies are lost.
NAFTA was negotiated before the advent of global value grids and the seismic shifts that now rattle the competitive foundations of international wealth creation. Many of the industries and specialized jobs that dominate the economies of today did not even exist in 1990. A thorough makeover that would strengthen the economic performance of the three member countries is long overdue.
The thickening border is also putting the Asia Pacific Gateway at risk. The gateway is all about connecting heartland North America with heartland Asia, and doing it via the ports, airports and shorter corridors across western Canada, with substantial benefits flowing to both Canada and the US. A thicker Canada-US border is an incentive to bypass Canada and enter the US directly, sacrificing the efficiencies provided by a gate-way solution. Would it not be far better to work with common focus toward the most globally competitive transportation systems for all of North America, aligning our approaches to infrastructure, regulations and border facilitation?
If the North American partnership is to work properly, we will absolutely have to approach security from threats such as terrorism, organized crime, global pandemics or product safety on a continental basis. The primary security perimeter should ultimately be continental. To do otherwise is to weaken the security of all, and do terrible damage to other aspects of the North American platform and the well-being of people in all three countries.
Participating fully in the new global economy also requires economic framework agreements that support and enable Canadians and Canada-based suppliers to participate in the dynamic and growing economies, particularly of Asia. We need the diversification such markets would provide, and we need the access and value grid linkages if we are to be a competitive force in the future. In an ideal world the North American partnership would shape harmonized framework agreements with other countries and trading blocs. Such an ideal is a long way off, but Canada cannot stand still.
At the moment, Canada has no comprehensive trade or economic framework agreements in place with any Asian country. Even the emerging Trans-Pacific Partnership agreement, potentially involving nine countries that include the US, New Zealand, Australia, South Korea and Japan, does not include Canada. Word has it that our old friend and ally the US is among those resisting Canadian participation.
Tensions over how the world adjusts and contains the environmental footprint of man’s activities are profound and will not subside any time soon. Friction over who should bear how much responsibility for possible corrections will play out in a world far less tolerant of grotesque inequalities in wealth, prosperity and living conditions.
Yes, trade negotiations have been concluded or are under way with Europe, India and a series of smaller economies, but our Asia flank remains dangerously exposed.
We are the world’s fifth largest supplier of energy, but 99 percent of our exports go to the US. In fine Canadian fashion, however, proposals that would support market diversification by means of expanded pipeline capacity to the West Coast are under increasing attack here at home. Even in the US, the very pipelines that offer energy security from stable and democratic Canada have come under attack. Again, a fundamental strategic imperative is lost in the fog of brand terrorism, narrow interests and attacks in the media.
Sadly, as America turns inward, Canada is falling behind competing nations in forging other trade agreements, and the prospects of a meaningful World Trade Organization Doha Round agreement remains distant.
Even Canada’s capacity to broaden and deepen the knowledge and innovation base of the economy depends on how we adapt to globalization. Our record when it comes to moving technology into the wealth-creating private sector has not been particularly impressive. This has negative implications for productivity and competitiveness, and it will hurt our ability to develop channels into countries like India, China and Brazil as they pursue paths of accelerating scientific leadership and discovery.
Any strategy for Canada, as a small trading economy, must begin with an assessment of game-changing shifts over which we have no control and from which there is nowhere to hide. We can adapt, adjust, take advantage of opportunities and mitigate threats, or we can wait for the “big one,” and pick up the pieces left behind.
The old baggage and stereotypes of Canada-US relations will take time to fade. Many are the sugar-plum visions of resetting the Canada-US relationship back to the special relationship of leaders convivially singing each other’s praises. On the other side are dark conspiracy theories that see only threats to Canadian culture, social programs and sovereignty. And while some see Mexico as part of the North American partnership, others are not so sure.
In the meantime, geopolitical and economic seismometers are signalling frantically that the pressures are getter stronger and spreading.
For the US and Mexico the message should be as clear as it is for Canada: Engage in an orderly process of engagement and collaboration around the big imperatives of security, economic competitiveness and environmental sustainability, or slide inexorably to the margins of global leadership.
It should be increasingly clear to Americans that something is going terribly wrong. The economic and fiscal crisis is only part of the problem. Deeper, more structural issues lurk in terms of global competitiveness, global security and the environment. Hopefully, American resilience and dynamism will again prevail. Maybe it will include an awakening on the potential role of North America in asserting leadership in the world of tomorrow.
Mexico is at an inflection point between becoming an advanced, increasingly prosperous and stable partner in North America, and falling back into the abyss of crime and dysfunctional governance. It needs American and Canadian support to move forward, and we should provide it. The notion that Canada can rebuild the North American platform without meaningful inclusion of Mexico is flawed. Hispanics have critical electoral mass in the US, and it is inconceivable that the US would accept the political and security risks of turning away from neighbouring Mexico. Paths and timing may vary, but the essential destination is the same.
Canadians have to reframe the way we look at our relations with the US. America long ago placed its relationship with Canada in the context of the larger economic and geopolitical arena in which its interests play out. Not surprisingly, as a quiet, nonthreatening ally, we don’t often command top position among American foreign policy priorities.
Canada needs now to place our relationship with the US in the larger context of our own geopolitical and economic aspirations. Let’s define how the North American platform supports Canadian interests. Patiently, persistently and with consistency derived from a well-defined long-term vision, our foreign policies should be crafted and positioned for implementation as opportunities emerge. Timing is always critical. Every initiative will have a time and context when quantum moves and progress can be made. The key is to know where we want to go and prepare for the journey.
While Canada is well positioned, particularly with natural resources and a geographical gift of gateway positioning between Asia and North America, the underpinnings are vulnerable. The North American platform is more critical than ever, and a process to reengineer what has become a frayed partnership with our continental partners is vital. The US will eventually see self-interest in the North American platform.
In the meantime, there is much to be done working with Mexico as well as working at a subnational level with the US. Vast progress has been made and can be made at the state or provincial level. Governors and premiers in the northwestern US and western Canada have made real progress to embrace collaborative approaches on a range of issues and initiatives. There is little standing in the way of Canadian companies establishing below the 49th parallel a footprint for their global value networks. Universities and research organizations are doing the same and it must continue.
But we must be ready when the US government is ready for a more comprehensive approach to economic, security and environmental collaboration.
Canadians are ready for the challenges that lie ahead. Living as we have off the avails of a small open economy, adaptation to the vagaries of the outside world is in our DNA. Business, government and community leaders have to step up to explain, communicate with and engage the public. Setting a foreign policy course and a foundation of opportunity for coming generations of Canadians must become job one.
We need to say what must be said, and do what must be done.