Friday, November 18, 2005

No, Canada?

In the course of some research on international trade I have recently come across some surprising data about economic activity in Canada. In an article in the Canadian Journal of Regional Studies from 2000, Mario Polèse notes in passing that many Canadians have become far more economically intertwined with the U.S. than with their own fellow citizens. It is interesting to speculate on the implications of this for Canadian national cohesion.

First, the data. Canada overall has become much more closely tied to the U.S. over the twentieth century. It seems hard to believe now, but in 1926 only roughly 37 percent of Canadian exports went to the U.S., compared to roughly eighty percent now. The two biggest provinces in particular have also followed this pattern even more extraordinarily. Ontario sent 39.2 percent of total GDP to the U.S. in 2000, as against only 17.2 percent in 1973. For Quebec the figures are 23 versus 8.6 percent. The percentage of all out-of-province exports going to other countries (and nowadays that is mostly the U.S.) as opposed to the rest of Canada has risen from 22 percent in 1967 to 59 percent in 1996, but this pattern is not uniformly true. In the Atlantic provinces and British Columbia this ratio has been relatively stable, but it has soared in Ontario and Quebec over this time. Five Canadian provinces – Newfoundland, British Columbia, Ontario, Alberta and Quebec – now export more to the U.S. than to the rest of Canada. Note that the last two provinces, particularly Quebec, have many who believe that they are treated unfairly by the rest of Canada.

It is also worth noting that the constitutional restrictions against provincial trade barriers with respect to other provinces are weaker in Canada than in the U.S. In the U.S. Article I, Section 8 of the U.S. Constitution uniquely empowers the federal government to regulate interstate commerce, so that Texas, say, cannot impose trade barriers on agricultural goods from New Mexico. While the Canadian Constitution explicitly prohibits provincial tariffs on imports from other provinces, various types of provincial nontariff barriers exist. While by the standards of many international trade barriers these are not large, because of NAFTA they may be larger than the barriers other provinces face on trade with the U.S. In parts of Canada there was (justifiable) anger about the unwillingness of the U.S. government to obey NAFTA-tribunal rulings requiring it to eliminate barriers to lumber exports from Canada, but many of the Canadian provincial officials complaining the loudest oversee economically similar barriers to trade with other parts of their own nation.

So the linkage of much of Canada with the rest of the U.S. is then growing faster than its linkage with the rest of Canada. One could easily imagine that this could weaken the ties that bind several parts of Canada to the rest of their citizens. Even secession is not entirely out of the question in the distant future, particularly for Alberta and Quebec. Ironically, if Quebec separation were to happen it would occur even as traditional Quebecois nationalism is a declining force. Mark Steyn argued in a piece in the British magazine The Spectator (and which is only available now for a fee, alas) in which he argued that declining Francophone Quebecois demographics had caused the separatists among them to lose the 1995 referendum on whether Quebec should separate, saying that "had Quebec Catholics of the mid-Seventies had children at the same rate as their parents, [separatist leader] M. Bouchard would now have his glorious république. Now he never will. Quebec couples have an average of 1.4 children, and their shrivelled fertility rate has cost them their country." Immigration (immigrants not being particularly nationalist, and tending to have larger families) and native demography make traditional nationalist separatism a spent force in Quebec. But the growing ties with the U.S., and the possibility that trade barriers with the rest of Canada might become relatively more formidable might make the Canadian federation a losing proposition. So too with Alberta, whose potential (if relatively high-cost, for now) oil reserves are coveted by entrepreneurs eager to sell them to the gigantic market of American consumers. It would be ironic if a trade agreement whose primary problem Americans saw as emanating from low-cost Mexico ended up having much bigger effects north of the border.


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