"Globalization, or at least the remorseless internationalization of the market economy, is changing the nature of Canadian politics, sharpening the cleavage between those who embrace and those who fear the consequences," writes Jeffrey Simpson, The Globe and Mail's national affairs columnist in Wednesday's column, painting the backdrop to this week's Time to Lead series on protecting strategic assets.
Mr. Simpson took questions at 2 p.m. ET Wednesday on the continental perimeter negotiations, the TMX-LSE stock exchange merger, free trade with Europe and more related to this thorny topic. A transcript follows, or skip to the bottom to follow the discussion in its original window.
Guy Nicholson: Hi, I'm Guy Nicholson, an editor with The Globe and Mail's opinions section. We're here today with Jeffrey Simpson to discuss sovereignty and globalization, including his latest column on that subject.
Please start submitting your questions now - we may not get to them all, but will try to answer as many as possible. As we wait for readers to chime in, I'll start with a question for our columnist.
Jeffrey, you say in today's column that issues such as free trade with Europe, perimeter security with the United States and the possible TMX-LSE stock exchange merger are sensitive because "Canada is the smaller partner and therefore will probably have to adjust domestically more than the larger partners." Are the adjustments worth the partnership?
Winning 'pegger: I am not a globalization-phobe and I believe that Canada can compete and win in the 21st century. However, my biggest apprehension about Canada's "open-season" stance on foreign ownership (potash notwithstanding) is that it risks ceding control over our natural resources and further, the method by which they are extracted. Is my concern warranted?
Alex: Do you thik the emrger would be a net benefit to Canada? How would this be measured and is there data available to make this estimate?
Guy Nicholson: I believe Alex is referring to the stock exchange merger.
Louis: I believe that Quebec should approve the deal ASAP. It was bad because the advance made in Montreal in the field of electronic platform was in the hands of Toronto. With London in charge it will rid this operation from the nation building handicap and release creativity. It would be a net benefit to Quebec.
Jeffrey Simpson: Guy - all such arrangements should be assessed, if possible, on a cost-benefit basis, knowing that there is much that is unknowable about how the arrangements will work out over time. If you think back to the free-trade debate with the U.S., the people who said that Canada would sacrifice its social programs were wrong, as were promoters who said Canadian productivity would rise. In these instances, the laws of international economics would likely favour the arrangements, but at some cost of domestic ability to act unilaterally.
Jeffrey Simpson: Winnipegger - If you believe that Canada can win in the 21st century, then it likely will be necessary to re-think the notion of sovereignty to some extent, because much of what we think of as globalization (trade, communications, services) does not respect traditional political boundaries. For Canada to truly "win," in mhy opinion, it would be better if we processed more of the resources here and had built up more world-size companies headquartered here.
Guy Nicholson: I'll also relay a question from reader Archie1954, who said offline: "America at the moment is in decline in every way except its military. … Why pray tell would we want a more porous border with a basket case?"
Jeffrey Simpson: Louis - If you believe that, then you would believe that a small exchange such as Montreal's would have more freedom and influence working under London (and Toronto) than under just Toronto alone. That is an illusion. But by this logic that Montreal is better off as part of something bigger, presumably you would favor Quebec and other provinces fold their little provincial securities regulators into something national. We are the only major country, as you know, that has these little fiefdoms.
Jeffrey Simpson: Archie1954, I have often written that the apogee of U.S. power came in 1990 with the collapse of Communism, and that it has been in relative decline ever since, in part because of tragic decisions it made such as the invasion of Iraq and in part because of ones it failed to make such as attending to its fiscal deficits. Having said that, the U.S. is where it is: next to us. It's economy remains ten times larger than ours. As Bismark once said, geography determines much in the world. To refuse to work on keeping open the border to our neighbor and largest customer (and friend) would be a serious error.
Guy Nicholson: Jeffrey, you mentioned the debate over free trade in the 1980s. How much has Canada benefited from the FTA and NAFTA, and what has it lost?
ohnilsson: Traditionally, Canada has been a net exporter as a trading nation - although we have had some difficulty being more than hewers of wood and drawers of water. What are the global competitive forces that may interfere with our vital international interests given how much of our trade is in commodities and resources?
dave: You state that the No.1 premise is to thin the border. What makes you draw this conclusion?
Andrew: What is the political fallout of the NYSE/DB merger? Since the LSE/TSX merger is actually more favorable to the minority side, shouldn't Canada approve it, or be left in the backwaters?
nevyn: Jeffrey, a quick question on an international perspective on corporate tax cuts. It seems that in the last couple of decades there has been a growing movement in several nations (including here) to cut corporate taxes as a way to encourage investment and grow the economy. But if every country is doing it, doesnt this essentially become a price war? One where there is no overall net gain and government revenues sink across the board?
Jeffrey Simpson: Guy, do you have a couple of hours? The simple answer is that no political party or major interest group (not fringe ones on the far left) would want Canada to withdraw from the FTA. There might be many reasons for that reticence; inertia being one. Another might be that it seems to have become woven into the fabric of the Canadian economy. As I said earlier, we did not lose our country (as then-Liberal leader John Turner warned) nor our social programs. Those fears were seriously overdrawn. And we have added jobs because of increased trade. The issue now, however, is that the U.s. economy, while still huge, is in relative decline in the world. Therefore, Canadian habits of behavior that look only southwards will get this country into trouble. Moreover, the U.S. has been horribly governing itself for some years now, borrowing massively abroad, piling up massive debts, invading other countries on borrowed money. The country is therefore weakening itself, which makes some diversification by Canada imperative.
Jeffrey Simpson: Ohnilsson - In the short term, a Canadian dollar at or above par with the United States makes exporting more difficult, although in the longer term it makes the importation of machinery cheaper, thereby making certain companies more competitive. We have a rentier view of ourselves: build something up and sell it to the Americans or whomever. That is a cultural habit of mind, alas. We also lack internal economies of scale, given our size.
Jeffrey Simpson: Dave, when so many hundreds of thousands of jobs in Canada depend on exports to the U.S., or on cross-border movements of goods and services, it becomes the number one foreign policy objective of any government per force.
Jeffrey Simpson: Andrew, I think at the end of the day, if exchanges elsewhere are merging, then the London-Toronto one will and should go through.
Jeffrey Simpson: Nevyn - you are right on both counts, sort of. Sort of, because almost all countries have been cutting corporate taxes, not just "several nations," the theory being that capital is mobile and lower corporate tax cuts might more easily attract capital To some extent, this does set off a kind of price war. But, and this is important, corporate taxes are one of many factors companies take into account when making investment decisions. There are factors involving location, geographical proximity to markets or resources or both, political stability, environmental regulations, quality of workforce, unionization rates and attitudes, and so on. The idea that a company would go to Place A instead of Place B because of a one-point difference in the tax rate is rather silly.
Guy Nicholson: Jeffrey, you said in your column that at least some of the questions raised by the opposition about the continental perimeter deal are legitimate. What questions need to be answered most pressingly, in your opinion?
ohnilsson: Given Canada's large unfunded liabilities in CPP and Healthcare and the temptation to inflate the problem away on the part of national governments, not just here, but elsewhere - do you see stability in the USD/CAD exchange rate, or continued appreciation of the Canadian dollar? Is this going to align Canada closer with the United States or other foreign trading partners - many of which do not have the same social overhead that we carry?
jmattei: When I first heard about a national regulator of exchanges I thought it made a lot of sense. I have since been informed by colleagues that the self-interested and self-serving provincial fiefdoms will fight tooth-and-claw to keep their jobs - understandably. Is there some reason that a set of national regulations cannot be formulated that could then be administered and enforced by the existing bodies in the provinces. Sort of like GAAP or SOX (which was imported almost wholesale from a foreign regulatory body). It would provide a national framework of standards that have to be met everywhere in the country.
Irek from Windsor: Will the Canada-EU free trade agreement represent NAFTA II for manufacturing cities like Windsor? In short, will CEFTA be "good for Canada BUT devastating for Windsor"?
Jeffrey Simpson: Ohnillson - people who predict where currencies are going to be long-term should save those predictions. What I could venture to say is that the U.S. dollar, what with the country's massive borrowing, trade deficit and current account deficit, is likely to be going down, but as the reserve currency it does not take the pounding that another currency would under similar circumstances. Canada's challenge is that our productivity remains so low that combining that factor with a high dollar puts the crunch on many Canadian companies. We also face provincial deficits that will indeed be further burdened by health-care costs for which there is no easy remedy.
Jeffrey Simpson: Irek, I doubt CEFTA will have much of an impact on Windsor, as it is focused on such things as provincial purchasing policies, services, agriculture.
Sam: Many countries like Japan are negotiating Free Trade Agreements: Do you think the Tokyo Stock Exchange will merge with any Asian or European exchange?
Guy Nicholson: Readers, if you have more questions for Jeff, please send them now.
Irek from Windsor: If water is the oil of the 21st century, is water privatization on the table in terms of CEFTA and what are the ramifications? I understand such moves failed badly in South America.
Jay Tomas: In theory globalization makes a good argument, but it links the worlds problems and bakes it in a nice cake so we all fail. Globalization allows corruption and manipulation of the worlds money and resources to occur. Greedy and power hungry factions with in gov'ts and industry make globalization a VERY dangerous issue. It becomes a tool people misuse.
Jeffrey Simpson: Irek, water is definitely not part of the CETA negotiations.
ohnilsson: What happens if the USD is no longer the reserve currency? We have seen a suggestion from the IMF and World Bank suggesting SDRs could be tapped to fulfill this role.
Jeffrey Simpson: Jay, corruption, judged by the annual reports of Transparency International, is found in many countries, some newly democratic, some authoritarian. Globalization can lead to corruption, in the sense of more money for corrupt elites; it can also open things up, since companies are judged by their shareholders in part on how they comport themselves overseas. Globalization also produces competition that threatens local elites and the often corrupt control they exercise in their markets.
Irek from Windsor: What is the role of universities in preparing Canada for the 21st century and how would you describe their competitiveness and funding in terms of research and development with American, European and global counterparts?
Jeffrey Simpson: Ohnilsson: Noobody has come up with an alternative to the USD as a reserve currency. The problem with the yuan is that it is a manipulated currency in a country without a firm foundation of laws governing invested money and property. With the recent troubles of the Euro, that doesn't look like a very good bet to become a major reserve currency any time soon. But because the UDS is the reserve currency, it shields the country somewhat from the follies of its profligacy.
Guy Nicholson: Readers, our columnist is out of time -- thanks for taking part in our weekly discussion. And thanks to Jeffrey for joining us today. Apologies that we didn't get to all the questions.