February 7, 1999
International agreements are best conducted among countries of relatively equal size and complementarity. This is especially true of bilateral agreements, because if one of the partners is substantially larger, the relationship can become exploitative for both parties. If you need proof, look behind the latest economic dust-up between Canada and the United States of Arrogance.
The issue (again) concerns split-run magazines. These publications are the same as the U.S. editions, except that they have a token Canadian story or two. The federal government objects to these magazines entering the country because they syphon off Canadian advertising revenue, thus undermining financial support for Canadian publications. Consequently, legislation (Bill C-55) has been introduced that would bar Canadian advertisers from buying space in these magazines, specifically Sports Illustrated. (Time and Reader’s Digest are exempt.)
The government’s reasoning is valid: The additional cost to produce split-runs is negligible compared to the cost of producing a magazine from scratch; therefore, split-runs represent unfair competition against domestic magazines. Since advertising isn’t covered in the North American Free Trade Agreement (leaving aside Mexico), you’d think the U.S. wouldn’t have much of a case against Bill C-55. It doesn’t, but that doesn’t matter. When you’re the world’s biggest economy, you pretty much make up your own rules and then force your “partner” to play along.
More interesting than the trade dispute, though, is the threatened retaliation. Against measures that affect an industry worth only $525 million, the U.S. is proposing to slap $4 billion-worth of sanctions on Canadian exports of steel, wood products, plastic, textiles and apparel. Clearly the U.S. isn’t interested in reasoned argument. The U.S. government’s policy of “What’s mine is mine and what’s yours is negotiable” does not permit it to recognize limits to economic expansionism.
In the past, when faced with irresistible American coercion, Canada has backed down, even when it was in the right. Time after time the U.S. filed complaints about Canadian softwood lumber exports, and each time the judgment found in Canada’s favour. Because the U.S. will not take no for an answer, Canada had to agree to hobble itself. To ensure that its softwood lumber, shakes and shingles don’t “harm” U.S. producers, which couldn’t satisfy demand on their own anyway, Canada imposed an export tax that especially hobbled B.C.
The unalterable truth is that Canada is little more than an economic vassal state, and NAFTA only exacerbates that subservience under the patina of “free trade.” The Globe and Mail reports that foreign ownership in Canada in 1996 totalled 31.5 per cent of all corporate revenue—just 5.1 per cent shy of the high of 1971, when Ottawa was prompted to enact the Foreign Investment Review Act. Of the 1996 total, the U.S. accounted for more than half.
To be fair, freer trade improves competitiveness and creates wealth. Nobody is advocating autarky, but since Canada has a weak, fractious domestic economy and a devalued currency, Ottawa has to look over its shoulder every time it wants to manage the economy for the benefit of its own citizens.
On the other hand, the U.S. also runs the risk of being exploited by Canada. In the case of the split-run magazines, the U.S. is deathly afraid that if Canada passes C-55, other countries will follow. “Canada is the vanguard,” said Christopher Sands, director of the Canada project for the Washington-based Center for Strategic and International Studies in the Globe and Mail. “The United States is saying ‘we’ve got to draw a line in the sand with Canada... If we don’t resolve them here, we will see barriers cropping up globally.” Such barriers would be a disaster for the entertainment industry, especially movie studios reliant on foreign markets to ensure that bad movies break even and good movies turn into gold mines.
Governments of culture-rich countries like France and Russia have every right to look upon American pop culture as a nihilistic narcotic that undermines their societies. Why should the land of Voltaire have to put up with Euro Disneyland, and why should the country that produced Dostoevsky have to watch icons of McCulture debase its society?
If all countries united to defend their cultures, the U.S. would be in deep trouble. Think of the ants in the movie A Bug’s Life the oppressor grasshoppers knew they’d be through if the numerically superior ants ever mounted a co-ordinated attack. Now, think of Canada as the lead ant. All it takes is one to stand up to the “grasshopper,” and then others might be emboldened to join.
America’s exaggerated response to C-55 must be seen as a sign of deep anxiety, and a recognition that Canada, as the smaller trade partner, has certain advantages. The only problem for Canada is finding the courage to enjoy the fruits of victory.
When Ottawa rightly passed legislation banning the gasoline additive MMT on health grounds, the manufacturer, Ethyl Corp. of Virginia, threatened to sue under NAFTA. To avoid an expensive dispute, Canada backed down. Canada recently refused to approve bovine growth hormone, both for health reasons and because it’s unnecessary in a quota-based milk industry. Monsanto, the hormone’s producer, is mounting an aggressive appeal. Will Canada back down again? What of C-55?
Against the health of Canadian citizens and culture, the bottom line of U.S. companies comes first. Somebody please explain to me the “free” part of free trade.