"The Canadian Advantage in the
Era of Globalization"

Notes for an address by the
President of the Privy Council and
Minister of Intergovernmental Affairs
the Honourable Stéphane Dion

at the Globalization 2000 Symposium

Calgary, Alberta

September 25, 1999

Globalization 2000: convergence or divergence? This is the question put to us by the organizers of today's symposium.

Globalization is a trend toward economic, social and political integration among the different populations of the world. In economic terms, it comprises all of the forces that tend to bring the world toward a single market-space. One of its most easily measured effects is the growing importance of external trade in countries' economies.

Globalization poses a number of challenges to national governments, in terms of their ability to meet the economic and social needs of their populations. But does it raise the question of their very existence? Will it merge them into larger units? Or, on the contrary, will it break them into smaller units? In light of my responsibilities for Canadian unity, you will understand that I am approaching this issue from the angle of the existence of countries. Your question thus becomes the following: will market globalization increase or decrease the number of countries in the world?

Some people believe that market globalization will lead countries to merge together, through a convergence effect, while others predict that the same phenomenon will cause a number of countries to break up, through an effect of divergence.

According to the first group, market globalization entails a concentration of the economy which in turn necessitates political concentration, and that the future belongs to supranational organizations such as the European Union, NAFTA and the World Trade Organization, much more than to traditional nation-states, which, having become obsolete, should gradually cease to exist. Proponents of this theory predict that national borders will lose all importance.

The second group predicts the rise of small regions, more homogeneous entities that will be able to adapt flexibly and find their specialized niche in the gigantic global market.

This debate touches Canada very closely. Some believe that globalization is eroding Canadian sovereignty and pushing us into the arms of the American giant (convergence effect), while others predict that our provinces will increasingly come to act on their own, which could eventually break up the federation, with Quebec leading the way (divergence effect).

In other words, in ten, twenty, thirty years time, will globalization have increased or decreased the number of countries? And will it have cost us our Canadian identity?

My sense is that market globalization will likely have no noticeable effect on the number of countries in the world. Ten, twenty, thirty years from now, the role of NAFTA, the European Union or the World Trade Organization will certainly have evolved, in a way that is difficult to predict today, but France, Germany, the United States, Mexico will still be separate countries, with their own seat at the UN.

As for us, market globalization is not a threat to our unity. On the contrary, it works in favour of Canadian unity. My presentation will be in three parts. First, I will show that market globalization has so far not created a single new country. Second, I will measure more precisely the actual scope of this phenomenon known as globalization: we must not let our enthusiasm for the concept exaggerate its importance or its effects. Third, I will show how, on the whole, the issues surrounding market globalization are a further argument in favour of Canadian unity.

1. Market globalization has so far not created a single new country

Quebec separatist leaders regularly point to the growing number of countries in the world, linking the phenomenon to globalization. For example, Jacques Parizeau stated on April 29, 1999: "One must not be surprised by the multiplication of countries, the number of nation-states. (...) In that sense, the debate on globalization (...) touches directly on the concept of sovereignty." [TRANSLATION]

The world comprised 69 nation-states in 1945. It now has 191, or 122 more. None of those 122 new nation-states was born of market globalization.

No fewer than 93 of them are former colonies. Decolonization stems much more from a surge in the values of equality and human dignity than from market globalization. Other instances of decolonization may occur in the future, as a result of the same process of political emancipation. East Timor is one such example, a former Portuguese colony whose forced annexation by Indonesia could soon come to an end.

Outside the decolonization process, only six nation-states were created between 1945 and 1989: Israel, North and South Korea, Senegal (after the disintegration of the Federation of Mali), Singapore (expelled from the Federation of Malaysia), and Bangladesh (which seceded from Pakistan). You'd be hard pressed to link any of those different cases to market globalization.

Since 1990, 23 new countries have appeared, all of them, without exception, born out of the chain of events that accompanied and followed the disintegration of the Communist empires: the three Baltic republics, Russia, eleven other former Soviet republics, five nation-states born out of the former Yugoslavia, the Czech Republic, Slovakia and Eritrea (which separated from Ethiopia following a civil war). Communism has been described as a type of historical deep- freeze, and in that sense, these countries' accession to independence stems from the death of a 19th century ideology. Their birth, as well, cannot be attributed to a recent phenomenon of modernization such as market globalization.

Some will say that the advancement of democratic and liberal values and systems throughout the world is one of the dimensions of this catch-all concept known as globalization. And it will be pointed out that, since the end of the Cold War, the international community has been better positioned to intervene for humanitarian reasons to bring peace to ethnic conflicts within countries. But we must agree that this dimension of globalization, which has brought down colonial and totalitarian empires, in no way threatens the unity of countries which, like Canada, are already democratic and liberal.

Thus, there is no historical basis to the claim that market globalization has any effect on the number of countries. Now let's look at the current trends.

2. The phenomenon of globalization must not be exaggerated

We need to be wary of intellectual fads, passing fancies for a new concept. Globalization is a real phenomenon, to be sure, but it is not the overarching mono-causal explanation for the major trends of today and tomorrow.

Indeed, we must not exaggerate the novelty of this phenomenon. It comprises new dimensions, such as significant communication technologies, but according to a number of economists, mobility of labour, goods and capital is more restricted today than it was a century ago. The 19th century phenomena of vast migrations to America and Australia, an almost complete absence of passports and tariff barriers and the division of the world into major colonial empires, led to globalization on a massive scale.

In contrast, the first half of the 20th century was a period of economic fragmentation, marked by two world wars and the Great Depression. Today, after five decades of market liberalization, we have barely achieved the degree of economic globalization that existed a hundred years ago. We thus need to put what we are currently experiencing into perspective.

Of course today's phenomenon of globalization is very real. It is characterized, among other things, as I have said, by the increasing proportion of external trade in countries' economies, by the enhanced role of international organizations, and by the scope of international agreements. But it would be a gross exaggeration to imagine that this expansion of the international economy is such that it will make national borders disappear and make them obsolete.

Let us look at our own case, Canada. While it is true that our trade with the United States is growing more quickly than our own interprovincial trade, this is because our domestic economy is already highly integrated. The Canadian economic space is much more than a free trade arrangement.

I am sure you are familiar with the work of John F. Helliwell (How Much Do National Borders Matter?, Brookings Institution, Washington, 1998). He has calculated that the flow of goods between provinces is 12 times greater than that between Canada and the US, once you take into account factors such as size and distance. And that flow is 40 times greater for trade in services.

This high level of integration of the Canadian economy is not mere chance. It stems from our sharing political and legal institutions, a common currency, harmonized economic and social policies, and from the fact that we are united by a national solidarity, all elements that are missing in our relationship with the United States.

Yes, borders still matter. In one sense, we can even say that the issues surrounding market globalization make it more necessary than ever to maintain a strong national cohesion within each country. Mutual assistance among fellow citizens and national solidarity are not obsolete assets; indeed, the very opposite is true. I would like to illustrate that point by again using the example of our own country, Canada.

3. The advantages of Canadian unity in the era of globalization

In our own case, market globalization is expressed essentially through a greater openness to the American market. More than ever before, the United States is our main trading partner. In 1988, 74% of Canada's external trade in goods was with the US. In 1998, it had increased to 85%.

Today like yesterday, and perhaps even more than yesterday, the Canadian federation is a tremendous asset for further opening the American market, and for resisting US protectionism. In 1998, our exports of goods and services to the US was estimated at around $297 billion.

I could mention the tremendous means Canada deploys to make its voice heard in the United State: our embassy (which is the third largest embassy in Washington) and our 14 consulates and trade offices. We need the professionalism of these diplomats, trade and investment officers, lawyers specialized in commercial law and science and technology advisors, because they are the ones who in large part advance our interests in the host of centres of influence in the Unites States: the business community, the White House, the House of Representatives, the Senate, and not to mention the states.

But what is most important is that these impressive resources are being deployed by a country that the United States knows and respects. While the American market is vital to us, the Canadian market is also very important to the US. Canada is its largest trading partner, far ahead of Japan and almost equal with all the European Union countries combined. We may be only 30 million Canadians, but those 30 million traded around $1.25 billion in goods and services with 272 million Americans every day in 1998. It is a trading relationship that is unique in the world, and that allows us to exert a strong influence on our big southern neighbour when necessary.

But there's more. Canada is an ally to be reckoned with in terms both of trade policy and of foreign policy in general. The US authorities know full well that few countries are as influential in so many international forums as Canada.

We have, and will continue to have, our difficulties with certain forms of US protectionism. But our main asset for breaking into the US market is our unity. Trying to do so in disorder and division would weaken us dangerously.

Conclusion

I hope that I have demonstrated three things today. First, market globalization has so far not created any new countries. Second, this phenomenon is not significant enough to render national borders useless in the future. Third, the challenges surrounding market globalization instead have the effect of encouraging countries to strengthen their internal cohesion.

I have placed special emphasis on the ties between Canada and the United States in this era of globalization. But when I look beyond the United States to our relations with other parts of the world, I am just as optimistic about the future of our country.

I have said that there are few countries better positioned than ours to succeed in this global world. Canada is a country that is respected, that has an excellent reputation, a country that has successfully combined cohesion as a whole with great diversity: the strength of provinces and territories that complement one another, two official languages that are international languages and two legal systems, civil law and common law, which allow us to speak the legal language of the vast majority of countries, a geographic position that puts us at the gateway to the Americas, Europe and Asia, and a multicultural population that gives us a foothold on every continent. There is no doubt that we have made our diversity into a strength that we will need more than ever before.

Canada is a decentralized federation which provides each of its provinces with maximum flexibility to optimize its assets, but it provides us at the same time with a cohesion, an exceptional capacity to pursue common objectives, both at home and abroad, strengthened by the diversity of our experiences.

Speaking of experience, Canada has it in spades, when it comes to globalization. It did not wait for globalization to become fashionable before it started taking an interest in it. Since the end of the Second World War, it has played a key international role in the creation of institutions that provide an effective framework for globalization. Such examples include the International Monetary Fund and the GATT, which became the World Trade Organization in 1995. One could also mention other examples such as the World Health Organization, whose first director general was a Canadian. When we speak of globalization, we, Canadians, are like fish in water.

In the face of our powerful neighbour to the south, which is increasingly our largest trading partner, we need to rely on a united Canada. At a time when international agreements are affecting our lives more and more, we need to be able to count on our country's prestige and influence. To take on the challenges of the new economy, solidarity among all Canadians is more essential than ever.

This is what Canada is all about: a synergy of cultures which yields excellent results. And that's why Canada works so well. It is this optimism in and enthusiasm for the future of our country that I wanted to convey to you as you study the phenomenon of globalization. I thank you for giving me this opportunity.

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