International Trade Liberalization:
Canada’s Potemkin Village of Policy?

The phrase “Potemkin village” refers to the clever ruse by Russia’s Catherine the Great’s minister and lover, Count Potemkin, to convince his employer of the health of the countryside. All along the carriage route taken by Catherine on one of her royal inspection tours, Potemkin ordered that false cottages and villages be built and that peasants be press-ganged into waving and smiling at their queen. The trick worked and has come to represent the cynical distance which the clever politician can put between symbolism and reality.

Is the same distortion at work in Canada’s trade policy? On the one hand, you have the Minister of International Trade loudly stating his support both for the ongoing Free Trade Area of the Americas (FTAA) initiative and a possible “Millennium Round” of World Trade Organization (WTO) talks. On the other hand, we see him and his colleagues defending subsidies to Bombardier, 300 percent tariffs on American dairy products, and restrictions on split-run American magazines as if these trade distortions, rightfully criticized in three WTO dispute resolution panels, were completely legitimate. And, who can forget Canada’s pusillanimous performance in the failed Multilateral Agreement on Investment talks of last Fall? It is as if Mr. Marchi et al deeply and fully support the principles of free trade, except when it requires Canada to confront one of its politically potent domestic interest groups. Free trade, yes, but only if the Council of Canadian’s Maude Barlow approves.

I admit I don’t know what Mr. Marchi and Mr. Chretien really believe about free trade. They were dead set against the FTA and NAFTA during the 1980s and early 1990s. Now they appear to have embraced both. Perhaps there is some clue in how Canada is exercising its leadership in international trade negotiations.

If you look at Canada’s role in the FTAA negotiations, for example, one sees a consistent pattern of what psychologists call “conflict avoidance.” To be fair, Canada is not alone in wanting to avoid having to tackle the tough issues of actually reducing tariffs and protecting foreign investors. Nor is it easy to bring together 34 countries, some with long traditions of protectionism, and get them to agree on trade liberalization. Indeed, even the United States, which should be leading the effort, has seen its Congress reject the President’s request for “fast-track” negotiating authority. (Such authority forces the Congress to only vote yea or nay on a trade treaty, thus preventing individual legislators from altering it to protect client interest groups.) Still, what is Canada doing?

This is an important question right now because Canada is currently in the position of chairing the FTAA talks until later this year. Canada is hosting the next summit meeting of the hemispheric trade ministers which will take place in Toronto on November 1.

To find out more as to Canada’s trade leadership activities, I consulted the website of the House of Commons sub-committee on International Trade, Trade Disputes and Investment. On March 3, 1999 Minister Marchi presented a report. He was quite stirring, in a way, in his support of the FTAA and its principles.

What is at stake, when we say the national interests of Canada’s trading policy would be well served, is this can create the world’s largest free trade area—800 million people with a combined GDP of $9 trillion. I think the FTAA would position Canada on the ground floor in what clearly will be one of the principal economic areas of our globe.

Mr. Marchi gave his two priorities as “business facilitation” and engaging “civil society.” Business facilitation refers essentially to cutting the red tape and regulation faced by exporters as they move goods from country to country. Marchi is correct in saying that it doesn’t matter if you get the policy right and companies still can’t trade because of practical barriers. By the same token, you are no further ahead if you face fewer regulatory obstacles, but the policy is askew. More to the point, the sticking point in the FTAA negotiations is not whether customs forms are a good or a bad thing, but whether countries can accept the inevitable dislocations stemming from freer trade.

To that end, Marchi’s near obsession with “civil society” consultations raises some concerns. To be sure, it is never a mistake to consult Canadians on major trade negotiations. However, if Canadians are to be consulted, all Canadians should be consulted. Though the preparations for consultations are at a preliminary stage, one senses that they intend, in the words of Claude Rains in Casablanca, to “round up the usual suspects.” Expect to see unions, environmental groups and self-appointed torch carriers for Canadian isolationism such as the Council of Canadians as the participants at the meeting of Non-Governmental Organizations scheduled for April 26, 1999. Consultations with just these groups would be a mistake. Too many of them will reject the FTAA precisely because it will alter the privileges of the interests they claim to represent.

The Liberal government, of course, knows this and that is why they are proceeding very, very delicately. Rather than defending the principles of free trade before these groups, they are brandishing its rhetoric while timidly inching towards its reality.

Mr. Marchi is a skilled politician and he knows how to speak to his House colleagues without giving away his true thoughts. For a better flavour of the tentative nature of Liberal trade policy, it is interesting to observe what the civil servants in the Department of Foreign Affairs and Trade (DFAIT) had to say a few days earlier on February 11 to the same committee. Here are just a few samples of the dialogue.

Mr. Benoît Sauvageau, MP Bloc Quebecois: Okay. Could you be more concrete as to the definition of “concrete progress”? [English]
Ms. Kathryn McCallion, ADM DFAIT: Oh, oui. You want me to “please be more concrete on the concrete progress”. Okay.

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Mr. Claude Carrière, DG DFAIT: There could be two answers to your question.
Mr. Charlie Penson, MP Reform: Is that all?
Mr. Claude Carrière: Yes, only two.
Some hon. members: Oh, oh.
Mr. Claude Carrière: Actually, there is one answer: it’s “maybe.”

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Ms. Kathryn McCallion: It’s about how we promote the geometric progression of information being shared, keeping it clear.

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The point here is not to pick on civil servants who, on the whole, perform admirably the tedious detailed work of trade negotiations.  The point is to call upon Mr. Marchi to express a stronger, clearer commitment to free trade. Obey in spirit and letter the WTO trade rulings, including the one of split-run magazines. Use the opportunity of Canada’s chairmanship of the FTAA summit to advance negotiations rather than avoid controversy. Listen and show leadership. No props. Concrete progress.