Is globalization good for Canada?
YES: Our jobs and quality of life depend on it, argues business professor ALAN RUGMAN Today’s agents of globalization are multinational enterprises, with names like IBM, Ford, Toyota, Nortel, Seagram and Bombardier. But their roots go back over centuries, as merchants and traders naturally expanded from domestic to international markets to grow. In this sense, business has always been international business.
United Nations data show that today the world’s
500 largest multinational enterprises account for more than 80 per cent
of the world’s stock of foreign direct-investment, defined as
equity-controlled investment in foreign subsidiaries. Of these 500
multinationals, 434 are from the core ‘triad” economies of the
European Union, United States and Japan. These triad-based
multinationals drive globalization. They compete with each other for
market share across manufacturing sectors, such as autos, consumer
electronics, specialty chemicals, and pharmaceuticals, and increasingly,
across service sectors — media
and entertainment, transportation, and financial services.
Canada is in the big leagues of international
business. The 500 multinationals include such Canadian-owned names as
BCE, Nortel, Seagram, George Weston, Transcanada Pipelines, and the five
chartered banks. Meanwhile, foreign-owned firms contribute to Canadian
prosperity. Firms like General Motors Canada, IBM Can- ada, DuPont
Canada and Kodak Canada pay taxes, employ thousands, transfer technology
and clearly contribute to our economic and social development.
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Let’s take automobiles as an example of
globalization’s benefits. such benefits do not stop with foreign-owned
firms such as Ford Canada, GM Canada, and Daimler Chrysler. These
multinationals are at the heart
of large business networks. Literally thousands of other items are
linked to them as key suppliers and customers in clusters of economic
activity, providing engine, brake, electrical, seating, and other
components. Virtually all of these secondary suppliers are
Canadian-owned. Even when the smaller firms have zero foreign sales,
they are still 100 per cent part of a global business as they sell their
product to a multinational automobile assembler that is competing
globally.
Some of these key suppliers, like Magna (based
in Aurora, Ont.); have grown enormously due to globalization. A key
supplier to the U.S. multinationals and a multinational itself, Magna
now has key suppliers of its own and has become a flagship firm —
that is, a multinational enterprise at the hub
of a business network. Such multinationals compete globally and provide
strategic direction to other members of their cluster. All the firms in
the network benefit from interlinkages.
Today, about one-third of Ontario’s
manufacturing sector is automobile related — about
the same proportion as 30 years ago. Thirty years ago, critics of
globalization criticized foreign ownership of the Canadian economy. But
GM, Ford and Daimler Chrysler are still with us, and thousands of
Canadians have jobs and incomes dependent upon their continued success.
Consider the computer sector, where Nortel
Networks of Brampton, Ont., is a flagship firm. It hires more University
of Toronto electrical engineering graduates than does any other
organization. In fact, for years, the best jobs have been with
multinationals and with their partner firms in the business networks.
And now, parts of the public sector are closely associated with business
networks, as research centres or as educators of skilled workers and
marketing people.
Instead of regulating business, nowadays
governments want to facilitate it. The health, education and
social-services sectors are only indirectly affected by globalization,
but their efficiency affects Canada’s competitiveness. As a
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result, all of Canada is embedded in the process of globalization.
If you don’t like globalization, you don’t like your neighbours and
their jobs. Critics may describe multinationals as big, bad and ugly —
but in reality, they are the engines of Canada’s
economic and social development. Global capitalism has a human face, and
for Canadians, this is a happy face.
Canadians are enmeshed in globalization because
they enjoy the wonderful geographic advantage of being anchored to the
world’s largest and fastest-growing market. The U.S. economy is a
magnet for Canadian business, with 85 per cent of Canada’s trade and
investment going there. For Canada, the free-trade agreement of 1989,
and NAFTA, in 1993, provided institutional linkages and market access to
this key part of the triad. Since then, Canadian- based multinationals
like Nortel have moved on to become truly transnational firms,
with networks of operations around the world.
Globalization and free trade have not
diminished Canadian sovereignty. The health, education, social-services
and cultural sectors were exempted from the national-treatment
provisions of the free-trade agreement and NAFTA. Twelve years after the
free-trade agreement, these exemptions remain. Provincial governments
are still in control of these sectors. The United Nations shows that
foreign direct-investment contributes to economic development; it also
ranks Canada as a country with the world’s highest quality-of-life
index. It seems clear that global capitalism helps economic development.
Technology, when it is generated by competing triad-based firms, raises
standards of living. Working together, business and government can help
foster business growth and thereby raise everyone’s standard of
living. Globalization has been good for Canada, and will remain a driver
for Canadian prosperity in the future.
Alan Rugman, formerly an
international-business professor at the University of Toronto, is a
Fellow of Strategic Management at Oxford University’s Templeton
College.
from Globe and Mail, October 18, 2000 pg. A15 |
Is globalization good for Canada?
NO: We are exacerbating the divide between rich and poor, says columnist NAOMI KLEIN I reject the question’s premise. This is not a debate about globalization; it’s a debate about
very specific economic policies and priorities that have been
masquerading under the pseudonym of globalization for far too long.
These are the policies that countries are told they must embrace if they
are to welcome foreign multinationals. In other words, it’s not global
trade that’s the problem, it’s the string of conditions attached to
that trade.
And yet, whenever there are protests against new trade agreements or
expansions of existing ones, the critics are always described as
protectionists who are somehow against all cross-border commerce. In
Canada, being against NAFTA’s expansion or the World Trade
Organization’s reach is often portrayed as being in favour of living
in cedar huts eating back bacon and butter tarts.
What we know is this: There is nothing magic about trade in and of
itself. The fact that 43 per cent of the GDP is exports is a meaningless
statistic. Trade is good for Canada when our trading partners are
healthy, and bad when they are not. In Ontario, Quebec and Alberta,
where the major trading partner is the United States, unemployment has
been down and growth has been strong. In British Columbia and
Saskatchewan, where trade means shipping wheat and logs to Asia, the
region has not yet recovered from the Asian financial crisis of 1997.
Knowing this, a country in charge of its destiny would not still be
stuck in the pro- or anti- trade debate. It would develop, in
co-operation with other nations facing these pressures, policies that
generate exports and protect workers and communities from the volatility
of trade. It would develop policies to attract investment that do not
barter away its social safety net and culture.
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None of this is protectionism; it’s good government, adapted to a
global age. So why can’t the discussion about trade abandon the
simplistic pro-con dichotomy? Why can’t we start talking about what
kind of trade we want? Because our government has embraced a model of
trade deregulation that involves much more than opening borders to goods
and services — it involves
following a set of transformative political policies designed to make
ourselves hospitable to investment. And it’s these preconditions of
successful trade, not trade itself, that are threatening our most basic
democratic right: to plan and manage our own economy.
According to a new study published by the Canadian Centre for Policy
Alternatives, between the 1997 election and fiscal 2001, the Liberals
will have spent only 2 per cent of the fiscal dividend on social
investment, compared to 98 per cent on tax cuts and deficit reduction —
a far cry from the promised 50-50 formula. And
even with that record, the OECD has warned Canada that we’d better not
spend our surplus on social programs — more
tax cuts and debt reduction are needed first.
Why? Because we need to provide a welcome climate for investors. This
process of trading away democratic control in exchange for investment is
not the globalization of nations; it is the ascendancy of corporate
power — a coup d’etat in
slow motion, as John Ralston Saul once described it. And nowhere is it
more on display than in the Department of Foreign Affairs. Canadian
trade policy now follows a single, crass mantra: more growth =
good. At home, it means tax cuts to attract
investors and endless deferral of everything else. Abroad, it means
Foreign Affairs has been turned into a caravan of travelling salesmen
shuttling between foreign governments opening their markets and Canadian
businesses looking for investment opportunities. Human rights and
environmental standards rarely come up.
Though this process is called globalization, it is actually an
ideological belief system that holds that increased trade and investment
— no matter what the
immediate social cost — will
eventually lead to improved quality of life and environmental standards
at home and around the world. According to this theory, the role of
government is simply to pursue trade at all costs and the rest will take
care of itself.
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In fact, any act that might be construed as “governing”
is a mistake, since it might hinder trade.
The policies that have attracted investment to Canada have made us more
vulnerable than ever:
more dependent on the ups and downs of other economies, less protected
by a safety net in our own. The demand for more incentives —
deeper tax cuts, a more flexible work force,
more sectors to privatize — is
an insatiable one. In a global economy where everyone is playing by
these rules, there is never a point when countries stop having to
compete with their neighbours for corporate dollars.
Defenders of the current free- trade system don’t like the idea that
there is a direct connection between the wealth being created and the
sacrifices being made by the most vulnerable in our society. These cuts
are short-term measures, we are told. Soon globalization will benefit
everyone. And yet the economic policies that brought about the current
wave of prosperity are precisely the conditions that have exacerbated
the divide between rich and poor in this country and around the world.
Globalization was built on the backs of the unemployment programs we
slashed, the labour protections we revoked, the schools we didn’t
fund. Poverty and inequality are not unfortunate side effects that can
be fixed with some additional economic medicine; they are the
preconditions of the brand of globalization we have chosen to embrace.
That’s why 30,000 people participated in the women’s march against
poverty in Montreal last weekend. It’s also why protests against
so-called globalization are spreading around the world. And until we
recognize these causal relationships, we will not be having a real
debate about globalization.
from: Globe and Mail, October 18, 2000, pg A15 |
