Canada Among Nations, 1997: Asia Pacific Face-Off 9780773574069

Table of contents :
Contents
List of Contributors
Preface
I: Asia Pacific Face-Off
II: Foreign Policy Under the Liberals: Prime Ministerial Leadership in the Chrétien Government’s Foreign Policy-making Process
III: Canada in the Global Economy: Where Do We Stand?
IV: Canada and the Clinton White House: Looking Back and Looking Ahead at Canadian-American Relations
V: Canada and Asia Pacific
VI: Canada’s Role in APEC
VII: Australia and Canada View the Asia Pacific
VIII: Canada, Asian Values and Human Rights: Helping the Tigers to Set Themselves Free
IX: Tigers, Asian Values and Labour Standards: Promoting a Fairer Global Trade
X: Canada and International Education in the Asia Pacific Region
XI: A New Frontier in Multilateralism: Canada and the ASEAN Regional Forum
XII: East Asian Arms Build-ups and Regional Security
XIII: Canada and Conflict Resolution in the South China Sea
XIV: Policy Implications of Canada's Trade and Investment Linkages With the Asia Pacific
XV: Re-engaging China: Striking a Balance between Trade and Human Rights
Acronyms

Citation preview

Canada Among Nations 1997

Team Canada '97. Prime Minister Jean Chretien, the Provincial Premiers, and members of the Canada-Korea Business Council, in Seoul.

Canada Among Nations 1997 Asia Pacific Face-Off

EDITED BY FEN OSLER HAMPSON MAUREEN APPEL MOLOT MARTIN RUDNER

Carleton University Press

© Carleton University Press Inc. 1997 Carleton Public Policy Series #2121

Printed and bound in Canada National Library of Canada cataloguing Canada Among Nations 1984Annual. 1997 ed.: Asia Pacific Face-Off. Each vol. also has a distinctive title. Produced by the Norman Paterson School of International Affairs of Carleton University. Includes bibliographical references. ISSN 0832-0683 ISBN 0-88629-327-8 (1997 ed.)

1. Canada—Foreign relations—1945 Periodicals. 2. Canada—Politics and government— 1984 Periodicals. 3. Canada—Politics and government—1980-1984—Periodicals. I. Norman Paterson School of International Affairs. FC242.C345 F1034.2.C36

327.71

C86-031285-2

Cover Design: Richard Hemphill, Barbara Gumming. Interior: Mayhew & Associates Graphic Communications. Frontispiece: Jean-Marc Carisse, Office of the Prime Minister.

Carleton University Press gratefully acknowledges the support extended to its publishing program by the Canada Council and the Ontario Arts Council. The Press would also like to thank the Department of Canadian Heritage, Government of Canada, and the Government of Ontario through the Ministry of Culture, Tourism and Recreation, for their Assistance.

CONTENTS List of Contributors Preface I Asia Pacific Face-Off Maureen Appel Molot and Fen Osier Hampson II Foreign Policy Under the Liberals: Prime Ministerial Leadership in the Chretien Government's Foreign Policy-making Process John}, Kirton

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III Canada in the Global Economy: Where Do We Stand? 51 Michael Han IV Canada and the Clinton White House: Looking Back and Looking Ahead at Canadian-American Relations Donald E, Abelson

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V Canada and Asia Pacific The Honourable Raymond Chan

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VI Canada's Role in APEC Karen Minden, Nicole Gallant and Paul Invin

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VII Australia and Canada View the Asia Pacific Andrew F. Cooper VIII Canada, Asian Values and Human Rights: Helping the Tigers to Set Themselves Free Errol P. Mendes

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IX Tigers, Asian Values and Labour Standards: Promoting a Fairer Global Trade Ozay Mehmet

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X Canada and International Education in the Asia Pacific Region Martin Rudner

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XI A New Frontier in Multilateralism: Canada and the ASEAN Regional Forum Amitav Acharya XII East Asian Arms Build-ups and Regional Security Shannon Selin XIII Canada and Conflict Resolution in the South China Sea Ted L. McDorman

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XIV Policy Implications of Canada's Trade and Investment Linkages With the Asia Pacific 299 Bijit K. Bora XV Re-engaging China: Striking a Balance between Trade and Human Rights B. Michael Frolic Acronyms

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CONTRIBUTORS Donald E. Abelson is an assistant professor in the Department of Political Science, the University of Western Ontario. Amitav Acharya is an associate professor in the Department of Political Science, York University. Bijit K. Bora is a lecturer in the School of Economics, the Flinders University of South Australia. The Honourable Raymond Chan is Secretary of State for AsiaPacific, Department of Foreign Affairs and International Trade. Andrew F. Cooper is a professor in the Department of Political Science, the University of Waterloo. B. Michael Frolic is a professor in the Department of Political Science, York University. Nicole Gallant is a Research Intern, at the Asia Pacific Foundation of Canada. Fen Osier Hampson is a professor and Associate Director in The Norman Paterson School of International Affairs, Carleton University. Michael Hart is a professor in The Norman Paterson School of International Affairs, Carleton University and concurrently a visiting professor at the Monterey Institute of International Studies during the Spring term. Paul Irwin is Manager of Research & Analysis at the Asia Pacific Foundation of Canada. John J. Kirton, is Acting Director of the Centre for International Studies, the University of Toronto.

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Ted L. McDorman is an associate professor in the Faculty of Law, the University of Victoria and Member, Oceans Institute of Canada. Ozay Mehmet is a professor in The Norman Paterson School of International Affairs, Carleton University. Errol P. Mendes is Director of the Human Rights Research and Education Centre, the University of Ottawa. Karen Minden is Vice President, Research & Analysis, at the Asia Pacific Foundation of Canada, and Director of the APEC Study Centre in Canada. Maureen Appel Molot is a professor in the Department of Political Science and professor and Director of The Norman Paterson School of International Affairs, Carleton University. Martin Rudner is a professor in The Norman Paterson School of International Affairs, Carleton University. Shannon Selin is a research associate in the Institute of International Relations, the University of British Columbia.

Preface

Asia Pacific Face-Off is the thirteenth in the Canada Among Nations series published by The Norman Paterson School of International Affairs. Some of the chapters in this volume address topics of importance in Canada's overall foreign policy during the calendar year 1996. However, in recognition of the government's designation of 1997 as Canada's Year of Asia Pacific, most of the chapters focus on aspects of Canada's relations with the countries of that region. During 1997 Canada will host both the annual Leaders' Meeting of the Asia Pacific Economic Cooperation (APEC) forum and a number of APEC ministerial meetings. As many of our contributors suggest, Canada has not yet made much of a mark in the Asia Pacific region and we have some distance to go before our status as an Asia Pacific nation is taken seriously by our APEC partners. The high profile of Team Canada missions should not be mistakenly interpreted as evidence of concerted Canadian policy with respect to Asia Pacific. In terms of educational or economic linkages with the countries of APEC Canada could take lessons from Australia, a country with whose policies ours are compared by one of our authors.

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We are happy to acknowledge financial assistance for Asia Pacific Face-Off horn, the Security and Defence Forum grant of the Department of National Defence and from The Norman Paterson School of International Affairs. This annual effort requires the assistance of a number of people whose contribution we gratefully recognize. Brenda Sutherland once again supervised the initial editing of the manuscript and typed in the many corrections and chapter updates. Janet Doherty organized the authors' workshop and encouraged our contributors to submit their chapters on time. Philip Raid prepared the glossary, checked the endnotes, and generally assisted with chapter editing. Noel Gates, Pauline McKillop and John Flood helped with various stages of the production process. The editors have very much enjoyed working on Asia Pacific Face-Off. We hope that its contents generate debate on Canada's relations with a region whose importance to this country needs to be recognized. Fen Osier Hampson Maureen Appel Molot Martin Rudner Ottawa, March 1997

I Asia Pacific Face-Off

MAUREEN APPEL MOLOT AND FEN OSLER HAMPSON

In November 1997, Canada faces off with its Pacific Rim partners by hosting the annual Leaders' Meeting of the Asia Pacific Economic Cooperation (APEC) forum in Vancouver. To mark this event, and the APEC ministerial meetings that will be held across the country during the year, 1997 has been designated by the Chretien government as Canada's Year of Asia Pacific (CYAP). The government sees CYAP as a "milestone ... a recognition of a fundamental fact of Canadian existence" that the country is part of the Asia Pacific community.1 In recognition of CYAP and the importance Canada attaches to its relationships with the countries of APEC, Canada Among Nations 7P97takes as its major theme Canada's relationship with Asia Pacific. As many of our contributors suggest, this country has not yet made much of a mark in the Asia Pacific region and we have some distance to go before our status as an Asia Pacific nation is taken seriously by our APEC partners.

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1997 is also an election year in Canada. While foreign policy performance may not rank high on the agenda of a population focused on continuing high levels of unemployment, uncertain economic growth and deficit reduction, there are particular aspects of the Chretien government's overall foreign policy record to which attention will be drawn in the election campaign: relations with the United States—most notably over Cuba and over Canadian policies of support to our cultural industries—in a political climate in which most Canadians think that Ottawa has little independence from Washington; the link between trade and human rights in relations with China and other authoritarian regimes; Canada's reputation and capacity as a peacekeeper, particularly in light of revelations of misconduct on the part of Canadian forces in Somalia and Bosnia; and an assessment of the Prime Minister's efforts to mount a humanitarian mission to the Great Lakes Region of Central Africa, which was seen by many as political opportunism more than as carefully constructed policy. This edition of Canada Among Nations examines Canadian foreign policy over the last year and a half, with a particular focus on Canada's connections with Asia Pacific. To put this theme in a broader context, the volume also contains chapters on the foreign policy process, Canada in the global economy and Canada-U.S. relations. As in previous volumes, each contributor presents his or her own analysis; no effort has been made by the editors to develop consensus out of the points of view expressed. That some commonality of views exists with respect to the gap between rhetoric and reality in Canadian foreign policy, particularly with respect to Asia Pacific, will, we hope, provoke readers to pose their own questions about our foreign policy priorities and our capacity to exert influence in the complex post-Cold War world. This chapter briefly assesses the Chretien government's foreign policy accomplishments over the last eighteen months in terms of the foreign policy objectives that the government articulated shortly after it assumed office. It also highlights some of the challenges Canada will face in its effort to turn in a credible performance as host of the 1997 APEC Summit and to demonstrate its seriousness with respect to its participation in Asia Pacific. A LEANER, MEANER FOREIGN POLICY? One characteristic of foreign policy under the Chretien government has been a struggle to define priorities in the context of diminishing

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resources and to find new modalities through which the government can pursue a number of foreign policy initiatives. A second, as John Kirton illustrates in his analysis of recent government behaviour, is the continuation of a "foreign policy team" of five ministers, though with some change in players, led by a prime minister who has assumed an activist posture in foreign policy. Although government pronouncements have emphasized that Canada can no longer afford to be as active in the international arena as it once was, the exercise of foreign policy priority determination has been characterized more by rhetoric than the capacity to make hard choices.2 Without question there have been some important organizational changes in the Department of Foreign Affairs and International Trade (DFAIT)3 and DFAIT and the Canadian International Development Agency (CIDA) have had their budgets cut, although DFAIT has had to absorb rather smaller reductions than CIDA and many other departments. But the government has been unable to take the hard decisions, that many argue are needed, with respect to embassy closures, the reevaluation of the list of Canadian aid recipients for the purpose of removing from the list countries whose economic growth has been robust, continuing Canadian participation in a large number of international organizations, and a reassessment of the value of trade promotion.4 The making of choices is not easy for a country which has prided itself on upholding the legacy of Pearsonian internationalism. But the world is far more complicated at the end of the 1990s than it was during the Cold War: there are many more challenges but proportionately fewer resources to meet them. For a country like Canada, which has a tradition of foreign policy activism dating from the immediate postwar years, any reduction in global activity and retreat into what is now called "niche diplomacy" is an explicit acknowledgement of reduced economic means and narrower horizons. It may also be unrealistic for a country that values its membership in the Group of Seven (G7) industrialized countries as well as the Commonwealth and La Francophonie, that has recently joined the Organization of American States, that wants to be a significant player in APEC as well as in the Americas, and is a dialogue partner of the Association of Southeast Asian Nations (ASEAN) and a member of the ASEAN Regional Forum (ARF), to contemplate dramatic changes in foreign policy activity. Our ability to protect and project our national interests depends upon our continued membership in a multitude of international institutions where, in reality, the price of admission is not all that great.

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Moreover, membership in one association usually translates into an ability to exercise influence in another. Even if we wanted to give up some of our memberships, many of our allies would express their strong disapproval, as they have in the past when we have downgraded our commitments. Domestic realities also push us in the direction of maintaining, if not expanding, our global commitments. As John J. Kirton points out in Chapter 2, Canada has an activist foreign minister with an agenda of his own. Foreign policy is important in preserving national unity since it is one of the policy areas on which there is a considerable degree of national consensus.5 Canadian trade dependence is growing, and although Canadian exports still go overwhelmingly to the United States, government trade and investment policy are oriented to promoting diversification of our economic partners. An increasingly diverse population expects government attention to concerns, be they economic or humanitarian, that derive from their countries of origin. And the government's commitment to democratize the foreign policy process and to utilize non-governmental organizations (NGOs) and the private sector in foreign policy delivery may make it more, and not less, difficult to diminish Canadian internationalism. When a government articulates its foreign policy goals in a formal policy statement, as the Liberals did with Canada in the World in February 1995,6 it provides a touchstone against which to measure its subsequent actions. Intradepartmental debate over the phrasing of objectives requires that these be phrased in general terms to encompass a range of interests. The three identified by the government as guiding its international agenda were so broad as to allow for a range of specific policy options to be subsumed under each: "the promotion of prosperity and employment; the protection of our security, within a stable global framework; and the projection of Canadian values and culture."7 Underlying the Liberals' foreign policy agenda was, as noted above, a commitment to open policy-making and consultation, and an emphasis on greater public participation in the making of Canadian foreign policy. We will use this set of goals as a means to assess some of the more important of the Chretien government's foreign policy activities of the last year, recognizing that some initiatives could be subsumed under more than one of these objectives.

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THE PROMOTION OF PROSPERITY AND EMPLOYMENT The government could point to its Team Canada missions to Asia, led by the Prime Minister in 1996 and again in early 1997, and to the free trade agreements concluded between Canada and Israel and Canada and Chile during 1996, as evidence of the priority it attributes to the promotion of Canada's economic well-being through open markets and free trade—a priority that is not very different in form or substance from the goal defined by former Prime Minister Brian Mulroney's Conservative government. Although the Team Canada missions generated never-ending photo opportunities for the Prime Minister and the participating provincial premiers and corporate executives, how many new business possibilities they facilitated is always difficult to determine. Many of the deals signed had been finalized prior to the trips, not developed during them. Prime ministerial visits demonstrate the priority the government attaches to enhancing Canada's economic ties with Asia. Nevertheless, our current economic linkages with that region, measured in trade terms, are, as Bijit Bora's chapter suggests, quite limited. Overall, only 9 percent of Canadian exports are destined for Asia. An Asia Pacific Foundation of Canada study reveals that Canada is lagging behind other G7 countries in capturing a share of the expanding Asian market; its share of the Asian import market plummeted over the last decade by one-third to a 1.6 percent share of that market.8 The potential is there in the projected growth rates for the region (see Minister Raymond Chan's contribution in this volume), but Canada is starting from a very low base. Doing business in Asia requires patience and a commitment for the long term. The preoccupation of many Canadian firms with the U.S. market and Canadian ignorance of the Asia Pacific region have inhibited the development of sustained economic ties. The Asia Pacific report questioned whether Canadian firms and governments have thought through a strategy for ensuring a Canadian presence in this area.9 As a small, open economy, Canada benefits from strong, rulesbased trade regimes, whether these are multilateral or bilateral. Canada was an active player in the first World Trade Organization (WTO) Leaders' Summit in Singapore in December 1996 and Canadian firms will profit from the international agreement to liberalize world trade in telecommunications. Michael Hart's chapter reviews Canada's commitment to the global trading system and the reasons why this country decided to reverse its historic opposition to a formal free trade

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agreement with the U.S. While applauding the consistency of Canadian government policy with respect to free trade, Hart queries the value of negotiating agreements with two countries, Israel and Chile, which are neither geographically proximate to Canada and with which we have no extensive economic linkages. Arguments can be marshalled on both sides of the pursuit of additional free trade agreements and evaluation is a function of assessments of relative costs and benefits. If resources are constrained and choices have to made between regions about where to expend limited resources, neither of these latest free trade agreements may be seen as necessary. On the other hand, a case could be made for each. The Canada-Israel Free Trade Agreement puts Canadian firms on an equal footing with those from the U.S. and the European Union in terms of access to the Israeli market, and provides a base from which to expand in the Middle East and Asia. Latin America, together with Asia Pacific, was identified in Canada in the World as a region in which Canada intended to expand its economic ties.10 The CanadaChile FTA had its origins in early Canadian enthusiasm for expanding the North American Free Trade Agreement (NAFTA) beyond North America;11 Canada decided to pursue the Chilean bilateral track when it became clear that President Clinton would be unable to secure fast-track negotiating authority from Congress (see Abelson's chapter). Canadian mining firms have a particular interest in Chile and Canada is the second largest foreign investor in that country after the U.S. The free trade agreement was easier to obtain than the other NAFTA desideratum noted in Canada in the World—enhancement of the agreement through negotiation of rules to limit trade distorting practices.12 Three years of talks aimed at reconciling the divergent trade remedy regimes of Canada and the U.S., a condition originally identified by Prime Minister Chretien as essential to making NAFTA acceptable to Canadians, ended in early 1997 with no progress.13 Approximately one billion dollars in goods crosses the CanadaU.S. border daily. In a trading relationship of this magnitude it is not surprising that there are skirmishes on trade-related issues. The most contentious during 1996, though certainly not the most significant in monetary terms, were differences over Canadian economic ties to Cuba. As Abelson's chapter notes in some detail Canada has strongly condemned the Helms-Burton Act which attempts to restrict foreign investment in Cuba and empowers the U.S. government to ban employees from firms contravening the law from entering the United

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States. From a Canadian perspective, this legislation recalls the concerns of the 1960s and 1970s over the extraterritorial application of U.S. law. The only Canadian firm affected thus far by the legislation is Sherritt International, a mining company with investments in nickel production in Cuba, though Wal-Mart Canada did withdraw from sale, and then restock, pajamas made in Cuba. The latter firm was subject to pressures from both governments.14 To signal to corporations doing business in Canada that it expected them to obey Canadian and not foreign legislation Canada amended its Foreign Extraterritorial Measures Act (FEMA) in 1996.15 The other major Canada-U.S. trade disputes in 1996 centred on Canadian strategies for the protection of poultry, eggs and dairy producers and efforts to protect the Canadian magazine industry. Both demonstrate the linkages between foreign and domestic policies and the constraints international trade commitments impose on domestic policy options. Canada has long used marketing boards to allocate production quotas to farmers, thereby controlling numbers of producers and maintaining price levels. Under the WTO, Canada converted its quotas to tariffs. The U.S. argued that NAFTA prohibits the imposition of new tariffs and took its case—or, more accurately perhaps, the case of U.S. farm organizations that saw export opportunities in Canada vitiated—to a NAFTA dispute panel. The panel of two Canadians, two Americans and a British chair unanimously ruled in Canada's favour. The sensitivity of the issue in U.S. politics and the determination of United States Trade Representative (USTR) Charlene Barshefsky to challenge the NAFTA panel decision16 suggest that this issue will likely surface on the bilateral trade agenda again in 1997. The dispute between Canada and the U.S. over the Canadian policy of imposing an 80 percent tax on advertising in so-called "split run" editions of magazines17 (in this case, Sports Illustrated) is but the latest bilateral difference over Canadian cultural policies.18 The two governments have very different perspectives on the definition and classification of culture. For the U.S., there is little difference between culture and entertainment, a category which now ranks amongst the most important, in overall value terms, of U.S. exports. For Canada, culture is part of identity, a component of the values we want to project abroad (the third of the Liberal government's foreign policy objectives), and, therefore, is in need of nurturing, if not protection. In the magazine case the U.S. took Canada to a WTO panel which found that the Canadian measures contravened the national treatment

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rule of the General Agreement on Tariffs and Trade (GATT).19 The U.S. applauded the decision, seeing it as a tool that could be used against Canada and other states that impose barriers to U.S. cultural exports. Initial response in Canada to the WTO ruling exposed differences within the Chretien cabinet over how much protection Canada should grant to its magazine industry, differences which, to some degree, reflected division of opinion among actors within Canadian cultural industries over the extent and modalities of assistance.20 At a midFebruary 1997 meeting between Heritage Minister Sheila Copps and stakeholders in the Canadian culture and telecommunications sectors the players considered how to modernize and adapt policies in the context of technological change and Canada's international obligations. In mid-March 1997 International Trade Minister, Art Eggleton, and Heritage Minister Copps decided that Canada would appeal the WTO ruling.21 Although the Prime Minister told a U.S. audience during his April 1997 trip to Washington that the next century belongs to the Pacific,22 the United States will continue to remain Canada's principal export market and the anchor to which our economic fortunes are tied. Moreover, to the extent that Canadians strive to maintain a distinct cultural identity, issues of market assess in the area of communications and culture will be a key source of friction in our bilateral relationship. THE PROTECTION OF OUR SECURITY WITHIN A GLOBAL FRAMEWORK Regional/ethnic conflicts and pressure to contribute to the reconstruction of war-torn societies continue to be the major security issues facing Canada. Like our Western partners, Canada has difficulty defining its security and defence priorities and interests in a post-Cold War world. Foreign Minister Axworthy's statement that Canada would act in those parts of the world where it could "make a difference"23 not only repeated the well-worn litany of one of his predecessors, former Secretary of State for External Affairs Joe Clark, but also begs the question: making a difference for whom, to what purpose, and for what ends? Boy scouts may be rewarded for the quality of their good works, but foreign ministers are held to a higher standard, which includes their ability to look after the broader national interest. A foreign policy driven by the desire to be relevant and to "make a difference" has its pitfalls unless it is founded on careful advance planning, clearly defined objectives, and a willingness to devote the

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resources necessary to carry out the task at hand. Canada was in clear danger of courting disaster in the mission it hastily assembled to avert humanitarian tragedy in the Great Lakes region of Africa. In the fall of 1996, on the initiative of the Prime Minister, Canada agreed to take the lead in organizing a military force to cope with what was seen at the time as an impending humanitarian disaster in eastern Zaire. By December, with the diminution in the urgency of the situation, the rescue mission was no longer on the active Canadian foreign policy agenda. The intensity with which the government involved itself in the assignment led analysts to ask whether the government had sufficient information on which to base its initial assessment of the situation and what kind of financial commitment Canada would be making if the intervention was a prolonged one. Was the turmoil in Central Africa truly a threat to Canadian security?24 If Canadian forces suddenly found both themselves under attack from local insurgents would they be able to defend themselves and international relief workers? Fortunately, the deployment was aborted by the sudden and massive return of refugees to Rwanda. Whether the threat of intervention prompted the exodus continues to be a matter of some debate, but there can be little question, that if the mission had been completed, it would have been fraught with risks, and by that time it would have been too late for the Prime Minister and those of his officials who were leading the charge to have sober second thoughts. Canada seemed less of a boy scout when it offered its services to resolve the Peruvian hostage crisis. This is because Canada's Ambassador to Peru, Anthony Vincent, who was thrust into an intermediary role, had been a hostage himself when the Tupac Amaru rebels seized the Japanese Embassy during a cocktail party. At the end of January 1997 Prime Minister Chretien offered Toronto as a venue for talks between Peruvian President Alberto Fujimori and Japanese Prime Minister, Ryutaro Hashimoto. Anthony Vincent, with the support of the Canadian government, continued to play a useful role in mediation efforts, aimed at maintaining a dialogue between the Peruvian government and the guerillas.25 If Canadian activities with respect to Zaire raised queries about the definition of Canadian security priorities, the lead taken by Foreign Affairs Minister Axworthy in the international campaign to ban antipersonnel landmines generated kudos in Canada and around the world. It even resulted in a Nobel Peace Prize nomination for the Minister.26 In October 1996, at a conference in Ottawa on the subject

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of landmines, Minister Axworthy invited the 50 countries present, and any others, to a meeting in Ottawa at the end of December 1997 to sign a treaty on banning these devices. At the Canadian Conference on Humanitarian Demining and Landmine Victim Assistance in Winnipeg, at the end of January 1997, the Minister stressed Canada's commitment to "establish a new global norm against these weapons" and expressly mentioned the contribution being made by members of the Canadian Forces to assist in demining around the world.27 The protection of Canadian security is intimately linked to the capacity and reputation of the Canadian Forces. The budget of the Department of National Defence continued to decline and none of the materiel decisions noted as necessary by Klepak in his review of Canadian defence policy last year was taken.28 During 1996 and early 1997 the Canadian military was regularly in the news; rarely was the coverage positive. There were the continuing revelations of the Somalia inquiry, which raised questions about the judgement and managerial capacity of Defence Minister Collenette and his Chief of Defence Staff, General Jean Boyle, both of whom resigned in October 1996. Disclosures about document tampering, the questionable behaviour of Canadian peacekeepers in Bosnia, and controversy over the treatment of a female infantry officer during training exercises, seriously damaged the public standing of the Armed Forces.29 Doug Young, who replaced Collenette as Minister of Defence in mid-October 1996, moved quickly to terminate the Somalia inquiry and to seek advice on how to improve morale and operational standards in the military. With a report from his advisors in hand the Minister said he would fight for stable funding for the military and promised a series of measures to enhance morale, improve training, and augment the powers of the military police.30 These steps may all be appropriate and important. But they are not a substitute for action to address the more profound questions about the role of the Canadian Forces in the post-Cold War world, including the significance Canada attaches to the responsibilities that used to entail only peacekeeping but now have expanded to involve peacebuilding and to cover an increasingly wide range of other security functions. As the contribution by Acharya outlines, Canada's direct involvement in security in the Asia Pacific region has been limited to efforts to launch the North Pacific Cooperative Security dialogue in April 1991 and participation in the ASEAN Regional Forum (ARF). In their chapters, Acharya, Selin and McDorman all analyze the reasons why

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Canada should pay more attention to Asia Pacific security issues: Canada has an interest in promoting stability and security in the area and its participation in the security dialogue will enhance our reputation in the region; expenditures on arms by East Asian countries are growing, with the potential to destabilize the area; and Canada should continue the efforts it has made through Track Two diplomacy to calm disputes over the Spratly Islands. Canada will continue to grope for a new image of itself in a postCold War, post-Pearsonian world. If we are seen by others to be relevant to addressing the world's new security challenges, it will not only be because we display initiative and leadership, but also because those qualities are backed up by our willingness to commit real resources to meet those challenges. THE PROJECTION OF CANADIAN VALUES AND CULTURE Arguably the most innovative of the three Canadian foreign policy objectives, the projection abroad of Canadian values and culture reflects, at least in part, some of the testimony before the Special Joint Committee Reviewing Canadian Foreign Policy as well as a recognition of the economic value, real and potential, of culture.31 There is also, as we will argue, an important intersection between this objective and Canadian policies with respect to Asia Pacific. Few in Canada would dispute the statement in Canada in the World that "a priority field of international concern and action for Canadians has been and remains that of human rights." Disagreements arise, however, in regard to the promotion of that goal, subsumed under which are workers' rights and concerns about child labour. Stances adopted by Prime Minister Chretien and Foreign Minister Axworthy on trips to Asia in early 1997 demonstrate the challenge of delivering a strong message on human rights while at the same time acknowledging the sensitivities of sovereignty, the realities of foreign government capacity and Canada's interests in expanding economic opportunities in the region. In South Korea, for example, the Prime Minister arrived in the midst of a serious labour dispute aimed at forcing the Korean government to withdraw labour legislation which was seen by workers and by many interest groups, including those in Canada, as anti-labour; although he indicated he would raise the issue with the South Korean president, the Prime Minister made it clear he saw the dispute as a domestic matter.32 In the Philippines, the issue of

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child labour came to the fore; in comments to the press the Prime Minister demonstrated that he recognized both the problem and the efforts being made to deal with it.33 On a trip to India, Foreign Affairs Minister Axworthy took a slightly tougher line on child labour, suggesting that the Canadian government would consider applying child-rights standards to foreign aid and trade assistance programs as one means of attempting to eliminate child labour.34 While agreement on the horrors of child labour is easy to secure, it remains to be seen how serious Canada is on the issue and whether it is prepared to assume a leadership role on child rights standards at the International Conference on Child Labour to be held in October 1997 in Oslo. Ozay Mehmet's chapter in this volume examines the record on labour standards of a number of Asia Pacific states and suggests that Canada has a role to play in working with these states to promote appropriate policies and standards. The link between Asian values and human rights is a theme explored by Errol Mendes in his contribution to this collection. Mendes argues that Asian values are used by state leaders to legitimate authoritarian regimes and withstand pressures to implement human rights policies that tolerate dissent and political opposition. In no context is the clash between values and sovereignty on the one hand and concepts of universal human rights on the other more palpable than with respect to China and the position Canada should adopt on the relationship between trade with that country and human rights. Although there has been criticism of the Chretien government's reluctance to engage the Chinese regime over human rights issues, the Prime Minister and his ministers have justified their decision in terms of national sovereignty and the cold calculus of potential economic costs.35 The decision by Germany and France to cease co-sponsoring resolutions critical of China at the UN Human Rights Commission in Geneva will make it easier for Canada to reconsider its long standing support of these resolutions.36 If additional evidence were needed on the sensitivity of human rights questions for many Asia Pacific states and Canada's recognition of this "uncomfortable reality," it can be found in the decision to keep human rights and democracy off the agenda of the Vancouver APEC summit.37 This issue will not go away, particularly if Canadian and international non-governmental organizations (NGOs) continue to press Ottawa to endorse a conference, parallel to that of the APEC summit, on trade and human rights. In the end the jury is still out on

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the evaluation of the effectiveness of constructive engagement through trade, aid and other contracts as a means of promoting human rights. Education is an obvious and critical avenue for the promotion both of Canadian values and of Canada abroad. Although Canada in the World proudly notes Canadian capacity in higher education and the numbers of foreign students studying in Canada38 this country, as Martin Rudner starkly demonstrates in his chapter, is lagging far behind others in its efforts to attract students from the Asia Pacific region. For a range of reasons Canadian universities and governments have not capitalized on the opportunities in Asia Pacific and few of our institutions have any profile in the region. As Rudner notes, human resource development is becoming an increasingly significant aspect of the APEC process. If we are to compete successfully in the highly competitive market for higher education in Asia Pacific serious planning, cooperation among jurisdictions and resource commitments are essential. In a wired age technology has an essential role to play in the projection of Canadian values and culture abroad. During 1996 DFAIT engaged the technology question in two ways, one being its rescue of Radio Canada International (RCI), the other its announcement of a Canadian International Information Strategy (CIIS).39 As in the previous year, RCI, the traditional technology, was saved in 1996 at the last moment, through an agreement between Heritage Canada, DFAIT, DND, and CIDA to share the $16 million cost of the service.40 For a country intent on promoting itself abroad the RCI debacle seemed an instance of avoidable mismanagement and miscommunication. Foreign Minister Axworthy's call for a CIIS reveals the influence on him and his staff of the idea of "soft power" which was first advanced by an American academic and former Clinton Administration official, Joseph S. Nye, and later echoed by Canadian broadcaster Ann Medina.41 The notion of "soft power" recognizes the growing economic and political importance of new information technologies in international affairs. For Canada, this means promoting Canada and Canadian values abroad via cultural exports such as film, television, books, and other cultural "goods." That new technology such as the internet and direct broadcasting via satellite has the potential to serve these goals is not in question. The challenge is to define what the Minister termed the first aim of the strategy, "to establish an integrated and comprehensive approach to projecting abroad information about

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Canada." How this will be done with the range of players, public and private that could be involved, and how the project will be funded remain to be determined. Whatever the intellectual and policy merits of the initiative, in a constrained fiscal environment there are questions that remain unanswered, such as: Will funds, realistically, be made available for this initiative? Who will undertake to coordinate the public-private sector partnership of which the Minister spoke and to negotiate the respective funding responsibilities? But these questions cannot remain unanswered for long, if Canada is to make use of its "soft power" and project its values abroad. DEMOCRATIZING FOREIGN POLICY

One plank in the Liberal party's 1993 campaign platform was the commitment to a more open foreign policy process—in the phraseology of Canada in the World "an effort to ensure that the voice of Canadians can be heard."42 The government has made good on that promise, by providing the opportunity for testimony before, and submissions to, the Special Joint Committee Reviewing Canadian Foreign Policy in 1994, and through the consultative foreign policy forums, national and regional, that have been held since 1995 and in which NGOs, academics, members of the media and others have debated topics identified by the government with a view to providing input for policy recommendations. The appropriateness and policy utility of the government's participation strategy has been analyzed in recent volumes of Canada Among Nations.^ Whatever the tangible benefits to policy that might have resulted from the consultation process, one of its legacies (i.e. legacies of the process) is a pattern of structured input which is more comprehensive than the articulation of interests related to specific issues. Interestingly, in the context of Asia Pacific and the projection of Canadian values, one of the more significant contributions of the consciously more open foreign policy process has been its demonstration effect in countries where the policy process is considerably more closed. A second, and perhaps more novel, form of public participation in the foreign policy process under the Liberals has been the utilization of NGOs and the business community in the delivery or execution of Canadian foreign policy. The most publicized instance of this new "partnership foreign policy" is the Team Canada concept, according to which corporate executives pay their own way to participate in trade and investment missions led by the Prime Minister or members of his

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cabinet. Other examples of anticipated business participation in foreign policy initiatives are the Canadian International Information Strategy noted above and the forthcoming APEC summit in Vancouver in November 1997. The corporate sector is expected to make significant financial contributions to both these undertakings. Peacebuilding, a priority of Foreign Minister Axworthy, demands a different kind of partnership, in this case between government and the NGO community. No longer able to contemplate solo ventures as it could with respect to peacekeeping, the government recognizes that if Canada is to play a role in rebuilding war-torn societies and in developing governance capacity in failed states it has to partner with organizations that have relevant field experience, area knowledge and, in some instances at least, non-governmental sources of funding. CANADA'S YEAR OF ASIA PACIFIC

By hosting the Asia Pacific summit in Vancouver in November Canada hopes to consolidate its position as a valued and equal partner in APEC. In one sense this should not be too difficult. As Minden, Gallant and Irwin remind us in their chapter Canada has the fourth largest GNP in the APEC community and has developed extensive trade, investment, and human ties with the region. It is very much in Canada's interest to diversify its portfolio of partnerships and to accelerate the pace of global trade liberalization. APEC can serve as a "trailbreaker," in their words, for progress in the WTO and other trade forums. It can also strengthen the broad range of multilateral initiatives and serve as an instrument for addressing particularly sensitive political issues. Bilateral relations can be developed and strengthened, especially in the ministerial meetings that take place as part of the summit planning process. APEC's informal consultative mechanisms are, moreover, better suited to the Asian preference for informal deliberation and consensus building as opposed to the more formal diplomatic practices of multilateral institutions like the WTO or United Nations. APEC can serve as valuable instrument which Canada can use to advance its interests in such diverse areas as product standards, environmental regulation and investment practices. The personal contacts and networks that have developed among APEC's political leaders and officials help to reduce regional tensions and enhance stability, even though regional security issues have traditionally not been part of the APEC agenda.

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At the level of the summit itself, the meeting will help to showcase Canada's own competitive advantages in such areas as environmental technology, infrastructure expertise, natural resource management and telecommunications. More importantly, CYAP should increase interest and awareness among Canadians about the growing importance of the Asia Pacific region for our own future economic health and prosperity. In its efforts to solidify its credentials as an Asia Pacific nation the government must, however, be careful not to raise too many expectations. As Andrew Cooper argues in his chapter, there are important lessons in Australia's attempts in the 1980s and early 1990s to leap into the region. Under Prime Minister Keating Australia upgraded APEC to be the "crown jewel" in its foreign policy, supplanting even the GATT as the cornerstone of trade policy. At the same time, Australia pushed a series of initiatives in the security area in an attempt to develop a multilateral security dialogue in the region. The government's intensive political style produced, however, a domestic political backlash and led to conflicts with some of Australia's Asia Pacific partners. From Ottawa's standpoint the domestic risks of engagement are not as great and the government appreciates the need to have a multifaceted approach to interaction with the region. For Canada the critical issue may be the longer term sustainability of what is launched in 1997; the touchstone of its success with CYAP will be the further development of economic ties with the region, something that can only be measured in years to come. As a number of our contributors note, Canadian corporations have with some exceptions been slow in developing strategies for doing business in Asia. It is also not clear how successful the government will be in its effort to secure corporate sponsorship for the various APEC meetings to be held across the country during 1997. As Minden, Gallant and Irwin caution, a significant issue for Canada in APEC will be its capacity to steer the organization through institutional challenges. Whether human rights will be a central part of Canada's Asia Pacific policy remains to be seen. Foreign Minister Lloyd Axworthy's spring trip to China underscored the government's desire to soft-pedal human rights and not to elevate it into a make-or-break issue in bilateral relations.44 The prospect of military coups and instability may seem remote among the new economic tigers of the Asia Pacific region but there are enough political rumblings to suggest that longterm political stability is far from assured. The most immediate political question mark is Hong Kong. No one really knows what will happen to

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the British colony when it reverts to China at the end of June 1997. Although all signs point to a smooth transition, as Bemie Frolic points out, Beijing may not grant Hong Kong the degree of autonomy it desires, particularly if it sees Hong Kong as a kind of Trojan horse for democracy in China. Furthermore, China's own political leadership is walking a tightrope in the post-Deng era, as it tries to contend with the social and political forces unleashed by rapid economic growth and China's embrace of Western-style capitalism, which sits uneasily with communism and totalitarian rule. In other countries in the Asia Pacific region high economic growth rates and growing levels of prosperity mask the soft political underbelly of Asia's tigers. In Malaysia tensions between the Malay and Chinese communities grow even as the memory of past struggles and violence between the two communities fades among the new generation of political elites. In Indonesia allegations of corruption coupled with growing demands for democratization and human rights threaten the stability of President Suharto's regime and there is likely to be a struggle for power once he leaves the political scene. On the Korean peninsula tensions between North and South Korea show few signs of weakening. Within South Korea itself political tensions are rising with the surge of worker demands for higher wages and a higher standard of living. Corruption is endemic throughout the region and has become a major rallying point for dissidents and opposition parties in Thailand, Taiwan, Indonesia, South Korea, China and Malaysia. In this complex political and economic environment the high profile of Team Canada missions should not be interpreted as evidence of a concerted Canadian policy with respect to Asia Pacific. On the one hand, Canada has placed a great deal of emphasis on improving trade and strengthening its economic relations with the region. On the other hand, it has tended put human rights and democracy on the back burner out of fear that it may jeopardize trade and investment relations with its Asia Pacific partners. But in a region where political stability is by no means assured and local human rights and democracy movements are growing it will be increasingly important for Canada to strike the right balance in our foreign policy between trade and investment on the one hand and democracy and human rights on the other.

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NOTES 1

2

3 4 5 6 7 8

9 10 11 12 13 14 15 16 17 18

Notes for remarks by the Honourable Jean Chretien, Prime Minister of Canada, Vancouver, British Columbia, November 21, 1996. Reprinted in Department of Foreign Affairs and International Trade, "This Week in Trade and Foreign Policy," November 18-24, 1996. See, for example, Evan Potter, "Redesigning Canadian Diplomacy in an Age of Fiscal Austerity," in Fen Osier Hampson and Maureen Appel Molot, (eds.), Big Enough to be Heard: Canada Among Nations 1996(Ottawa: Carleton University Press 1996), 23-55; Potter, "Niche Diplomacy as Canadian Foreign Policy," International Journal 111 (Winter 1996-7), 25-38; and Andrew Cooper, "In Search of Niches: Saying 'Yes' and Saying 'No' in Canada's International Relations," Canadian Foreign Policy Vol. Ill, 3 (Winter 1995), 1-13. See Chapter by John Kirton in this volume. Potter, "Redesigning Canadian Diplomacy ..." 46-7. Fen Osier Hampson and Maureen Appel Molot, "Being Heard and the Role of Leadership," in Hampson and Molot, Big Enough to be Heard, 5. Canada, Department of Foreign Affairs and International Trade, Canada in the World: Government Statement (Ottawa: Canada Communications Group 1995). Canada in the World, i and 10. The other G7 members, excluding Japan, have seen their share of the Asian import market slip by 6 percent. The decrease can be explained, in part, by the fact that Asian countries have increased trade amongst themselves. However, other G7 members have pushed very hard to maintain and expand their sales in Asia. See Ross Howard, "Canada trails in race to Asia," The Globe and Mail, February 14, 1997, Al, A7. Howard, "Canada trails in race to Asia." Canada in the World, 17. For a review of this see Glen Bailey, "Canadian Diplomacy as Advocacy: The Case of Chile and the NAFTA," Canadian Foreign Policy, Vol. Ill, 3 (Winter/hiver 1995), 97-112. Canada in the World, 15. Barrie McKenna, "NAFTA partners end trade talks," The Globe and Mail, March 21, 1997, B20. Ijeoma Ross, "Cuban pajamas back in Wal-Mart," The Globe and Mail, March 14, 1997, A6. The purpose of FEMA is to prevent companies and persons in Canada from being compelled to comply with foreign judgements. Drew Pagan, "Canada 'slam dunks' U.S. in farm dispute," The Globe and Mail, December 3, 1996, Bl, BIO; Peter Morton, "Barshefsky rattles sabre at Canada," The Financial Post, January 30, 1997, 1. These are magazines produced in Canada, with Canadian advertising, but with editorial content imported from the U.S. version of the publication. See Abelson in this volume. See also Keith Acheson and Christopher J. Maule, "Is There Life After Deathstars? Communications Technology and Cultural Relations," in Hampson and Molot, Big Enough to be Heard, 95-110.

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19 The case has received wide attention in the print media. See Lawrence Herman, "Canada didn't have a trade leg to stand on in magazine fight," The Financial Post, January 22, 1997, 11; Peter Morton, "Canada loses magazine battle," The Financial Post, January 17, 1997, 1; Drew Pagan and Laura Eggertson, "Canada loses magazine case," The Globe and Mail, January 17, 1997, A1,A7; and "WTO Interim Report Calls for End to Canadian Curbs on Magazines," Inside U.S. Trade, January 24, 1997. 20 Alan Toulin and Peter Morton, "Culture policy splits ministers," The Financial Post, February 12, 1997, 5, and Laura Eggertson, "Copps maybe out of her league in culture clash," The Globe and Mail, February 12,1997, B5. 21 "Canada to appeal WTO ruling in magazine trade dispute," Department of Foreign Affairs and International Trade News Release No. 47, March 14, 1997. 22 Graham Fraser, "Chretien adjusts warmth dial," The Globe and Mail, April 10, 1997, Al, A4. 23 Made on CBC television The National Magazine, April 7, 1997. 24 See Jeff Sallot, "Zairian mission decided without first-hand facts," The Globe and Mail, December 27, 1997, A4; and David Bercuson, "R.I.P.: The great Canadian refugee rescue mission," The Financial Post, December 14, 1997, 57. 25 Paul Knox, "Canada host for hostage summit," The Globe and Mail, January 30, 1997, Al. 26 "Axworthy nominated for Nobel," The Globe and Mail, March 13, 1997, A3. 27 Notes for an Address by the Honourable Lloyd Axworthy, Minster of Foreign Affairs, to the Canadian Conference on Humanitarian Demining and Landmine Victim Assistance Winnipeg, Manitoba, January 31, 1997, Statements and Speeches 97(6). 28 See Hal Klepak, "Future Defence Policy in an Epoque de vaches maigres," in Hampson and Molot, Big Enough to be Heard, 57-86. 29 See Scott Feschuk, "Minister's resignation defined inquiry," The Globe and Mail, January 16, 1997, A5; Paul Koring, "Uncertainty about future undermines Forces," The Globe and Mail, January 4, 1997, Al; and Tu Thanh Ha and Timothy Appleby, "Military examines reports of beating," The Globe and Mail, December 31, 1996, Al. 30 Jeff Sallot, "Military officers must toe new line," The Globe and Mail, March 26, 1997, A1,A8. 31 The Special Joint Committee of the Senate and House of Commons was established by the Liberal government in March 1994 to hold hearings and make recommendations concerning the objectives and content of Canadian foreign policy. Its report, Canada's Foreign Policies: Principles and Priorities for the Future appeared in November 1994 (Ottawa: Canada Communications Group 1994). The reference to the economic value of culture is found on p.67. See also Maxwell Cameron and Maureen Appel Molot, "Does Democracy Make a Difference?" in Maxwell Cameron and Maureen Appel Molot, (eds.), Democracy and Foreign Policy: Canada Among Nations 1995 (Ottawa: Carleton University Press), 12. 32 Rheal Seguin, "Trade mission skirts rights issue," The Globe and Mail, January 13, 1997, Al, A8.

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33 Rheal Seguin, "Canada confronts Philippines over issue of child labour," The Globe and Mail, January 15, 1997, A3. 34 John Stackhouse, "Canada may tie child rights to aid, trade," The Globe and Mail, January 10, 1997, Al, A9. 35 See Frolic, Chapter 15 in this volume. 36 Rod Mickleburgh, "Canada reviews position on China," The Globe and Mail, April 3, 1997, Al, A10; Jeff Sallot, "May drop anti-China measure, PM hints," The Globe and Mail, April 10, 1997, A4. 37 Ross Howard, "Summit agenda ignores rights," The Globe and Mail, February 17, 1997, Al, A3. 38 Canada in the World, 37. 39 Notes for an Address by the Honourable Lloyd Axworthy, Minister of Foreign Affairs, "Foreign Policy in the Information Age," Department of Foreign Affairs and International Trade, Ottawa, December 6, 1996. 40 Hugh Winsor, "Demise of Radio-Canada averted," The Globe and Mail, December 13, 1996, A9. 41 See Joseph S. Nye and William A. Owens, "America's Information Edge," Foreign Affairs, Vol. 75, no.2 (March/April 1996), 20-36; and Ann Medina, "Canada's Information Edge," Canadian Foreign Policy, Vol. IV, 2 (Fall 1996), 71-85. 42 Canada in the World, 48. 43 See in particular Cameron and Molot, Democracy and Foreign Policy as well as Hampson and Molot, "Being Heard and the Role of Leadership," in Hampson and Molot, Big Enough to be Heard, 7-10. 44 Paul Knox, "Axworthy to press China on rights," The Globe and Mail, March 31, 1997, Al, A7.

II Foreign Policy Under the Liberals: Prime Ministerial Leadership in the Chretien Government's Foreign Policy-making Process

JOHNJ. KIRTON

1996 was a year of considerable change in the foreign policy decisionmaking process of the Canadian government, and in the foreign policy which that process produced. The year opened with three new ministers appointed to manage the Department of Foreign Affairs and International Trade (DFAIT); Lloyd Axworthy became Foreign Minister, Art Eggleton Trade Minister, and Pierre Pettigrew Minister of State Responsible for International Cooperation and La Francophonie. Change continued during the summer with the most far-reaching reorganization within DFAIT since the combined Department was created in 1982. Change culminated at year's end with Ottawa's foreign policy decision-making machinery mobilized to mount a major Canadian initiative for military intervention in Zaire. The sequence was revealing. The ministerial shuffle of January 25, 1996 promised to produce a foreign policy decision-making process

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led to a greater degree by an engaged, experienced, and more expert foreign minister, intent on shifting from the trade focus of the first two Chretien years toward a stronger emphasis on social responsibility, human rights and sustainable human development. The summer reorganization, centred on a 50 percent reduction in DFAIT's Bureaus and Assistant Deputy Ministers (ADMs), pointed to a foreign office and foreign service afflicted by continuing budget cutbacks, and thus forced to take an isolationist turn from a diplomacy which was global and diffuse to one which could be characterized as discrete, "niche," diplomacy and to retreat to regionalism at the expense of Canada's broad multilateral commitments.1 Yet, in striking contrast, the Zaire initiative in the late autumn of 1996 displayed a strong infusion of Prime Ministerial leadership at home and abroad, designed to inject Canadian influence into a distant region in an unusually forceful way. Despite its unusual public visibility and uncertain impact, the Zaire initiative was not an episodic interruption or transitory aberration, but an authentic expression of the Canadian government's foreign policy decision-making system and resulting foreign policy focus throughout 1996. The system was dominated by a determined Prime Minister with a well-developed conception of Canada's role abroad, which in turn produced a foreign policy distinguished by an assertive, ambitious, highly engaged globalism.2 Despite Jean Chretien's initial instinct to leave foreign policy largely to his trusted foreign and trade ministers, and amidst the often agonizing policy redefinitions, budget reductions and departmental reorganizations, both the substance of that policy and the process that produced it came to bear the central stamp of a Prime Minister who had developed clear convictions about Canada's importance and leadership in the world, and a regular, dominant involvement in the decision- making required by Canadian foreign policy, and often in the delivery of that policy. 1996 POLICY DIRECTIONS AND DETERMINANTS

The practice of an ambitious and innovative foreign policy driven by the Prime Minister during 1996 came as somewhat of a surprise to those preoccupied with the shocks and setbacks of 1995. As 1996 opened, there was a widespread feeling that Canada's foreign policy, under the punishing impact of the nearly successful referendum of October 30, 1995 in Quebec, continuing fiscal reductions and departmental downsizing within the federal government, as well as the relentless

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impact of globalization, would be forced to accept a significantly reduced capacity at home and a more restrained role abroad. In practice, however, the trends started in 1994 and 1995 continued to propel Canada in 1996 into the pursuit of unilateral initiatives and toward the exercise of leadership on a global scale.3 Doctrinally, Canadian foreign policy throughout 1996 remained intellectually constrained and coordinated by the vision and priorities set forth in the government's Statement of February 7, 1995. To those who had taken seriously the Liberal Party's Pearsonian tradition and the tone of the Red Book commitments, and who had overlooked the foreign policy promises of the Chretien government's first throne speech, the February 1995 Statement offered a surprisingly and impressively innovative conception of Canadian foreign policy. Gone was the traditional focus on multilateral diplomacy aimed at Cold War and regional security challenges of concern to the Euro-Atlantic world, to be dealt with through the United Nations (UN) and the North Atlantic Treaty Organization (NATO). In its place came a vision of Canada's global leadership and its influence on the new economic and global issues centred in the rising regions of the Asia Pacific and the Americas, to be addressed through the institutions of the Group of Seven (G7) and the Asia Pacific Economic Cooperation (APEC) forum. The traditional Pearsonian premium placed on internationalist values and institutions was replaced by the innovative and self-interested priorities of promoting prosperity and employment, protecting Canadian security within a stable global framework, and projecting Canadian values and culture abroad.4 These new emphases were largely reinforced by the resource reallocations that followed in the Statement's wake. In overall terms, the federal government's budgets of 1994 and 1995 had displayed a profound isolationist thrust, substantially reducing outlays in the high expenditure areas of international assistance and national defence. But over the two years their impact on DFAIT itself had been essentially neutral, as a five percent increase in the first year had been offset by a seven percent reduction in the second. More strikingly, within DFAIT the 1995 budget marked the first real move away from automatic expenditures devoted to multilateral organizations for peace and security abroad and toward Canadian-controlled outlays to promote Canadian economic, trade and other interests and ensure better coordination at home.

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The federal budget of spring 1996 signalled the end of the recent thrust toward fiscal isolationism. Allocations for the three major international affairs departments together declined only 2.4 percent, led by the Department of National Defence's (DND) 4.7 percent reduction for FY 1996-7. However the Canadian International Development Agency (CIDA) received a 6.5 percent increase and DFAIT's budget expanded 5.6 percent.5 In 1996, and indeed during the entire period in which the Chretien government had been in power, DFAIT had come through Ottawa's budget-cutting process relatively unscathed. During 1996 the Prime Minister's travel abroad continued with an intensity and a global coverage that exceeded even the vibrant pace he had established during his initial year in office. During that year, in the 13 months to November 30, 1994, Prime Minister Chretien made nine tours abroad, meeting the leaders of 36 separate countries (with the United States being the most frequent partner, but followed closely by all Chretien's G7 colleagues). During the subsequent two years, to July 5, 1996, he travelled abroad to meet the leaders of more than 124 different countries, with France leading the list by a clear margin and the G7/G8 countries, together with Ukraine, occupying the first through ninth spots.6 In 1996 as a whole these patterns continued. Pulled by two meetings of the G7 and G8 (with Russia), one each of APEC and the Organization for Security and Co-operation in Europe (OSCE), and his third Team Canada tour to Asia, Chretien travelled abroad to have 108 summit encounters with the leaders of 78 countries. The United States and France tied for first place with five visits apiece, closely followed by Canada's G7 partners, Britain, Germany, Italy and Japan with four apiece, and then its G8 associates Russia and Ukraine (which, along with Ireland, had three apiece). Despite the APEC Summit and Team Canada tour, the weight of Canada's traditional Atlantic orientation, reinforced by the G7/G8 and OSCE summits, gave the U.S. and countries of Europe a decisive lead over those of the Asia Pacific and the almost entirely neglected Americas. This dominant thrust toward an ambitious, assertive, more fully engaged globalism was further evident in the Chretien government's major foreign policy decisions. Despite the Pearsonian party inheritance and the Prime Minister's own cautiousness, in the security field Canada under Chretien moved into regular military intervention in combat situations and into the practice of coercive diplomacy in

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theatres that were often distant. It had repeatedly decided to remain in the United Nations Protection Force (UNPROFOR) and enter the International Force (IFOR) in the former Yugoslavia, and it had initiated the "Turbot War" with Spain in the spring of 1995. In 1996, despite the compounding assault on DND's budget and reputation, the government decided to participate in the successor force to IFOR in the former Yugoslavia, and to mobilize and lead a military force in eastern Zaire in the autumn of 1996. In the trade and economic field, Canada under Chretien had contributed to the final stage of the birth of the World Trade Organization (WTO), and moved beyond the multilateral embrace of the General Agreements on Tariffs and Trade (GATT) and the WTO and the continental confines of the Canada-U.S. Free Trade Agreement (FTA) into plurilateral and bilateral trade liberalization. It decided to enter the North American Free Trade Agreement (NAFTA) in late 1993, promoted APEC's free trade regime in November 1994, and successfully inserted an initiative for a Free Trade Agreement for the Americas (FTAA) into the U.S. planning for the Miami Summit of the Americas in December 1994. In 1996 the Prime Minister continued the Team Canada formula he had initiated in 1994; and Canada took the historic step of securing free trade agreements on its own with countries beyond the North American continent, by concluding agreements with Israel and Chile. Canada also moved decisively to revise the established international order.7 It used its hosting of the G7 in Halifax in 1995 and its participation in Lyon in 1996 to secure a reform of the international financial and UN economic institutions. It focused its diplomacy in APEC, which it would host in 1997, on maintaining its trade liberalization momentum, but gave equal weight to its economic and development mission. And it moved, however tentatively, into the Middle East, through Chretien's presence at the "Sinai Summit of the Peacemakers," held in Sharm-el Sheikh, Egypt, on March 13, 1996. Propelling these policy initiatives were several forces. The first was the combination of processes of globalization, which could operate more freely in the post-Cold War international system.8 In the broadest terms, the deadly combination of failed states, involuntary migration and internationally televised humanitarian suffering and potential genocide intensified the demand for military intervention on the part of the world's principal powers and challenged Canada, as a member of this select group, to exercise its responsibility.9 The possibility and

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desirability of having governments agree to lower trade barriers— given the vast new array of market economies and democratic polities on the globe—induced a process of competitive trade liberalization, as Canada sought to beat its rivals to new markets and become the hub of a global network of free trade areas. Moreover the end of the Cold War and advent of globalization bred a focus on new security threats, and a premium on new values, such as humanitarian intervention and global environmental protection, that required major reforms in the international institutions created and designed half a century previously. Finally, the communications revolution had a major impact on the way in which DFAIT considered adjusting its presence and relationship with its posts, and promoting Canadian values and culture abroad.10 A second constraining force was the new demand for involvement and policy reorientation from Canadian civil society. Most broadly, Canada's ambitious, comprehensive, highly engaged foreign policy in 1996 was sustained by the strong globalist consensus deeply embedded throughout Canadian society. As 1996 opened, Canadians were confident that they could compete in the world on an equal basis with other industrialized countries, and strongly supported NAFTA and participation in trade agreements with other countries.11 On balance they wanted Canada to become more involved in UN efforts to promote peace, international organizations helping the poor, and trade agreements with other countries—though less involved in UN peacekeeping, NATO, the Commonwealth and La Francophonie. Especially among those aged 34 or younger there was keen interest in international environmental problems, international peace, the threat to the North Atlantic fisheries and violations of human rights. Finally, the respondents were virtually unanimous in declaring that Canada should place a high priority on its overall relations with the United States, put Japan in second place, and in descending order of priority albeit with margins that had been rising since 1993, Western Europe, China, Mexico, Australia/New Zealand, Latin America, and the Middle East. Demographic change in Canada, driven by high immigration levels, prompted a reorientation of foreign policy away from Europe to Asia and, to a lesser degree, to the Americas. The slow demise after October 30, 1995 of an acute, imminent separatist threat from Quebec worked in the same direction, and lessened the need, central during 1995, to orient foreign policy and operate the foreign policy process so as to maximize the demands, values and interests of francophone

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Quebecers and thus Canadian unity. The new international affairs capacity within groups in Canadian society generated a continuing democratization, especially as expenditure cuts forced DFAIT to look outside for political support, program partnerships, ideas for more efficient operation, and groups to which it could transfer the responsibility for performing functions that were still needed, but too costly.12 A further source of guidance and constraint came from Parliament. The continuing weight of the February 7,1995 Statement was due in the first instance to its recent origins, and to the heavy and direct involvement of the Prime Minister in dictating its major themes.13 But its impact was strengthened further by the fact that it was the culmination of a parliament-based foreign policy review process, in which two wellinformed and influential Liberals, Bill Graham of Toronto and John English of Kitchener, participated. Their leading positions in the House of Commons Standing Committee on Foreign Affairs and International Trade (SCFAIT) ensured a continuing interest and oversight. A final constraint in 1996 was the imminence of a federal election, widely expected to be held as early as June, 1997. Its most notable effect, besides its influence on the January 1996 cabinet shuffle, was to reinforce the pressure to fulfil the unmet foreign policy promises in the Liberal Party campaign Red Book of September 1993. At the beginning of 1996, this list included the creation of an independent foreign policy institute, annual reports on the human rights records of other governments, to be used in defining conditions of official development assistance (ODA), and restrictions on arms exports.14 Of similar importance was the more detailed Foreign Policy Handbook of May 1993- Because the latter had been drafted mainly by Lloyd Axworthy and Christine Stewart, and because the media increasingly held the Chretien government accountable for these campaign promises as the next election drew nearer, officials in DFAIT assumed the two documents had a political weight and thus worked through the concepts and categories they had defined. PRIME MINISTER CHRETIEN'S BELIEFS AND INVOLVEMENT This thrust toward an assertive globalism flowed directly from the frequent intervention in the Ottawa policy-making process of a Prime Minister who had acquired well-developed and deeply held convictions about Canada's place in the world, and a confidence in his own role as the leading definer and often the deliverer of Canadian foreign policy.

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Jean Chretien had entered office with an entrenched foreign policy belief system formed by his early personal and family experience and refined by his three decades in the Liberal caucus and cabinet under Lester Pearson and Pierre Trudeau.15 At its foundation was a core concern with national unity, centred on the need to maintain a francophone community in North America. His family experience pointed to the United States as a great assimilator of French-Canadians through migration and linguistic absorption, and, by extension, of EnglishCanadians through cultural penetration. The result was an emphasis on increasing the distance and difference between Canada and the U.S., partly through policies of left-wing Liberalism that allowed Canadians to believe they had a more desirable society than that to the south. From this latter emphasis, from his experience of journeying across Canada with his family and from his personal experience in travelling around the world as a politician, flowed an unabashed, outspoken patriotic conviction that Canada was the best country in the world. He was adamant in maintaining the classic 1960s definition of the national unity dimensions of foreign policy, greeting Quebec assertions of a right to greater representation abroad with a firm refusal and the immediate reply that Ottawa would handle foreign representational roles. He had also acquired, from growing up, like Brian Mulroney, in a town where employment and family fortunes depended directly on exports, and from his years in the private sector prior to his return as Liberal Party leader, a firm belief in the importance of exports to the Canadian economy, and their critical role in generating employment for Canadians. By the spring of 1996 he had also come to accept the logic of economic globalization, setting aside earlier ideas about the desirability of controlling international currency transactions.16 Finally, at no time had he possessed any of the affection for or trust in the United Nations that was so vibrant among Pearsonians and many elements of the Liberal Party. His operational beliefs and methods were also well developed. His convictions about Canada's superiority were so strong that his propensity to offer lengthy discourses on this theme had to be restrained by his officials. In sharp contrast to Pierre Trudeau, he had little patience for lengthy philosophical discussions about the future, and a strong preference for short-term, concrete results. He also had a great belief in the value of personal contact. By 1996 he had honed his cautious predispositions and his skills in timing, delaying action

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until the necessary moment, and trusting some problems to solve themselves through the passage of time alone. Around the cabinet table, Chretien's firm belief in the Pearsonian approach of allowing ministers to manage their own portfolios initially overrode the vast personal experience he had acquired through having held many of the most senior and internationally relevant portfolios in government, including Trade, Finance, and, very briefly, Foreign Affairs.17 He thus remained relatively unengaged in foreign policy in a broad strategic, philosophical or substantive policy sense, giving his ministers relatively free rein until they strayed off course. Thus, on issues such as children's rights he allowed Axworthy to take the lead within the overall framework he had established. But he reserved for himself a substantial number of priority areas. These began with Canada-U.S. relations, where core issues of domestic Canadian policy were engaged, where Chretien had developed a very good personal relationship with President Clinton, and where he avoided public criticism of the President or his country. It extended to Canadian military intervention in the former Yugoslavia, where Foreign Minister Ouellet's advice had been overridden and where Axworthy subsequently evinced little interest. Another area of interest was the Team Canada missions, which DEAIT's Howard Balloch had conceived during his time as ADM for Asia Pacific, and carried with him to the Prime Minister's Office for the management of the national unity campaign; there the Prime Minister became firmly convinced of their value. Chretien's "domaine reserve" further embraced all issues related to the international dimensions of national unity, the overall pattern of budget cutting and his personal diplomacy through summitry, and to trade policy generally. Indeed, on trade matters proper, his strong personal interest, combined with his lengthy tenure in the trade portfolio and very brief experience in External Affairs, initially left Trade Minister Eggleton less room to manoeuvre than that generally enjoyed by Foreign Minister Axworthy. Chretien's increasing involvement in foreign policy was also driven by a globalization that brought the world and foreign policy directly into his domestic agenda of jobs and growth, by the regular Team Canada missions that flowed from this agenda, by the spread of institutionalized summitry in the G7, APEC, the OSCE, and the western hemisphere, and by television pictures from distant places such as Bosnia and Zaire. As instinct turned into conviction the Prime Minister intervened more directly and confidently in foreign affairs.18 He had personally

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defined the major doctrine of the February 1995 foreign policy Statement.19 He had personally set and persisted with the reform of international institutions as the central theme of the 1995 Halifax G7 Summit and placed the follow-on issue of UN reform among his key priorities for the 1996 Lyon summit.20 On the many issues dealt with at the summit, he would also intervene in cabinet discussions in a knowledgeable way. His influence was also felt in the many cabinet meetings dealing with the Canada-Chile free trade agreement. Canada's response to Helms-Burton also received the Prime Minister's very close attention,21 and he also played a decisive role on key resource issues, notably in preventing the closure of any of DFAIT's extensive network of foreign posts during the major cost-cutting exercise culminating in the summer of 1996.22 The Prime Minister's leading role was evident not only in internal government decision-making but also in international diplomatic delivery. His preference for rapid action, concrete results and personal diplomacy led him, even more than Prime Minister Mulroney, to telephone other world leaders spontaneously, leaving his officials to discover later that such conversations had taken place. This penchant for direct dial diplomacy was most pronounced in regard to his G7 colleagues, but also extended to the many leaders, such as Brazil's President Cardoso, whom he had met at his other summits and on Team Canada tours. For example, Chretien was on the phone to leaders in the Americas in regard to a prospective coup in Paraguay in 1996 that was successfully averted by the diplomatic intervention of the region's fellow democratic heads. Within Ottawa, the PMO, and Privy Council Office and the regular mechanisms for government-wide coordination responded to the pull. Within the PMO, there were no foreign policy advisers who routinely challenged the pre-eminence of those in the relevant departments by regularly advising the Prime Minister on foreign policy subjects. Although Chaviva Hosek was important for international social policy issues, even with respect to major Prime Ministerial issues such as the G7, Chretien was content to look to his line officials.23 Within the PCO, however, the staff of professional foreign service officers seconded from DFAIT provided Chretien with close-in policy advice and support that at times overrode that from DFAIT. Of particular importance was the Assistant Secretary to the Cabinet for Foreign Policy and Defence, James Bartleman, who had encouraged the Prime Minister, over Foreign Minister Andre Ouellet's objections,

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to leave Canadian forces in the former Yugoslavia. Bartleman was also particularly important in crisis situations, and as the intermediary for communications between DFAIT and the Prime Minister. Outside Ottawa, Chretien relied on his nephew Raymond Chretien, a career diplomat whom he had appointed Canadian Ambassador to the United States, for advice on Canada-U.S. relations and foreign policy in general. Raymond Chretien and Bartleman worked closely together to develop the Prime Minister's initiative on Zaire. THE NEW MINISTERS After Chretien's increasing involvement, internally and internationally, the most important change in Canadian foreign policy-making in 1996 was the installation of a new ministerial team in DFAIT. On January 25, 1996 the Prime Minister shuffled his cabinet, replacing Andre Ouellet with Lloyd Axworthy in Foreign Affairs and Roy MacLaren with Art Eggleton in International Trade, and appointing Pierre Pettigrew to the portfolio of International Cooperation and La Francophonie. He retained Christine Stewart as Secretary of State for Latin America and Africa and Raymond Chan as Secretary of State for Asia Pacific. Outside DFAIT, the major internationally relevant ministers remained in place, with David Collenette in Defence, Paul Martin in Finance, and Doug Peters as Minister of State for International Financial Institutions. The shuffle, both in the international affairs portfolios and in others, was widely thought to reflect a shift in the government's policies from the right to the left and to a more youthful image as an election approached.24 The replacement of Ouellet by Axworthy marked a major change. The new minister strongly wished to place a personal imprint on his new department and its policy. Andre Ouellet had overseen several initiatives during his tenure, notably the Rapid Reaction study focused on UN reform and revival, and the G7's Ottawa Conference on transnational crime. But he had approached his role as Foreign Minister primarily as a subsidiary to his pre-eminent and continuing responsibility as Quebec lieutenant, forcing all foreign policy to be viewed according to its impact on Quebec. This was particularly true with respect to the selection of Canadian companies to assist CIDA with its aid and technical transfer. It became an intense preoccupation in the lead-up to the referendum of October 30, 1995 in Quebec on the province's separation from Canada. Ouellet was also considered

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to be unconcerned with human rights issues, having told his caucus colleagues that Canada could not act like the "boy scouts" by insisting on respect for human rights in other countries.25 In contrast, Axworthy, upon becoming foreign minister, resigned his long-standing responsibilities as the regional political minister for western Canada and maintained few concerns with constituency issues and impacts. A former professor at the University of Winnipeg, he relied far more on his long experience as the Liberal Party's foreign affairs critic, as a minister under Trudeau, as co-author of the May 1993 Foreign Policy Handbook, and as a "red" Liberal attached to an activist social policy. Moreover, he was keenly interested in his new ministerial responsibilities, having coveted the foreign minister's portfolio for at least a decade.26 As the Liberal Party opposition critic for foreign affairs, he had favoured peacekeeping roles for the Canadian armed forces, criticized the expensive weaponry required for combatcapable armed forces, and complained about Prime Minister Mulroney's "camp follower" approach to the United States. As a minister in the Chretien government, he had lobbied quietly and with some success for the inclusion of Canadian values and human rights as a priority in the foreign policy White Paper of 1995.27 Axworthy's appointment was therefore widely thought to signal a new emphasis on human rights, arms control, Third World development assistance, and other centre-left foreign policies. Combined with the departure of Roy MacLaren, an ardent trade liberalizer, it was also seen as a shift towards a more reserved approach to trade policy, and a greater stress on including environmental and even labour issues in new trade liberalization agreements. Axworthy quickly undertook a series of initiatives to balance the government's earlier foreign policy emphasis on employment through exports. Drawing upon his ideological convictions and earlier portfolio experience, he added, to the Team Canada emphasis and elsewhere, social responsibility, children's rights, and human rights.28 One initiative from the new minister was to have CIDA start a program in Brazil on job training (as opposed to offering the standard official development assistance that would have been seen as an affront to Brazilian national dignity). He also took up with enthusiasm Canada's leadership in the G7/G8 process of developing stronger measures to deal with transnational terrorism. Axworthy launched further initiatives in the areas of peacebuilding, peacekeeping, demining, and a Canadian International Information Strategy.

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However amidst the rhetorical change and individual activism, Axworthy's impact on the substance of Canada's foreign policy remained limited. Canada's global trade-human rights policy saw little change. His activism on Nigeria, supported by Christine Stewart, stood in sharp contrast with Canada's continuing trade-focused approach to Cuba and China. His peacebuilding initiative inspired increasing questions about the meaning of the concept, and the depth of underlying consideration of what Canadian capabilities could sustain. Facing a separate minister responsible for CIDA, Axworthy was less successful than his predecessor in mobilizing CIDA's monies for short-term, highrisk foreign policy-oriented interventions, at the expense of the longerterm, development-oriented, well planned, carefully managed and accountable programs with a high probability of reward that CIDA itself preferred. January 1997 found Axworthy in India and Cuba, promoting trade as well as children's and human rights. The replacement of Roy MacLaren, the cabinet's most pronounced right-wing or "blue" Liberal, by fellow Torontonian Art Eggleton, also brought a real, if less immediately visible change. MacLaren had been a long-time principled believer in free trade. As a Liberal Party opposition member he had led those who had urged the party to accept NAFTA. As Chretien's first and highly accomplished trade minister he had gone so far as to recommend that Canada unilaterally eliminate its tariffs on all foreign products except agriculture. His professional career, initially as a diplomat in Canada's Trade Commissioner Service and subsequently as a private sector publisher in Canada, gave his views added authority and effectiveness in the trade portfolio. The new minister, Art Eggleton, a former mayor of Toronto, brought an intimate knowledge of the political concerns of Canada's business community, centred in Toronto. As Mayor of Toronto he had innovativeiy managed the city's hosting of the 1988 G7 Summit, had created the city's office of international affairs and promoted Toronto internationally as a place to do business. His knowledge of local issues and members of local Chambers of Commerce gave him a strong awareness of the social dimensions and local impacts of trade issues. He took a pronounced interest in, and displayed skill and approachability in handling trade promotion and the service-oriented aspects of his portfolio. However he had no firmly defined views on trade policy, and pledged upon entering the portfolio to leave his predecessor's policies intact.29

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Yet Eggleton quickly mastered the trade portfolio, and by the autumn of 1996 was in full command. His immediate encounters with the crises of softwood lumber and then Helms-Burton reinforced his nationalist instincts and his judgment that managing Canada's relationship with the U.S. was his priority task. Elsewhere he followed the Red Book emphasis, the trade policy agenda and the business consensus in focusing on Asia and Latin America, while dealing comfortably with the European Union as a single entity. His extensive foreign travel also provided an important forum for learning on the job. His first experience with the inter-American system, at the Cartagena ministerial held to advance the FTAA process, left him aghast at the formal, inflexible character of the forum, the absence of any room for manoeuvering or deal-making, and the obvious lack of progress or momentum. He also found APEC a similarly frustrating, pre-scripted event. But he found his form and forum in the Quadrilateral,30 where he developed good relationships with his American and European counterparts, and used them to deal bilaterally with the critical issues of Helms-Burton and leghold fur-trapping. His first real international success came in the Kobe Quadrilateral of September 27-28, 1996, when he secured the agreement of his counterparts to invite the Secretary General of the International Labour Organization to address the first ministerial meeting of the WTO in Singapore in December. At Singapore itself he fought strongly and successfully to secure a paragraph in the concluding communique on trade and labour standards. His support for such standards, and his nationalist approach on Helms-Burton, gave him a relatively easy rapport with Lloyd Axworthy. Eggleton's impact on trade policy was felt in other ways. It was he who added a demand for environmental side accords in the bilateral free trade agreement with Chile that Canada successfully concluded in November 1996. Against departmental advice, he criticized President Clinton's further six-month waiver of Helms-Burton's most onerous provisions, announced on January 3, 1997, as being disappointing and insufficient. As a seasoned politician, he had no reservations about overriding the views of his department, moving ahead of it, or taking risks on its behalf, when it could often appear conservative and slow. He also relied heavily on the perspectives of his cabinet colleagues, listening particularly closely to the concerns of Agriculture Minister Ralph Goodale and Industry Minister John Manley.

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The January cabinet shuffle also brought in Pierre Pettigrew as Minister of State Responsible for International Cooperation and Relations with La Francophonie. In practical terms he left little personal imprint on the portfolio, especially as his initial time in it was taken up with winning the by-election in Andre Ouellet's old constituency. He was replaced in September 1996 by a Franco-Ontarian, Don Boudria. The arrangement thus left DFAIT, less than a year after the referendum of October 30, 1995, without a single minister from Quebec among its complement of five. The net result of the shuffle was that five ministers would oversee the single Department of Foreign Affairs and International Trade, in addition to what critics of the arrangement termed "a globe-trotting Prime Minister."31 To reduce the potential overlap, the Prime Minister charged Axworthy, upon his appointment, with ensuring coherence and coordination in the Department as a whole and among its five ministers.32 Partly in response, Axworthy instituted a weekly meeting of the five, in which they collectively coordinated portfolio-wide concerns. It was a sharp contrast to the previous arrangement, under which Ouellet and MacLaren, both senior ministers and knowledgeable political veterans, never regularly met. The process of the five ministers lunching together every Tuesday atrophied by the autumn, when a new minister arrived and scheduling difficulties arose. Axworthy and Eggleton, however, continued to meet as necessary. In practice, despite the frustrations generated by the legal requirement for the foreign minister to give his approval on such core trade matters as civilian export licencing, the two quickly came to a good working relationship as equals. The presence of five ministers created heavy demands on the bureaucracy, as officials had to service the multiple and at times conflicting demands of more than one minister interested in, and claiming a role with regard to, many international issues. Moreover, since Canada, unlike Britain, had no legislated definition of the powers and role of secretaries of state, there was an enhanced prospect for political-level friction. This was particularly true because Axworthy tended to assume control of the high profile issues. Typical of the overlap was Helms-Burton, which involved Trade Minister Eggleton, Axworthy (for Canada's bilateral relationship with Cuba and human rights, governance and political issues), Stewart, and the official level branches, bureaus and divisions responsible for the United States,

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trade policy, the WTO, and Latin America. In practice, the relevant officials, who found it relatively easy to make the adjustments required by the necessary trade-offs, had to rely heavily on ministerial staffs to ensure coherence and a smooth division of labour above. Compounding the challenge facing DFAIT's officials was Axworthy's propensity to deliberately seek new ideas outside as well as inside established channels. He would regularly assemble small groups of officials and outsiders for freewheeling, academic-style discussions of policy issues. He also moved quickly to establish a formal outside advisory structure linked to the Department, backed by a modest fund to encourage outside interest groups and individuals to contribute papers containing policy advice. The 1996 National Forum, the first to be held on a regional basis with a grassroots orientation, reinforced the propensity of the new ministers to link trade with human rights and codes of conduct, while the new Advisory Council, in its first year of operation, concerned itself with using the Internet to improve the Department's communications with the public. On the trade side, Eggleton continued to rely on the long-established International Trade Advisory Committee (ITAC) and its many Sectoral Advisory Groups on International Trade (SAGITs), and moved quickly to make effective use of them. Within DFAIT these mechanisms for consultation with outsiders were treated with considerable seriousness, were sometimes seen as influential, and were seldom viewed as a threat. THE DFAIT REORGANIZATION A further changef consequent to the new arrangements in 1996, was a major reorganization of DFAIT in the summer of 1996.33 It was prompted by several factors. A major stimulus was the view that DFAIT had too many layers, making it sluggish in responding to the demands of its many ministers. One routine example was the handling of the daily briefing books for anticipated orals for the House of Commons question period; each of the 50 or more questions and answers prepared by desk officers had to move up the chain of command to reach the Ministers' offices. A more dramatic instance was provided by the Haitian crisis, in which all officials from the Deputy Minister downward dealt with the issue in a continuing, detailed way. From these situations emerged a strong feeling that some layers in the DFAIT hierarchy could be eliminated to provide the rapid response ministers

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liked and the cost savings they demanded. A further feature prompting reform in a similar direction was the "stovepipe" feature of the Department, which caused advice to be funnelled from the bottom to the top through linear reporting relationships without any lateral input from other officials who might have acquired expertise in the area. Another force for reorganization, from outside the Department, was the PCO exercise aimed at "getting government right," in part by defining what core federal government responsibilities were.34 There was an emerging feeling in Ottawa that DFAIT could operate more effectively by assisting the other departments, virtually all of which had international components, to set out their foreign policy goals.35 The service DFAIT provided abroad was widely seen by the other departments and the provinces as effective. But DFAIT was thought, in cabinet, to need a stronger role in helping to implement the domestic agenda of jobs, national unity, and projecting Canadian values and interests overseas. The Department therefore moved to develop "lines of business," or key areas of federal responsibility, government policy, and support for its clients in the provinces and the business, NGO and academic communities. A further factor was budgetary constraint. Fiscal stringency meant that in 1996 DFAIT was facing the fourth year of a salary freeze. With budgets tight, there was a demand for greater accountability, for fewer grants to institutions, and for fewer initiatives. A final element in the situation was the changing relationship between headquarters and posts in an era of rapidly changing communications technology, and the resulting dissemination and use of information. Compared to the old era of teletype, code and fax, the new communications technology allowed for the instantaneous secure transmission of documents at much less cost, reducing the need for staff abroad. Canada possessed the most modern diplomatic communication system among its G7 colleagues, having invested in it heavily as a way of projecting Canada abroad more vibrantly. To consider changes in the DFAIT organization two working groups were established. The first had to identify a structure for the Department that would make it less top heavy. A second group examined the Department's daily procedures, such as briefing books. The results of the review, announced in June 1996, were farreaching.36 In the first instance, the number of bureaus headed by ADMs was reduced from 14 to seven (in part through voluntary early

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retirements). The new bureaus grouped geographic and functional responsibilities, at times in combined fashion, as follows: Asia Pacific and Africa; Trade and Economic Policy; Global and Security Policy; Corporate Services; Americas and Security/Intelligence; Europe, Middle East and North Africa; and International Business and Communications. The seven ADMs were to function as a board of directors, making decisions corporately and collectively and focusing on broad policy and longer-range issues. This would allow daily decision-making to be devolved to the Directors-General (who would report directly to the Deputy Minister), and to the Directors below. The Directors-General were also to acquire decision-making authority over budgets, issues, and relationships with countries and organizations abroad. The Policy Planning Staff, designed to serve the two Deputy Ministers, was retained but reduced in size, in part by eliminating its division responsible for the G7 summit. At the top, the recently recreated position of Associate Deputy Minister was eliminated. The two Deputy Ministers—one for foreign policy and one for trade—were left intact. Accompanying the reorganization was a reduction in personnel. In all, 80 positions were eliminated, with the biggest reductions, 50 in all, coming in the senior executive category. However by current Ottawa standards, this was a relatively small reduction. Moreover the downsizing was made easier by a special arrangement Deputy Minister Gordon Smith negotiated with the Treasury Board to render DFAIT eligible for the special financial assistance for early retirements, a program previously reserved for severely affected departments. To some extent DFAIT's relatively light reduction was due to the Prime Minister's known support for the Department. It was also due to the figures produced for a PCO group on continuity in the public service. It revealed that in the coming five years, due to the great hiring boom in the Department of External Affairs and CIDA from 1963 to 1975, a full 60 percent of DFAIT's complement would reach the 55 years of age or thirty years of service threshold of eligibility for early retirement. It was thus necessary for the Department to keep on recruiting and promoting, in part to make the organization more demographically representative of Canadian society as a whole. There were several curious features of the new system. The separate Bureau of Global Affairs, created just the previous year, was abolished and merged with those responsible for more traditional forms of security.37 The combination of the weighty geographic

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region of the Americas, including the United States, with the demanding function of security and intelligence led the Latin American ambassadors in Ottawa to complain that the new ADM would have little time to address them or their concerns. The ADM overseeing the Trade and Economic Bureau, the area of the White Paper's first priority and of keen Prime Ministerial interest, was also assigned responsibility for the APEC Summit Canada would host in 1997, making for a formidable and heavily operational workload. The combination of the vastly disparate and geographically divided regions of Asia Pacific and Africa into a single bureau also appeared to be a highly ambitious assemblage. Moreover, there were relatively few francophones in the senior ranks. By the end of 1996, and of the first four months of experience with the new system, it was operating reasonably well. In some areas there was a concern that the ADMs were overworked and unavailable to provide the desired leadership on critical issues which erupted. Immediate crises such as the December hostage-taking at the Japanese ambassador's residence in Peru tended to involve the relevant ADM from the start. But the seven ADMs and the two Deputy Ministers were meeting frequently to collectively address broad issues they had not dealt with together in the past. These included resource allocation, personnel, future planning, and the best way to conduct relations with the interdepartmental community. The Department's nine senior officials, meeting around a single small table every Wednesday for a three-to four-hour exchange based on an agenda and documents provided the previous Friday, were now able to have an informed and in-depth discussion and take specific decisions together as a result. From this process arose a sense of collective responsibility to the organization as a whole, as ADMs spent less and less time defending the particular interests of their oversight sectors, increasingly took responsibility for finding solutions upon themselves, and moved to set strategic priorities. As 1997 began, the new corporate management structure was proving its value in setting priorities for resource allocation, and was beginning to take up the challenge of relating resource allocation to policy decisions. In September and October 1996 the Executive Committee, meeting as a Management Committee, had defined the Department's seven "lines of business" (in the first instance on the basis of the three priorities of the 1995 Statement). It was proceeding to identify sub-objectives and priorities, and moving to decide on new

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priorities by reallocating resources across the entire Department rather than only within the particular functional or geographic sector most directly responsible. In January 1997 it confronted the task of identifying an agenda which would enable it, when it met, as originally intended, as a Policy Committee, to address issues such as NATO expansion or the assumption of expanded responsibilities in the Organization of American States (OAS), in which policy decisions and resource reallocations were closely related. THE INTERDEPARTMENTAL COMMUNITY The Prime Minister's primacy in the foreign policy-making process, previously referred to, was further enhanced by the difficulties afflicting DFAIT's sister organizations, CIDA and DND. Although CIDA had acquired new responsibilities for the delivery of assistance to the transition economies of the post-communist world, its weight had been reduced by several factors. One was that, in sharp contrast to the Mulroney government process, no move had been made to make it the subject of a separate development policy review and white paper. A second was its effective organizational subordination to DFAIT, a weakness compounded by the presence during 1996 of three different, largely inexperienced ministers responsible for international cooperation. A third was the unprecedented scale of the budget reductions, as a 2 percent cut to CIDA in the first Chretien budget of 1994 was followed by a 15 percent cut the following year, and only partly offset by the 6.5 percent increase of 1996. Underlying CIDA's weakness was a new belief that the integration of developing countries into the international trade system, rather than overseas development assistance, was the central instrument of development; and an additional factor was the ineffective lobbying strategy of development NGOs during the 1994-5 foreign policy review. In the case of DND, budget reductions, the highly public agony of the Somalia inquiry, prospective expensive weapons purchases, recurrent decisions over the deployment of Canadian forces in the former Yugoslavia, and the revival of hostilities in Iraq all served to draw the Prime Minister into an area in which he had no ministerial or professional experience. In general, Chretien's interventions brought strong support to the Department's forceful minister, David Collenette, an early Chretien leadership supporter whose vivid memories of the blitz in World War Two Britain sustained a strong and successful desire

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that Canada retain combat capable armed forces. Yet even with such assets, for much of 1996 the Department was preoccupied with and paralyzed by the media drama of the Somalia inquiry. It consumed the time and ultimately the departmental careers, first of Chief of Staff Jean Boyle, and subsequently of Collenette himself. The autumn appointment of Doug Young as Defence Minister and the mobilization of the Department to prepare for the Zaire intervention briefly raised hopes that the DND might become a relevant policy-making force. But as 1997 opened, the uncertain impact of the Zairian mission, the unfilled positions in senior reaches of DND, and new allegations about misconduct in training exercises and peacekeeping in the former Yugoslavia suggested that the emasculation would continue. CIDA and DND were not alone in being preoccupied with budget cutbacks and declining public support. Virtually all other departments with important international responsibilities were also engaged in a severe downsizing. Environment Canada, for example, was still coping in 1996 with its recent budget reduction of 35 percent. Such a situation exacerbated the conflict between DFAIT and other departments, as all tried to limit the expenditures for which they were responsible, and DFAIT attempted to reduce its burden of financing other departments' international operations in areas where DFAIT did not have the policy lead. The task of ensuring government-wide coordination was the responsibility, in the first instance, of the deputy minister-level mirror committee on foreign policy, chaired by DFAIT's Deputy Minister, Gordon Smith. This body, open in practice to any deputy who wished to attend, dealt with such future-oriented issues as the impact of North American integration on Canada's social programs and culture. It also examined, in November 1996, the implications for Canada of the U.S. presidential election results, when Smith, impressed with the analysis presented within the Department, took it upwards to the broader group. However, the deputy ministers' committee did not meet often. Issues such as peacekeeping and Haiti were dealt with by DFAIT and DND alone, with CIDA brought in when reconstruction questions arose. The centre of coordination therefore lay in the cabinet itself. In practice, cabinet provided a substantial degree of direction, not only on current crises but on longer-range issues as well. For example, on November 7, at the height of the refugee crisis in Zaire, cabinet

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considered the implications of the U.S. election results for the management of Canada's relationship with the United States, following the discussion in the deputy ministers' committee. THE CASE OF THE INTERVENTION IN ZAIRE, OCTOBER 1996 The competition among cash-strapped departments and the Prime Minister's key participation in defining Canada's assertive global role was dramatically illustrated at the end of 1996 by Canada's initiative aimed at mobilizing an international force for military intervention in eastern Zaire. The process began on October 26, when United Nations Secretary General Boutros Boutros-Ghali called Canada's Permanent Representative to the UN, Robert Fowler, with the message that he needed a special envoy, from a francophone country with no colonial history and the full resources of his government behind him, to deal with the imminent humanitarian disaster in war-ravaged eastern Zaire.38 Fowler immediately relayed the request to Foreign Affairs Deputy Minister Gordon Smith, who set the interdepartmental machinery in motion. Within Ottawa, at the official level, there was considerable caution, particularly over the prospect of Canada moving from a diplomatic mission to military intervention. DND in particular was reluctant. The heavy legacy of the Somalia inquiry was evident in DND's demand that any Canadian forces deployed in the region possess robust rules of engagement, and that these rules be preapproved by the Judge Advocate General. DND officials further argued they had no available forces, with the Airborne Regiment disbanded and all available francophone units committed to the former Yugoslavia and Haiti. Canada's military force in Haiti was seen by Washington as helping to prevent a new wave of Haitian refugees from arriving on the shores of Florida, and that gave Canada important "diplomatic capital" with the U.S. DFAIT was therefore reluctant to divert its forces from Haiti for deployment to distant Zaire. Foreign Affairs, too, was reserved. Its officials argued that if Ottawa were to accept responsibility for clearing a corridor so that the refugees could return to Rwanda, they would have also to ensure that Rwanda would receive them. Many felt it was beyond Canada's capacity to assume the tasks of pressuring Rwanda to do so, and to create the multiethnic harmony in Rwanda needed to ensure that the refugees would be safe upon their return. Canada's war crimes

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tribunal judge pointed out how difficult it was to identify and prosecute war criminals. Others raised commercial interests. The French were active in selling arms in the region. South Africa was also, although on November 6, 1996 President Mandela ordered a halt to such activity. Canada itself had 100 million dollars of investment in Tanzania, where many Rwandan refugees were waiting. Health Canada pointed to the prevalence of infectious diseases, such as AIDS and cholera, among the refugees. It argued the refugees might thus pose a threat to Canadian forces in the region, but could also find their way to Canada even if Canada were not to intervene. Others noted that an estimated 40 percent of recent refugees in Canada were currently on social assistance, and that a further intake from Rwanda would only increase the burden. The cost was also a major inhibition in budget-conscious Ottawa. Canadian intervention would consume an estimated 100 million dollars, which was simply unavailable within DFAIT's reserves. CIDA's President, Huguette Labelle, when asked if she might have the funds to assist proximate African forces to participate, replied that she did not consider it within CIDA's development mandate to finance the military intervention of foreign armies in third countries. There was also little encouragement from abroad. The memory of casualties in Somalia led the U.S. to refuse initially to commit ground forces. Countries in the region were deeply suspicious of France. The Belgians, with their unpleasant history in the region, had no desire for their troops to return. As of November 8, 1996 only Spain and France were prepared to commit forces to a Canadian-led multinational coalition. By the end of November, the steering group Canada had constructed consisted of its G7 colleagues (with Germany absent), the European middle powers Belgium, Spain and Sweden, and four African countries. In the face of such widespread reluctance, it was the determination of Prime Minister Chretien that led Canada to respond favourably to Boutros-Ghali's request and take the lead in mobilizing a multinational military intervention force. Chretien was aroused in the first instance by the television pictures of the plight of the refugees in Rwanda, and by the views of his nephew, Raymond Chretien, who had served as a Canadian diplomat in the region. In the wake of the close results of the 1995 referendum, he was particularly sensitive to

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the close association many francophone Quebecers had with Rwanda and Zaire, through longstanding missionary and educational ties. The Prime Minister therefore authorized the use of Raymond Chretien as a special envoy. Sustained by Raymond Chretien's reports, he authorized and exerted Canadian leadership in organizing a military coalition of up to 10,000 troops to deliver humanitarian relief and assist with refugee resettlement. Thus, on November 12, 1996, Canada publicly offered to lead a multinational military force to assist the estimated one million refugees in eastern Zaire with humanitarian relief and aid to return to their homes in Rwanda. However, less than two weeks later, just as Canadian forces were beginning to deploy to the region, the Hutu militias controlling the refugees camps in Zaire departed, leaving their inhabitants to stream en masse back to Rwanda. As Canada's coalition partners, and later Canada, rapidly reduced their estimates of the need for forces and their commitments, the Canadian government was left to argue, with substantial plausibility, that their credible threat of deployment was the trigger that had transformed the calculations of local actors, and led at low cost to the outcome Canada sought. Within Ottawa, this satisfaction with the apparent success of the Canadian initiative was accompanied by a study to determine the lessons to be learned as a basis for improved performance in the future. There was a general approval of the flexibility displayed by the new departmental structure in the crisis, as ADMs Paul Heinbecker and Claude Laverdure swiftly moved to take charge of the issue, as others moved to assume their normal supervisory responsibilities, and Directors-General smoothly shifted to report temporarily to new ADMs as the situation demanded. However there were concerns about the possibility that too many ADMs had become involved in the issue, and that, in the haste of decision-making during the crisis, there might not have been adequate provision for recording decisions taken and distributing the results to all who needed to know. A more basic issue was whether Canada was wise to base its decisions on the fragmentary evidence available from its own diplomats and NGO representatives of the region, and the satellite and other intelligence provided by the U.S. and other allies, or whether it now needed to develop a foreign intelligence gathering capability of its own.39

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CONCLUSION It was revealing that many of the Prime Minister's decisions and statements about the final stages of the Zairean intervention were made in Asia, during his attendance at the fourth annual summit of APEC leaders and amidst his accompanying visits to Japan and China. He continued his personal involvement with Zaire as he flew from Asia to Portugal for a summit of the OSCE, using his brief time at the latter summit to build support for a revised Canadian force. The sequence showed Canada and the Prime Minister as globally engaged and demonstrated the centrality of the Prime Minister in both the design and the delivery of Canadian foreign policy initiatives which had an importance for the international system as a whole. It was a process and policy likely to continue during 1997 when, despite the domestic diversions of an election, both Canada and Chretien would be called on to play important leadership roles at the June G7 Summit in Denver, and above all at the APEC summit in Vancouver itself. NOTES The information and judgments in this article are largely based on extensive private interviews and participation in meetings during the past three years with senior officials, ministers, and ministerial staff in DFAIT, other departments and agencies most involved in international affairs, and the Prime Minister's Office (PMO) and the Privy Council Office (PCO). Information is treated as reliable if related in detail by one source in a position to know, confirmed directly by one source or in general by several, and not contradicted by others. The author gratefully acknowledges the research assistance of Nicholas Lensky, Atif Mir and Gina Stephens in the preparation of this chapter. 1

Andrew Cooper, "In Search of Niches: Saying 'Yes' and Saying 'No' in Canada's International Relations," Canadian Foreign Policy 3 (Winter 1995): 1-14. For additional accounts of the recent Canadian foreign policy decisionmaking process, emphasizing reductions at home and abroad, see: Evan Potter, "Redesigning Canadian Diplomacy in an Age of Fiscal Austerity," in Fen Osier Hampson and Maureen Appel Molot, eds., Canada Among Nations: Big Enough To Be Heard 1996 (Ottawa: Carleton University Press, 1996), 23-56; Evan Potter, "A Question of Relevance: Canada's Foreign Policy and Foreign Service in the 1990s," in Fen Osier Hampson and Christopher J. Maule, eds., Canada Among Nations 1993-4: Global Jeopardy (Ottawa: Carleton University Press, 1993), 37-56; and Hal Klepak, "Future Defence Policy in an Epoque de vaches maigres," in Fen Osier Hampson and Maureen Appel Molot, eds., Canada Among Nations 1996, 57-82.

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2

3 4 5 6

7

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11 12

In theoretical terms, a foreign policy marked by global, interest-based, autonomous bilateral involvement, by unilateralism, divergence and diversification, and by revised institutionalization, concert and modification, is one that flows from and breeds a government decision-making process dominated by the Prime Minister and those closest to him or her. See David Dewitt and John J. Kirton, Canada as a Principal Power: A Study in Foreign Policy and International Relations (Toronto: John Wiley, 1983). John Kirton, "Une ouverture sur le monde: la nouvelle politique etrangere canadienne du gouvernement Chretien," Etudes Internationales 27 (juin 1996), 257-279. Canada, Department of Foreign Affairs and International Trade, Canada in the World: Government Statement (Ottawa: Canada Communication Group, 1995), i. Canada, Department of Finance, Main Estimates, 1996-7. By way of comparison, during his first eighteen months in office, Prime Minister Mulroney made 16 official visits abroad. The countries which appeared most frequently on the Prime Minister's itinerary were Britain (9 trips), U.S. (7 trips), France, Japan and Italy (6 visitations each), and Germany with 4. On the G7 see John Kirton, "The Diplomacy of Concert: Canada, the G7 and the Halifax Summit," Canadian Foreign Policy 3 (Spring 1995), 63-79. On APEC see John Kirton, "Institutional Arrangements in the New Asia: Possibilities for Canada in APEC," Paper presented to the Japan Association for International Relations-International Studies Association Special Joint Conference, Makuhari, Chiba, Japan, September 20, 1996, and in revised form as Asia Pacific Papers 3 (March 1997). For a full account of the impact of globalization on the Canadian foreign policy decision-making process see G. Bruce Doern and John Kirton, "Foreign Policy," in G. Bruce Doern, Leslie Pal and Brian Tomlin, eds., Border Crossings: The Internationalization of Canadian Public Policy (Toronto: Oxford University Press, 1996), 237-64. Andrew Cooper and Leslie Pal, "Human Rights and Security Policy," in Border Crossings, 207-36. In 1994 Canada maintained 146 posts (excluding honorary consulates and honorary consulates-general) abroad, compared to Britain's 422, the U.S.'s 293, Italy's 284, France's 263, Japan's 261, and Germany's 260. Non-G7 members with more posts than Canada included Finland with 500, Denmark 378, China 350, Turkey 244, Korea 226, Algeria 212, El Salvador 211, Spain 205, Colombia 182, Egypt 179, Switzerland 165, Argentina 152, and Brazil 150. "Foreign Service Around the World at a Glance," Bout de papier \l (Summer 1994), 32-33These conclusions are based on the results of a survey by Goldfarb Consultants of 1,653 Canadians, conducted in February 1996. A Treasury Board study showed that in the fiscal year ending March 30, 1996 the federal public service shrank from 225,000 to 208,000. "Cuts hit young civil servants," The Globe and Mail, August 3,1996, A4. On the implications for NGOs in international affairs see Kenneth Bush, "NGOs

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13

14 15

16

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18

and the International System: Building Peace in a World at War," in Fen Hampson and Maureen Molot, eds., Canada Among Nations 1996, 251-72. The White Paper had an immediate effect in the ensuing budgetary wars, since the listing as a priority, for the first time ever, of the promotion of Canadian values and culture prevented reductions to these portions of DFAIT's budget at a time of heavy cost cutting in the Department. Jeff Sallot, "Foreign Affairs gets new shift to centre-left," The Globe and Mail, January 26, 1996, A4. John Kirton, "A New Global Partnership: Canada-U.S. Relations in the Clinton Era," Canadian-American Public Policy 15 (November 1993), 21-22; Jean Chretien, Straight from the Heart (Toronto: Key Porter Books, 1994), and Lawrence Martin, Chretien: The Will to Win, Volume 1 (Toronto: Lester Publishing, 1995). For evidence of his revised views see Chretien's speech at the opening session of the 14th Annual Plenary of the Interaction Council, May 19, 1996, Vancouver, Pan Pacific Hotel (available as PMO Press Release May 16, 1996, at http://pm.gc.ca/english/pmo/pm-speech/van-eng.htm). In the lead-up to the 1996 G7 Halifax summit, which he wished to focus on the reform of international economic institutions, he had railed against "28-year old currency traders in red suspenders" who could ruin the Canadian economy in seconds, and remained open to the idea of a Tobin tax on speculative international currency transactions. With only France showing any sympathy, he had dropped the idea by the time of the summit itself. On the lead ministerial principle see John Kirton, "Foreign policy decisionmaking in the Trudeau government: promise and performance," International Journal 33 (Spring 1978), 287-311, Kim Nossal, "Dividing the Territory, 1968-1994," International Journal 50 (Winter 1994-5), 189-208, and John Hilliker and Donald Barry, "Sharing the Territory, 1946-1968," International Journal 50 (Winter 1994-5), 163-88. Chretien served as Deputy Prime Minister and Secretary of State for External Affairs from July to September 1984 (and in that capacity he advised Prime Minister Trudeau to engage in summit diplomacy for electoral advantage), as Minister of Energy, Mines and Resources from September 1982 to July 1984 (during which time he operated the National Energy Program), Minister of Justice from March 1980 to September 1982, Minister of Finance from September 1977 to June 1979 (in which capacity he attended the 1978 Bonn G7 Summit), Minister of Industry, Trade and Commerce from September 1976 to September 1977 (during the aftermath of the November 1976 election of the separatist Parti Quebecois government in Quebec), President of the Treasury Board from August 1974 to September 1976, Minister of Indian and Northern Affairs from July 1968 to August 1974 (he was responsible for preparing the 1970 Arctic Waters Pollution Prevention Act), Minister of National Revenue from January to July 1968, and Minister without Portfolio attached to Finance from April 1967 to January 1968. For an overview during Chretien's first two and a half years as Prime Minister see Edward Greenspon and Anthony Wilson-Smith, Double Vision: The Inside Story of the Liberals in Power (Toronto: Doubleday, 1996).

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19 At the cabinet meeting of January 31, 1995 cabinet considered the draft foreign policy Statement. It was the subject of an animated two-hour conversation in which most ministers, including the Deputy Prime Minister Sheila Copps, intervened. The document was substantively enriched by the discussion, and the ministers, having made the document their own, were willing to defend it. Chretien, having just returned from his Latin American trip, was in a buoyant mood and intervened forcefully. His contribution, reflected in the opening pages of the document and particularly in the opening five bullets, centred on the emphasis that Canada had major assets in dealing with foreign policy. While it was then International Trade Minister Roy MacLaren, who had suggested jobs, prosperity and national unity as themes, it was Chretien who had all references to national unity struck from the document, on the grounds it would provoke an avoidable battle with the Bloc Quebecois and Quebec. 20 Although, at President Clinton's initiative, the 1994 Naples G7 Summit had set international institutional reform as the centrepiece subject for the 1995 Halifax summit, Canada, as host of the latter event had considerable freedom to set the agenda. During the autumn of 1994 Chretien persisted in identifying reform of the international financial institutions, notably the IMF and World Bank, and the reform of UN economic institutions as the central subjects, despite a lack on interest on the part of Germany and other G7 partners (prior to the Mexican peso crisis of December 20, 1994 and the subsequent collapse of Baring's Bank). Although the French hosts showed little interest, Chretien also identified UN reform and trade as his key priorities for the 1996 Lyon G7 Summit, and was able to make some progress on both issues. 21 Helms-Burton, as an issue involving both trade and human rights, and Canada's overall relationship with the United States, received the recurrent attention of many ministers, including Christine Stewart and Sheila Copps and the Prime Minister himself, and was the subject of more cabinet discussions. While all ministers agreed that Canada should oppose the legislation, there were differences of opinion on how far Canada's opposition should be taken. Both Axworthy, with his human rights and sovereignty concerns, and Eggleton, with his concern for the Canadian business community, found it relatively easy to come together on a common position. Ultimately it was the Prime Minister who decided that Canada would remain strongly opposed. See discussion by Donald Abelson in Chapter 4 of this volume. 22 During the cost-cutting exercise there was a widespread view that because DFAIT was such a personnel-intensive Department, with very costly foreign posts, and because the new communications technology reduced the need for an on-site presence abroad, DFAIT should not remain everywhere but should close posts in low priority countries and international organizations. However, on his return from the 1996 Lyon G7 Summit, the Prime Minister discussed this question and decided that no posts would be closed. Indeed, his decision was to open a few additional posts, and to secure savings by reducing the staff complement at some large and medium-sized Canadian posts, as well as Canadian contributions to international organizations, and

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25 26

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ODA staff positions abroad, including housing offices that had arisen as part of an earlier decentralization of CIDA. His reasoning was based directly on the professional support he had received from these posts during his very extensive travels abroad as Prime Minister. On this most basic subject a decision-making process dominated by the Prime Minister had thus produced a policy that favoured globalism, instead of allowing resource constraints to dictate a geographic move from a "diffuse" to a "discrete" or "niche" diplomacy. In the previous year cabinet had also made it clear it did not want post closures. Within the PMO his special adviser Mitchell Sharp was there largely for moral support and provided no foreign policy advice. Chretien's desire to rely on permanent officials, due to his initial political socialization and desire to reduce the large political staffs of the Mulroney era, was seen in his choice of his personal representative for the G7 summit. Here he retained, and relied on, his predecessors' choice of Foreign Affairs Deputy Minister Reid Morden, and replaced him after the 1994 Summit with Gordon Smith in both positions. Hugh Winsor, "PM bets heavily on ability of recruits," The Globe and Mail, January 26, 1996, Al. The Globe editorialized that the changes meant a cabinet "Weaker in trade, stronger in social policy, stronger in foreign affairs ..." See "On balance, a stronger cabinet," The Globe and Mail, January 26, 1996, A14. Sallot, "Foreign Affairs gets new shift... ," A4. It is said that Chretien promised Axworthy he would keep the foreign affairs portfolio for the second Liberal mandate, should the Liberals win the forthcoming election. One account suggests that Axworthy could have had the foreign affairs portfolio in Chretien's first cabinet in 1993, but that he preferred the big budget Human Resource Development portfolio instead. The presence of human rights as one of the Canadian values specified in the review also represented, however, a response to Bloc Quebecois criticisms of the parliamentary committee report, and an effort to forestall Quebec criticism of the government in the year of the referendum. For example, upon his arrival in the portfolio the Department prepared a comprehensive list of priorities that were designed to appeal to the new minister. From the list, in preparation for the 1996 G7 Summit, Axworthy selected child labour and human rights, Nigeria (about which he was very concerned), Haiti, landmines and conventional weapons, Hong Kong (regarding which he wanted to send the right signal, not forgetting it but not criticizing China too harshly), and Bosnia (where he felt medium-term peacebuilding and the work of the war crimes tribunal were very important). Barrie McKenna, "MacLaren leaves trade battles behind," The Globe and Mail, January 26, 1996, Bl. The G7 trade ministers' forum of the U.S., the European Union (EU), Japan and Canada. Jeffrey Simpson, "Federal cabinet positions are both more and less than they seem," The Globe and Mail, January 30, 1996, A20.

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32 Upon their appointment, both Axworthy and Eggleton received the standard portfolio letters from the Prime Minister, outlining their respective tasks and responsibilities. These definitions minimized any friction or sense of a senior-junior relationship between the two. 33 For a reflection of the debate within the Department on the reorganization see: Don Waterfall, "Reengineering DFAIT: Developing, Reorienting and Rewarding the Foreign Service," Bout depapier 13 (Fall 1996), 20-21. 34 This was likely to result in enhanced influence for DFAIT, as its senior officials argued forcefully that trade and foreign policy were undeniably core federal responsibilities, to which provincial governments and the private sector could lay little claim. 35 Within Ottawa there tyere 18 departments with formal international affairs units. DFAIT had long ago relinquished the policy lead to most of them (for example to Agriculture Canada in regard to defining Canada's position in the Food and Agricultural Organization) but retained the budgetary responsibility for maintaining Canadian participation. This latter commitment had become particularly problematic at a time when all departments in Ottawa were attempting to reduce their budgetary responsibilities in order to meet centrally imposed constraints. 36 The results of the reorganization were outlined in several documents issued by DFAIT: "Executive Committee for Priorities, Planning and Resources," "Operations Committee Procedures," "Annual Resource Allocation Cycle," "Generic Accountabilities: ADMs and DGs," "Message from the Deputy Ministers, Departmental Review: Update," "Organizational Symbols and Titles," "Program Review II and Organizational Changes." 37 Gordon Smith, "Canada and the Halifax Summit," in John Kirton and Sarah Richardson, eds., The Halifax Summit, Sustainable Development, and International Institutional Reform (Ottawa: National Roundtable on the Environment and the Economy, 1995), 33-37. 38 Boutros-Ghali had considered and apparently contacted three countries and was seeking someone, such as a former head of government or at least a cabinet minister, who could deal effectively with world leaders. 39 Jeff Sallot, "Zairian mission decided without first-hand facts," The Globe and Mail, December 27,1996, A4.

Ill Canada In the Global Economy: Where Do We Stand?

MICHAEL HART

Members noted that the strength of exports benefited both from strong demand in the United States and from the structural effects of trade liberalization under the WTO and the NAFTA .... While acknowledging that this reflected Canadian firms' ability to operate in a highly competitive market, several Members stressed the cyclical vulnerability inherent in such dependence on one destination .... Members recognized that Canada's efforts towards trade liberalization, complemented by domestic reforms, had created a stronger basis for long-term economic expansion. Most sectors of the economy and a wide range of policy areas had been affected. WTO, Trade Policy Review of Canada, November 19961

Vv hat a difference a decade can make! In the middle of the 1980s, Canadians were consumed by considerations relating to bilateral trade relations with the United States. The federal government's pursuit of a free trade agreement with our neighbours to the south

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had stirred up spirited debate and made trade policy a matter of household concern. Dire predictions of Canada's imminent demise were matched by equally hyperbolic claims of unprecedented pending prosperity. Free trade turned out to be neither a calamity nor a panacea, but trade did become ever more important to the daily concerns of Canadians. Between 1986 and 1996, exports of goods and services as a share of Canadian economic activity grew from roughly 25 to 40 percent and trade issues occupied a growing share of the time and energy of government leaders. Canadians are not alone in experiencing an explosion in trade and investment and a new sensitivity to the benefits and disadvantages that can flow from deepening economic integration. Trade has become central to a growing number of countries. It is not surprising, therefore, that the trading system and its many constituent agreements are fast becoming the main rules of the game governing interstate relations. The protection of the environment or the promotion of human rights are among the leading international issues that now arouse public anxiety. Individually, there is a limit to what political leaders can do to meet such concerns. The reality of a global economy and of economic interdependence makes it hard for even the largest powers to solve problems unilaterally. Collectively, however, they can begin to address these issues, and trade agreements may provide the most potent forums for doing that. Thus, in addition to conventional economic considerations, trade institutions have become the forum of choice for addressing issues not traditionally considered to be within their ambit. This new reality was put to the test at the first ministerial meeting of the new World Trade Organization (WTO), held in Singapore, December 9 to 13, 1996, and attended by trade ministers from nearly 130 countries. A number of them had been present nearly three years earlier in Marrakech, Morocco, where they had committed their governments to the launch of the first post-Cold War international institution, reflecting growing acceptance by the world community of the need for an institution to address the complexities of governing an increasingly integrated global economy. At the beginning of the 1980s the General Agreement on Tariffs and Trade (GATT) was still widely regarded as a club of the rich that addressed problems of interest to the industrialized countries, but did little that was of direct benefit to developing and centrally planned participants. A decade later, opinion had shifted markedly. Not only had most of the central

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planning countries been transformed into so-called transitional economies, but the developing countries had become active and constructive participants in the ongoing GATT negotiations. Both groups of countries were reacting to the demands of a rapidly globalizing world economy, and both saw the need to find appropriate means of governing this new reality, as did many of the countries in the Organization for Economic Cooperation and Development (OECD). The WTO fitted this new reality, as did the extensive range of new commitments falling under its supervision. For Canada, a traditional strong supporter of multilateral trading rules, this new order presents fresh challenges. For most of the postwar years the multilateral rules provided a relatively successful framework within which to pursue the triple objectives of managing trade relations with the United States, exposing the Canadian economy gradually to more open competition, and expanding export opportunities for competitive Canadian-based firms. The careful balancing of these three objectives over the past two decades, coupled with a range of domestic policy initiatives aimed at reducing the role of government in the economy and releasing competitive forces, has made the Canadian economy better prepared to deal with the challenge of competing in a global environment. The conclusion of the CanadaU.S. Free Trade Agreement (FTA), its extension into a North American Free Trade Agreement (NAFTA), the consequent restructuring of the Canadian economy, and the pursuit of global trade opportunities in the GATT and the WTO have all contributed to a major advance in Canada's integration into international markets over the past decade. Having weathered the adjustment to a more open economy, the federal government has become a more activist participant in the making of global trade policy, pursuing its traditional high policy role of helpful fixer, but now in a forum where the stakes are different and the payoffs more direct and immediate. Playing such a role requires some clear thinking about strategy. Where do we stand and where do we want to go? What kind of leverage can Canadians now deploy in pursuit of trade and related objectives? Are we better placed today than we were a decade ago? This paper explores the new framework within which Canadians will need to address these questions.

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THE REALITY OF GLOBALIZATION AND REGIONALISM

The new framework takes shape amidst a growing awareness that we now live in an integrated global economy. Goods, services, information, technology and capital may now originate, in whole or in part, from anywhere in the world. This new state of affairs represents the culmination of a phenomenal series of seemingly unrelated developments in technology, in the organization of business, and in domestic and international government policy choices. The defining elements of globalization are American, reflecting the fact that the United States is the dominant political, military, and economic power of our day and the source of many of the changes ushering in a global economy. American cultural values, assumptions, and priorities, spiced up with the best that the rest of the world has to offer, are everywhere dominant. American business products, practices, and values have penetrated every corner of the globe, again with the addition of the best practices and products gleaned from around the world. The language of business and popular culture around the world is American English and in schools from Ukraine to Vietnam, from Indonesia to Argentina, educators are scrambling to add English to the curriculum. As the world economy has become more and more integrated, the scope for conflict has increased, and many of the conflicts are being played out on the field of trade policy. They are not based solely, or even mainly, on traditional protectionist interests; clashes of differing values are increasing in frequency. Are the keiretsu in Japan fair? Is protecting the spotted owl an American or a global responsibility? Should the U.S. take responsibility for protecting dolphins on the high seas? Should governments differentiate in their regulation of foreign and domestic capital? Should new U.S. technologies be made more easily available to American than to foreign users? Should Canadians be allowed to limit the number of U.S. channels available on cable? Should France get away with placing quotas on foreign access to movie screens? Is government health insurance a subsidy to industry? Do differing labour market regulations constitute a non-tariff barrier? These are all issues that have cropped up in trade discussions in the past few years. None of them bears any resemblance to such traditional trade policy issues as tariffs and quotas. All suggest the extent to which trade can take seemingly domestic matters and turn them into transborder issues. All are examples of what Sylvia Ostry has called system friction, i.e., conflicts that arise out of the differing regulatory and value systems than have historically developed in individual countries.2

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While the term globalization has gained increasing currency over the past decade, there remains considerable skepticism about its extent and depth, with some critics even pointing to the third decade of the 19th century as a period of greater international integration. A recent WTO report provides some of the clearest evidence to date of the extent of globalization. Its analysis of world trade data indicates that the period 1950-1994 was one of steady integration through trade and investment. For the whole of this period, the volume of world trade grew at a rate 1.6 times faster than that of world production, ranging from a low of 1.2 during the 1970s to a high of 2.8 in the 1990s. Over this 45-year period, the value of world output increased by a factor of five, while the value of world trade in goods multiplied by a factor of 14. By the end of 1994 world trade in goods and commercial services was valued at nearly US$5.2 trillion. The WTO calculates that the ratio of world trade in goods and services to output increased from 15 to 22 percent between 1974 and 1994 and estimates that it increased from 7 to 15 percent over the period 1950-74, that is, it has more than tripled since 1950. More remarkably, the pace of integration is accelerating. It grew rapidly in the first two decades after 1950, slowed perceptibly in the period 1974-84, recovered between 1984-89 and has grown rapidly since 1990.3 During the first few postwar decades, integration was most pronounced among the OECD economies, but since the early 1980s Asia and, more recently, Latin America have begun to participate more actively in this integration process. Open economies have shown markedly faster progress in economic development, with a number of them now converging on OECD income levels. Among OECD economies, only Japan has not increased its participation in the global economy over the past two decades, remaining stagnant at a level of around 11 percent of Gross Domestic Product (GDP) being traded. Among non-OECD economies, those in Central and Eastern Europe are only just beginning to show improvement, while those in Africa and the Middle East remain mired in earlier patterns of integration. While continuing growth in world trade levels is the most obvious indicator of expanding integration, increases in flows of foreign direct investment (FDD suggest even more the deepening of this integration. World FDI flows exceeded US$220 billion in 1994, with developing and transitional economies now accounting for nearly a quarter of the inflow of world investment. The impact of these investment flows is illustrated by three developments: the rising proportion of trade

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represented by intra-industry trade, the increasing importance of trade in intermediate inputs, and the growing share of transactions taking place on an intra-firm, intra-network, or other basis of interrelated corporate structures. Finally, the most important but most difficult indicator to measure is the flow of information and technology. The last two decades have seen not only an explosion in the absolute amount of knowledge and technology but, more importantly, in its availability and usefulness to a growing share of the world's population. An unknown but large quantity of information and technology is traded within private and proprietary networks, adding to the ability of firms to do business globally. Only a proportion of this trade is captured within official trade statistics, suggesting that these may be underestimating the true value of world trade and not reporting the full richness of new patterns of economic integration. The WTO report also examined the longer historical record and concluded that more than a century of evidence suggests a strong correlation between international policy efforts to keep markets open and the growth of world trade and investment and, subsequently, integration. The period 1860-1914 was marked by an increasing level of internationalization as countries followed the example of the Cobden-Chevalier Treaty between France and England and entered into a set of interlocking most favoured nation treaties that lowered barriers and created institutional reinforcements to keep them low. While the momentum of liberalization was lost by the early 1880s markets were kept relatively open as a result of these institutional factors. The agreements evaporated with the disintegration of international relations during the First World War. As a result, the period 1914-1947 was characterized by a high degree of instability as barriers were raised and frequently adjusted. In the absence of institutions to prevent country after country from adopting protectionist and discriminatory policies world trade levels plummeted. The integration achieved by the turn of the century had been largely lost even before the catastrophe of the Great Depression. The period 1948-1994 was again one of steady integration, again underwritten by a set of liberalizing rules and institutions. By the middle of the 1970s, the ground that had been lost in the period 1914-1947 had been largely regained and since the 1980s integration has widened and accelerated considerably as more and more countries have both increased participation

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in the global economy and adopted more liberal trade policies multilaterally, regionally, and unilaterally. Critics of this globalization claim that its beneficiaries are largely confined to the middle and upper classes in the OECD economies and that labour in the OECD countries and all but a small elite in the rest of the world have been driven deeper into poverty. There is no evidence of such cataclysmic results. Rather, there is strong evidence to the contrary. While it is true that globally more than 1.5 billion people remain mired in poverty, it is also true that more than 3.0 billion people have been lifted out of poverty during the five decades since the end of the Second World War. The pace of population growth makes the absolute number of people in poverty loom very large, and the absolute number keeps growing, but the spread of market-based economics and the benefits of an increasingly open global economy have reduced the relative number of people in poverty and opened the prospect of large numbers of people being lifted out of poverty in the foreseeable future.4 Long-term economic growth and development can only flourish in a society that accepts change, values innovation and entrepreneurship and maintains an institutional structure that rewards both. From its medieval foundations to the present day the Western economy has proven to be the first and only economy to exhibit these traits on a continuing basis. Its distinguishing feature has been innovation, not just innovation in products and processes, but also in the institutions and organizational structures required to make the economy work to its highest potential. The drive to innovate and the will to exploit its fruits have, in turn, been nurtured by the political institutions that developed in Western Europe and in its most successful early overseas colonies, North America and Oceania, and that have since been adopted in an increasing number of countries.5 Finally, as interdependence among national economies has grown, the nation-states of the West have developed the necessary rules and institutions to reduce conflict and encourage cooperation. This steady progression over the past half millennium or more has, of course, been anything but inevitable. Forces committed to the status quo have fought hard to preserve what they believed to be the natural order; their efforts have helped to shape the institutional response to innovation and the resultant new patterns of production and economic exchange. Similarly, the tremendous breakthroughs that underpin globalization have not been without cost and without a need to adjust,

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leading to laments about the homogenization of popular culture along American lines, the devaluation of labour, the de-skilling of OECD countries, the end of the Keynesian welfare state, and other woes being voiced by critics from around the world.6 As interdependence deepens, nationalist forces will resist efforts to develop suitable institutional structures to manage and reduce conflict and facilitate extranational exchanges. It will therefore not be easy to reap the full benefits of deeper integration or to ensure that governments will respond with appropriate rules and institutions to make it work. Adjustment to the new reality of deeper, global integration is taking place at a number of levels. The private sector is pursuing business strategies involving restructuring, reorganization, and cooperative alliances both in order to take advantage of the opportunities of globalization and to hedge against its risk. Governments are similarly retooling their national regulatory structures and entering into new cooperative arrangements to provide common rules and institutions for managing the demands and opportunities of deeper integration. Such cooperative arrangements are being forged at bilateral, subregional, regional, and global levels. The result is a degree of flux and churning that is challenging the adaptive capacities of both individuals and social, political, and economic institutions. At the regional level, there are a number of experiments in process that seek to address the demands of deeper integration among countries which presumably have common interests due to geographic proximity and shared experience. In Europe, the fifteen members of the European Union (EU) and the encircling members of what is becoming known as the acquis communautaire1 have made the greatest progress in developing rules and institutions geared to deeper regional integration. Market-led and policy-based integration initiatives have proved mutually reinforcing and have created an increasingly tightly knit European economic reality. In North America, market-led integration was finally matched in the 1980s by regional rules and institutions. The result has been a quickening of the pace of integration as more and more firms have adopted North American-based business strategies, even for their overseas trade and investment activities. Efforts are now underway to explore the potential for creating an acquis americain involving the rest of the Western Hemisphere—the potential Free Trade Area for the Americas (FTAA). In Asia, arguably the most dynamic region of the global economy, market-based integration has far outpaced facilitating or governing rules and institutions. Most of

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the countries of the region have only recently begun to take their GATT, now WTO, obligations seriously and have had only limited success in translating rhetoric about regional cooperation into tangible rules and institutions with sufficient authority to make them something more than symbolic gestures. There is as yet little evidence of any progress, formal or informal, toward an acquis asiatique. Instead, there are efforts to define an Asian way whose distinguishing feature is the absence of formal rules or institutions and a reliance on a fluid process of consultation and concerted, unilateral action. The Manila meeting of APEC leaders at the end of November 1996 took a further step along this path, and the Vancouver meeting at the end of November 1997 may further consolidate this approach. Pride of place, however, has been restored to global approaches, with the WTO now providing a credible consolidation of many of the earlier experiments at the regional level. THE ACHIEVEMENT OF THE WTO

The initial success of the GATT, now WTO, lay in its single-minded pursuit of a simple goal: the development of a universal framework of rules and procedures dedicated to liberalization and non-discrimination enforced through mutual respect of its members for the rule of law. Its success is attested both in its growing membership and in its steady progress in widening and deepening liberalization and in strengthening the rules and procedures to back it up. The Uruguay Round marked but the latest in a sequence of successful efforts to make the system work to the mutual benefit of its member states.8 With the entry into force of the WTO and its much more robust dispute settlement and surveillance procedures the trading system achieved a new level of capability to ensure compliance. Decisions on the interpretation and effective implementation of the agreements covered by the WTO are now binding on all member states. Some of the characteristics of the new WTO agreements illustrate the richness and the revolutionary nature of the achievement: • The WTO is now established as a permanent international institution, headed by a Director-General of a stature equivalent to that of the heads of the International Monetary Fund and the World Bank and similarly endowed with an independent secretariat and a regular, ministerial-level conference to provide policy direction.

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The ambit of global trade rules now extends to many more countries: 128 of the 129 countries that participated in the Uruguay Round are now members of the WTO; a further 28 countries are in the queue, including China, Russia, and most of the former Soviet republics. By the year 2000 it is not difficult to foresee a WTO with a membership in excess of 150 members covering virtually all of world trade and investment. The patchwork of previous GATT obligations has been replaced with an integrated, single undertaking that applies to all members. Obligations covering the full array of GATT disciplines have been substantially deepened through a series of binding agreements and understandings. GATT-like principles, rules, and procedures have been extended to cover trade in services and the protection of intellectual property while disciplines to govern the two orphans of the past four decades of rule making—trade in agriculture and trade in textiles and clothing—have been significantly strengthened. The trade and trade-related policies and practices of WTO members are steadily converging, providing traders and investors with increasing stability and confidence in their ability to do business on a global basis. All WTO members have now bound their regimes for trade in goods in schedules attached to the main agreement, and indicated the extent of their commitments on services in schedules attached to the General Agreement on Trade in Services (GATS). Special and differential treatment for developing countries has disappeared as a permanent feature of international trade obligations and been replaced by a recognition, by developed and developing countries alike, that the latter need to be full and active members of the WTO, with no more than time-limited derogations and technical assistance programs marking the difference between them and developed members. The Protocol of Provisional Application for the 23 GATT original members9 and its echo in the protocols of subsequently acceding members have disappeared. Instead, each member has accepted the positive obligation "to ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements."10 In effect, members have agreed that the claim upon them of their WTO obligations is superior to domestic law. As well, "waivers" as a

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political escape valve for members troubled by the bite of an obligation have been made exceedingly difficult, further strengthening obligations. • Members have agreed to subject their trade laws, policies, and practices to periodic public scrutiny and review: biannually for the four leading members (the U.S., EU, Japan and Canada) and less frequently for other members. These reviews are becoming more credible as experience is gained and governments learn that constructive criticism of their trade regimes is healthy. • The possibility of the further extension of GATT-like principles, rules, and procedures to competition issues, to investment, and to labour and environmental standards has become steadily more plausible. It is now possible to foresee WTO members gradually developing a seamless code of conduct governing the full competitive activity of global markets. What makes these breakthroughs in the process of imposing new, deeper, broader, and tighter obligations credible is the body of provisions on dispute settlement. The Understanding on Dispute Settlement enshrines a number of critically important principles and procedures in the practice of the WTO, including: • the right of every member to have its complaints addressed by a panel of experts; • the promise that the panel will act expeditiously and independently on the basis of clear rules and procedures; • the commitment that panel reports will be adopted by the WTO unless an objecting member can successfully organize a consensus to block adoption; • the right to have the decisions and reasoning of panels subjected to review by a permanent appellate body; • the obligation of members to implement adopted panel findings by taking action to remove the basis of the complaint; the right of the complainant to compensation or the exercise of authorized retaliation, while recognized in order to give teeth to this obligation, does not remove the obligations of the party at fault; • the assurance that panels will have the assistance of a qualified, capable, independent group of officials with legal training in analyzing the issues and reaching decisions; and • the promise that decisions will gradually accumulate into a body of precedent that will further strengthen the rule of law in international trade and trade-related activities.

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Taken together, these developments amount to the establishment of a powerful set of provisions that give governments, traders, and investors alike a basis for confidence in the rules and procedures of the international trade regime. Even a cursory examination of the WTO Agreements on Agriculture, Technical Barriers to Trade, Subsidies and Countervailing Measures, and Trade-Related Intellectual Property Rights, suggests that governments have now agreed to a consequential degree of potential intervention in their internal affairs by other member governments through the dispute settlement and trade policy review procedures. The early record of dispute settlement cases, as well as the emerging agenda for future negotiations, suggest this trend is irreversible. They also highlight the reasons which have put the trade regime well ahead of any other international regime in terms of both credibility and enforceability. While the multilateral WTO system has now entrenched its preeminence in the constellation of world trade rules, its successful establishment would not have been possible without the major breakthroughs in rule-making and institution-building at the regional level.11 During much of the 1980s and into the 1990s, there was considerable pessimism about the future of an open, multilateral trade regime. Managed trade and regional arrangements seemed to be where the action was. With the benefit of hindsight, it can now be appreciated that the regionalism of the 1980s, as well as the increasing resort to trade remedies and other measures aimed at managing trade and investment flows, were a constructive part of the politically necessary experimentation and adaptation required to deal with deeper integration. While there remains considerable scope for either regionalism or trade management to undo what has been achieved over the past decade, the prospect for the continued vitality of open multilateralism is much brighter today. Indeed, the combined impact of both the WTO and of regional agreements such as the FTA/NAFTA underscores the fact that over the past decade we have witnessed a revolution in the extension of legal concepts and principles to the governance of international trade. This revolution also suggests the extent to which trade negotiators have succeeded in building the foundation for a new world order. At the Singapore meeting, ministers dutifully performed their task in taking stock of the WTO's first two years and in charting the direction of its work in the medium term. They focused their work not only on defining areas of agreement emerging from ongoing negotiations

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on telecommunications, maritime transport and financial services, but also on setting the terms for further discussion of contentious issues such as trade and the environment and trade and labour standards. At the same time, ministers were conscious of the need to send a strong message underlining the political importance of the WTO as the primary vehicle for continuing efforts to dismantle barriers to international trade and to provide a comprehensive framework of rules to govern world trade and investment. They noted the importance of making further progress in expanding membership in the WTO, in integrating developing countries into the world trading system, and in maintaining a constructive balance between regional and multilateral initiatives.12 At the conclusion of the meeting on December 13, 1996 ministers adopted a declaration which pushed the envelope a little further and firmly ensconced the WTO as the key international organization in which the difficult issues raised by global economic integration would be addressed. The declaration states that the ministers: • endorsed or gave further impetus to ongoing negotiations left over from the Uruguay Round or built into the agenda of WTO agreements; • agreed to establish working groups to examine the relationship between trade and investment and the interaction between trade and competition policies—the traditional way to lay the groundwork for possible future negotiations on two critical gaps in the existing architecture of rules for governing transactions in the integrated global economy; • took a more cautious approach on the politically sensitive issues of tying trade disciplines both to the enforcement of core labour standards and to environmental protection measures, ducking the first and endorsing continued discussion of the second; and • agreed to a number of steps to further liberalize and facilitate world trade, including a declaration on trade in information technologies. The meeting indicated that while there is now wide acceptance of the critical role of the WTO, member governments are far from unanimous in their view of the organization's priorities. Discussion of both traditional liberalization issues as well as new topics such as investment, competition, the environment and labour testify to the fact that governments differ widely regarding ways of pursuing their national

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interests and fitting them to rules to ensure the smooth operation of the global economy. The tone and tenor of the debate, the wide interest in it, and the broad participation of governments were all in sharp contrast to the tone and tenor of discussions at the annual meeting of GATT's contracting parties. GATT was clearly part of the old order, staffed even at this exalted level by technicians and attracting the attention only of specialists. The WTO is central to the new order, with discussion, staffing, and level of interest all indicative of its important new role. THE CANADIAN SITUATION

Fifty years ago, when Canada participated in the planning and negotiations that led to the GATT, the country enjoyed a special status in the world economy. Its efforts to help supply the Allied war effort had transformed it economically. Canada had made a major contribution not only to the military success of the Allies but also to the economics of the Allied victory. In the years immediately after the war, Canadian generosity provided substantial assistance to the reconstruction of the UK and Europe. The economy adjusted swiftly to the demands of peacetime and grew at a rapid rate for most of the first three decades after the war. Much of that growth was fuelled by domestic demand as Canadians, tired of deprivation caused first by depression and then by war, sought and gained the benefits that should accrue to the second most productive economy in the world. While the Canadian economy boomed, it did not become more outwardly oriented. For the first three postwar decades the Canadian economy remained at roughly the same level of international integration. In 1950 Canadian merchandise exports accounted for 16.8 percent of Gross National Product (GNP). Twenty-five years later, in 1975, Canadian merchandise exports still amounted to only 19.6 percent of GNP. In the intervening years the ratio had dipped as low as 14.3 percent in 1957.13 Foreign direct investment in Canada, undertaken largely by American firms, helped to ensure that most of the goods Canadians consumed were produced at home. Canadian exports remained heavily concentrated in the resource sector, although some progress had been made in upgrading some of these resources at home before exporting them to world markets. National trade policy had contributed to this pattern. Through the first six rounds of GATT negotiations Canada zealously sought market access for its resource-based exports, while maintaining high levels of protection for the

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manufacturing sector. The result was an inwardly focused, foreigndominated manufacturing sector and an outwardly focused resource sector, also foreign-dominated. Canada's main source of manufactured goods remained the U.S., while Americans steadily became our best customers. The UK's economic tailspin made it an increasingly unreliable customer, while the rest of Europe never developed into the market Canadians had optimistically expected. Similarly, Asians and Latin Americans proved disappointing as potential trading partners. By the early 1980s, however, it was clear that some important developments had been pushing the Canadian economy in new directions. By 1980 the value of merchandise exports had come to represent more than a quarter of Canada's GNP, many of them being cars and parts traded under the terms of the 1965 Canada-U.S. Auto Pact. In nominal terms Canadian merchandise exports had been growing at a steady 14.9 percent over the period 1968-81, or 4.9 percent in constant 1971 dollars, with motor vehicles and other end products growing at more than 7 percent annually in real terms.14 An increasing number of firms and sectors had become prepared to compete internationally by exporting to foreign markets. Even more firms, however, were finding that they had to compete internationally at home, as tariff and other barriers were reaching levels that could no longer guarantee them the home market. The trade dependence of the Canadian economy was widening and the need to adjust was becoming more broadly felt. Trade policy needed to adapt to these new circumstances. THE CANADIAN POLICY RESPONSE Historically, Canada has been a small, rule-taking economy highly dependent on foreign markets, capital, and technology. Over the years, its location next door to the U.S. has ensured that it would be particularly dependent on U.S. markets, capital, and technology. At the same time, Canadians have always been concerned to retain sufficient room and independence to preserve a unique identity, to pursue cultural integrity and to protect certain domestic manufacturing industries. Since 1935, when Canada first negotiated a modern trade agreement with the U.S., Canadian governments have consistently sought to place relations with Canada's trading partners, particularly the U.S., on a sound foundation of rules and procedures. In effect, Canadian negotiators pursued preemptive rule-making, i.e., cooperated in developing standards that would prevent the use of coercive force by the big powers. By the

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1970s, Canadians had firmly grasped that agreed rules had the double benefit not only of reducing disparities in power in the conduct of relations with larger and more powerful economies but also of providing governments with a principled basis for achieving more open market conditions for both exports and imports. The advantages of rules-based relations and the liberalizing bias of the GATT regime were, for most of the postwar period, offset to some extent by powerful interests in Canada that saw greater benefit in maintaining protection than in adjusting to competition. Thus, throughout the period, Canadian governments held to a delicate compromise between the mercantilist interests of domestic groups, particularly manufacturers, and the broader interest of the nation in rules-based multilateralism. The cumulative effect of this compromise, however, was to gradually open the Canadian market to greater competition and at the same gain better access for competitive Canadian producers to foreign markets. Canada's approach was typical of most participants in the GATT-based system and explains how it succeeded in paving the way for the acceleration in globalization in the 1970s and 1980s. Faced with the cumulative effect of trade liberalization and increasing economic interdependence, Canada responded in the 1970s and early 1980s with a number of initiatives to enlarge the scope of rules-based economic internationalism. In the 1970s, it sought to enhance economic relations with the European Communities and Japan—its second and third largest trade and investment partners— and thus to reduce dependence on the U.S. While political agreements were concluded, they were unlikely to generate much new trade without clear contractual commitments and enforcement procedures. Efforts in the GATT Tokyo Round negotiations (the seventh of GATT's periodic negotiating conferences to liberalize trade) proved more successful, but not sufficiently so to reverse the trend. By the early 1980s, Canada's economic dependence on the U.S. had risen to an unprecedented degree while rules and institutions to underpin that degree of dependence had not kept pace. Efforts to launch a new round of multilateral negotiations at a ministerial meeting of GATT in 1982 proved premature, leaving Canada in what was perceived to be an increasingly intolerable situation: heavily dependent on a single market but without sufficiently free and secure access to make investment on the basis of a North American economy feasible. The solution was a free trade agreement with the United States.15

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The Canada-U.S. FTA, negotiated with much difficulty in 1986-7 against the background of a ferocious national debate, served not only as an improved basis for encouraging Canadian economic restructuring to serve larger markets, but also as a precursor to the kind of restructuring and rule-making the country required to become better integrated into global markets. Thus, adjustment in Canada to the FTA—and to the NAFTA negotiated in 1992 to improve the FTA and expand it to Mexico—both accelerated and complicated Canadian adjustment to the forces of globalization. The debate in Canada on the merits of the FTA was in many ways a debate on the merits of deepening integration. It indicated that the compromises which governments now had to forge differed significantly from those that had animated the trade negotiations of the 1950s through 1970s. Then the debate had been largely between import-competing (read manufacturing) and export-oriented (read agriculture and resource) producers. Echoes of old imperial sentiments and appeals to new economic nationalism added spice but were essentially secondary considerations. By the 1980s, however, Canadian producers were largely of one view. Even import-competing sectors accepted that there had to be significant restructuring if Canadians were going to compete in the global economy and that such restructuring could best take place within a framework of rules that allowed them to compete in a larger market, even at the expense of more competition at home. The new opposition came from a coalition of populist groups worried about a range of issues—such as Canadian culture, health care, environmental protection, gender equality, and other largely non-economic concerns—believed to be threatened by a more open economy as well as by closer economic ties to the U.S. In effect, the debate pitted a corporate internationalist vision against a populist nationalist one. By the early 1990s, however, a subtle shift had developed in the terms of the debate. Educated by the FTA and NAFTA debates, which were soon followed by the Uruguay Round, populist opponents had learned that for Canada there could only be an internationalist vision. Autarky was not an option. What counted was not whether there would be rules, but what the nature of those rules would be, how and where those rules would be negotiated, and by what process they would be enforced. In effect, the forces of globalization had disposed both sides to begin considering the need for introducing rules about

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a new range of issues into international trade agreements, but for very different reasons and for achieving very different goals. For business interests, international rules serve to create a level playing field, preventing governments from capriciously interfering in the efficient operation of the market. For populist groups, the ideal line of defence is to isolate national economies from the rigours of competing in the international economy so that governments remain free to maintain their own social and other programs. Having conceded, however, that the clock is unlikely to be turned back, populist groups now see the next challenge to be the negotiation of international agreements that can be used as instruments to create a universal Keynesian welfare state, guaranteed by international treaty. Their revised agenda is reflected in the call for agreements enforcing environmental protection and international fair labour standards. Like their corporate opponents, they have learned to appreciate the utility of international rule-making to reinforce their goals domestically. The changing terms of the debate in Canada are not yet fully reflected in the United States. Because of the rather recent growth in U.S. exposure to international competition, there are still many analysts who view the U.S. economy as relatively self-contained. Similarly, U.S. populist groups remain prepared to insist on autarky as a solution to the inconvenience or unacceptability of globalization. The collection of essays edited by Mander and Goldsmith for the Sierra Club presents a veritable hymn to autarky.16 More mainstream analysts, however, have also not yet fully factored in the dramatic changes that have taken place over the past decade, both in terms of the degree of global integration and of the extent of institutional and policy responses to it. Anne Krueger, in her recent book lamenting developments in U.S. trade policy, pays insufficient attention to the significance of the WTO agreements and their binding effect on U.S. trade policy. Similarly, she and analysts like Jagdish Bhagwati are unduly alarmist about the trend toward greater regional institutionbuilding.17 In a similar vein, Paul Krugman has popularized sophisticated economic arguments to demonstrate the extent to which U.S. production is still largely focused on goods and services consumed at home.18 In terms of traditional trade statistics, he may be right, but in pointing out that some of the economic problems being experienced in the United States are homegrown, he misses the point that traditional trade statistics no longer capture the extent of international economic interdependence. Over the past decade, public discussion of

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U.S. trade policy has been cast more in terms of a much-feared decline in U.S. hegemony than in terms of coming to grips with the reality of a much more integrated global economy within which wealth, power, and responsibility are more widely shared.19 CANADIAN CIRCUMSTANCES AND INTERESTS TODAY The Globe and Mail recently headlined a story reporting on the WTO's review of Canadian trade policies with "Dependency on U.S. leaves Canada 'vulnerable': WTO."20 The story itself was somewhat less alarmist and the report on which it was based even less so. The chair of the WTO's Trade Policy Review Body, summarizing the discussion, indicated that some members had expressed concern about Canada's dependence on exports to the U.S. but that others had noted the extent to which policy and other adjustments had created a strong basis for long-term economic expansion.21 The numbers bear out this latter analysis. Over the course of the decade 1986-95 Canada experienced one of the strongest periods of trade-led growth in its history. Merchandise exports to all sources more than doubled at market prices from $120.7 to $253-8 billion. Total trade—exports and imports, goods and services—reached almost $580 billion in 1995, representing nearly 75 percent of Canadian GDP. In constant 1986 prices, exports grew by 88 percent from $121 to $227 billion, while trade in goods and services rose from less than 50 to above 80 percent as a proportion of GDP. The United States accounted for the preponderance of this trade, as it has for most of the postwar years. In nominal terms, Canadian merchandise exports to the U.S. of $202 billion in 1995 represented 79.7 percent of the total, while imports from the U.S. of $169 billion accounted for 75 percent of total Canadian imports. Imports from the U.S. have grown steadily over the past decade, rising from between 64.6 to 68.2 percent of the total Canadian imports in the period 1986-1990 to between 70.9 and 75 percent in the period 1992-95. During the same period, the U.S. share of Canadian merchandise exports varied from 77.2 percent in 1986 to a low of 72.9 percent in 1988 and a high of 81.4 percent in 1994.22 While the dominance of the U.S. is not surprising, given the influence of proximity and policy, as well as of corporate preferences on both sides of the border, the expansion in trade with our neighbour was not at the expense of more remote trading partners. Indeed, in nominal terms, merchandise exports to both Japan and the EU almost doubled over this period, from $6 to $11.5 billion and $8.2 to

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$15-9 billion respectively. Exports to non-OECD countries reached $20.3 billion, up from $12.4 billion. On the import side, imports from the EU replaced those from Japan, rising from $12.9 to $20 billion, while those from Japan stagnated at $8.4 billion. As indicated above, given the extent and depth of Canada-U.S. integration, bilateral Canada-U.S. trade figures probably include non-U.S. transactions; as a result, Canadian trade statistics tend to understate the extent of trade with the rest of the world and overstate that with the United States.23 Exchange rates are an important part of the explanation for the rapid rise in exports, particularly in the first half of the 1990s. What is more fundamental, however, is that behind these aggregate statistics lies the story of an economy becoming more outwardly oriented and diversified. Canada has become steadily less dependent on exports of resources as knowledge-based sectors have grown and pursued markets in the U.S. and beyond. Trade in automotive products now accounts for less than a quarter of the total, while resource-based products account for less than half. Industrial and agricultural machinery and aircraft and other transportation products now total 22.2 percent of Canadian export sales. Additionally, sales of business services, software, and other knowledge-intensive products add further billions to Canada's current account. As a further indication of Canada's steady integration into the North American economy, and through that economy into the rest of the world, Canada has steadily increased its foreign direct investment abroad, valued in 1995 at over $142 billion, while foreign direct investment in Canada reached a book value of $168 billion in 1995. What has been missing from the Canadian economy over the past decade has been domestic demand. Without the boost provided by trade, the Canadian economy would have experienced one of the longest and deepest depressions in its history. Increased Canadian integration into the North American and global economies, instead of leading to job and income loss, has helped Canada weather profound adjustments arising from changes in the nature and structure of production as well as from demographic developments. Changes in internal trade patterns illustrate the extent of the restructuring of the Canadian economy. In 1981, Canadians traded $75 billion in goods interprovincially and exported $56 billion to the U.S. By 1989, interprovincial shipments were equal to U.S. exports at $105 billion. By 1994, interprovincial trade had fallen to $91 billion, while exports to the U.S. had expanded to $179 billion. In every province across the

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country, the same pattern developed: exports to the U.S. boomed while interprovincial shipments stagnated.24 The factors behind these changing patterns are complex, but they include government retrenchment, affecting both demand and employment patterns, continued high unemployment in the resource-based peripheral regions, and heavy labour adjustment in traditional manufacturing sectors as firms have switched from labour-intensive to capitaland knowledge-intensive processes. All have affected consumer demand and confidence and have led to stagnating domestic demand. The trade policy measures adopted in the 1980s facilitated and accelerated adjustment to these forces. As domestic demand stagnated and foreign demand rose, trade policy measures encouraged firms to restructure to meet new opportunities. The result was a major reorientation from an east-west national economy to more specialized regions within a larger continental economy. While there is no question that at the individual level these adjustments have imposed hardships, at the aggregate level they have saved Canadians from much more pain. They also suggest where Canada's policy priorities should lie in the near-to-medium-term. For Canada, the trade relationship with the U.S. is and will remain the most important by a wide margin. Thus for Canada, a critical factor in any trade policy decision is its impact on relations with the United States. While some might argue that multilateralism provides the foundation of Canada's policy choices, in reality it is the impact of any policy choice on Canadian interests in the U.S. The importance of that relationship determines Canada's strategic choices; any policy course or instrument that advances Canadian interests in the U.S. market and that strengthens Canada's capacity for managing the U.S. relationship is worthy of pursuit, whether action is taken bilaterally, regionally, or multilaterally. A multilateral approach, because of the presence of other players with similar interests and the possibility of developing universal rules, may often be the preferred choice, all else being equal. But often all else is not equal, and a regional or bilateral approach may lead to a superior outcome in terms of advancing Canadian interests in the United States. In the immediate future, multilateral negotiations are unlikely to address some of the continuing distortions in bilateral trade and investment created by antidumping procedures, government procurement preferences, and similar unresolved issues. Given the degree of integration that now exists, Canada would do well to give serious consideration to ways of transforming

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the NAFTA into a customs union. Such an approach would not only enhance opportunities for Canadian-based production in North America, but would also address some of the problems associated with a free trade area, such as rules of origin. While there would be some costs, experience over the past decade indicates that, on balance, deeper North American integration brings substantial benefits. At the same time, as noted by Canada's ambassador to the WTO, this latter organization remains the "bedrock" of Canadian trade policy, in the sense that it provides the basic framework of rules for the preponderance of Canada's trade relationships, including those governed by complementary regional or bilateral arrangements.25 Canadian representation at the WTO reflects this reality. Even in the mid-1970s, the heyday of Canadian multilateralism, the government appeared content to be represented at the GATT by an ambassador who had strong credentials in the political dimensions of diplomacy and who devoted most of his energy to the affairs of other multilateral institutions in Geneva, such as the Disarmament Conference or the International Labour Organization. GATT affairs were handled by three other officers in the mission, only one of whom was assigned full-time responsibility for GATT issues. The other two officers divided their energies among the GATT and several other international economic bodies, including the United Nations Conference on Trade and Development (UNCTAD) and the Economic Mission for Europe. By the mid-1990s, the mission in Geneva boasted not only two ambassadors, with the senior ambassador concentrating on economic institutions and the second on political institutions, but also up to seven other officers conversant with trade policy matters and equipped to handle various WTO issues. The ambassador today is an experienced senior trade negotiator combining excellent credentials in Ottawa with the high regard of his colleagues in Geneva. In addition, Canada has succeeded in placing more Canadians in influential Secretariat positions. Canada gets good mileage out of this enhanced representation in Geneva in the day-to-day affairs of councils and committees, in the inevitable informal diplomacy that is key to resolving delicate negotiating issues, and in the building of coalitions and alliances so essential in multilateral negotiations. With the support of a much enlarged headquarters staff this country gets consistently good marks for the quality of its representation and the ideas it brings to the table, giving it a voice and influence that are often out of proportion to Canada's weight in world trade matters. Canada's share of world trade—3.8 percent in

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1995 or 4.6 percent if intra-EU trade is excluded—is not the only basis for Canadian participation in the Quadrilateral trade ministers' meetings. The quality of Canadian representation counts as well. Canada is also actively engaged in the settlement of disputes, both as plaintiff and as respondent.26 While the media may focus on politically difficult issues such as the U.S. complaint about Canadian measures restricting access for a split-run edition of Sports Illustrated, Canada has also succeeded, either alone or in company with other parties, in removing French restrictions affecting imports of scallops and Japanese restrictions affecting the sale of alcoholic beverages. Canada is currently pursuing cases involving EU restrictions affecting meat imports and Brazilian export financing programs for aircraft, and has pursued consultations with Australia regarding its restrictions on imports of salmon, with Hungary regarding export subsidies on agricultural products, with the EU regarding restrictions on imports of grains, and with Korea regarding the treatment of imported bottled water. Only the U.S. and the EU have been more active users of the system, and this is consistent with the larger volume and more diversified nature of their trade. The Sports Illustrated case, possibly the most controversial in Canada today, involves critically important issues that should help the government to adopt measures that are less discriminatory and thus inject greater balance into the measures taken by Canada to promote the interests of Canada's cultural industries. As Trade Minister Art Eggleton asked in a recent speech: "Are the instruments designed to promote Canadian culture at home in fact hindering its success abroad?... The question is not whether we ought to support Canadian culture, but how best to support it ... .the coming of age of Canadian culture may not depend on our ability to protect it at home, but to project it on the world's stage."27 The WTO case, even if it is scored a "loss" by the media, may prove an important stepping stone toward a more fruitful policy than has been politically possible to date, one that can be accepted by all but the most die-hard nationalists. Canada has been an equally active proponent of the deepening of the WTO's rules and of their extension into new areas, particularly those areas related to the full contestability of markets. Canadian officials have made substantial contributions to the discussion of the interaction of trade and competition policies at the OECD and have been at the forefront of this discussion in Geneva. Traditionally one of the more reluctant participants in the elaboration of multilateral

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investment disciplines, Canada is now more prepared than other OECD countries to bring this issue to Geneva, preferring the global forum of the WTO to the more specialized arena of the OECD, where negotiations on a Multilateral Investment Agreement are currently proceeding. Canada is one of the few countries pointing to the weaknesses of the OECD approach: the OECD has no credible record in the enforcement of rules, and the issues at stake are more relevant in relations between developed and developing countries than in those existing between developed countries.28 Considering the WTO to be the appropriate forum for the elaboration of global investment rules, Canada sponsored a seminar in Geneva in October 1995 organized by the UNCTAD and aimed at garnering support among developing countries for the negotiation of a global agreement on investment, preferably integrated into the WTO. The establishment of WTO working groups on investment and competition policy issues at the Singapore Ministerial Conference is in part the fruit of Canadian statecraft. In addition to its active participation in the implementation, application, and further negotiation of the WTO's rules, Canada has vigorously advocated the extension of WTO membership. While the accession of most applying countries is relatively straightforward, the extension of membership to China and to Russia poses major policy challenges. The Chinese application has been debated for more than a decade, as China has been subjected to a barrage of more than 3,000 questions by members skeptical of its ability and willingness to abide by the WTO rules. While WTO Director-General Ruggiero told a committee of the French Senate in February that he believes that Chinese accession is imminent,29 difficult policy questions remain unresolved. At the same time, the absence of China seriously undermines the WTO's credibility as the main forum for handling global trade issues. Similarly, the absence of Russia, particularly now that it is pursuing market-based policies, leaves the Organization seriously incomplete. Canada has injected its interests into the accession process at two levels. In Geneva, it works with other major players to ensure that this process is both fair and credible. It has gone on record as welcoming all those who have applied, including China and Russia, but at the same time has insisted that the accession negotiations lead to commitments that make their accession economically and commercially credible. To that end, it has, through the Canadian International Development Agency (CIDA), organized and funded training programs for officials in acceding countries, funded research projects

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related to WTO accession, and otherwise extended technical assistance to the governments of those countries, including China, Russia, the Baltic States, Ukraine, Vietnam, and others.30 While the multilateral WTO has inherited a restored central role in the pursuit of Canada's global trading interests, one that had gradually slipped away from its predecessor, the GATT, in the 1980s, Canada has not shied away from opportunities available at the regional level, but now seems prepared to use such opportunities more strategically than in the past. In the early 1990s, Canada seemed to be bent on majoring in minors, prepared to negotiate free trade agreements with almost anyone interested, including Israel, Jordan, Chile, New Zealand, and Singapore. Two of these negotiations, with Israel and Chile, have now been concluded, even though there was little basis for them, either on commercial or on foreign policy grounds. Free trade agreements only make sense when market-based integration is already extensive and the impediments to further trade and investment are unlikely to be tackled effectively in multilateral negotiations. The aborted discussions in 1995-96, aimed at preparing the ground for a possible trans-Atlantic trade agreement, provide a case in point. The desire of some Canadians to build on the ties of history, kinship, and sentiment to Europe is not reciprocated. The barriers that deter greater Canadian participation in the EU market are either selfimposed by skeptical firms on both sides of the Atlantic or are not readily amenable to negotiation outside the universal forum of the WTO. Wishing matters were otherwise, as do some officials and ministers at the Department of Foreign Affairs and International Trade, cannot change this reality. While little is likely to happen, the issue will continue to crop up, particularly in response to equally unrealistic efforts by U.S. State Department officials determined to relive the past. Two ongoing regional initiatives warrant the continued attention they are receiving, not because they are likely to lead to contractual arrangements, but because they can be useful vehicles for building relationships and strengthening market-based approaches to policy. The FTAA initiative has stimulated a high level of analysis and discussion that should help to consolidate Latin American commitments to market-based trade and investment policies and should facilitate further rule-making. From Canada's perspective, it would be preferable that this energy and commitment eventually bear fruit in WTO negotiations. Nevertheless, should U.S. leadership promote regional agreements, Canada could not afford to absent itself from such a

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process. Similarly, Asia Pacific Economic Cooperation (APEC) discussions may prove a useful way to advance Canadian interests in the region and help to build momentum and consensus on issues that will eventually be addressed at the multilateral level. On both fronts, however, Canadian interests would not appear to be served by aggressive efforts to move these two initiatives toward regional free trade agreements. Except in its dealings with the U.S. Canada needs to be a global trader pursuing global rules and institutions. Canada, of course, pursues its interests wherever it makes sense to do so, and in the available space it is not possible to provide an exhaustive survey of all the possible arenas of Canadian global trade interests. The OECD, for example, continues to provide a critically important arena for testing new ideas, building consensus among its members, preparing for negotiations in the WTO, and more. Many of the most important breakthroughs in the Uruguay Round negotiations, for example, particularly in agriculture, capitalized on work first pursued in the OECD. The OECD's forays into the negotiation of contractual commitments, as noted earlier in the case of investment, have proven disappointing in the past and Canada has been one of the countries most prepared to note that action of this kind is not the OECD's strong suit. It is to be hoped that with a Canadian, Donald Johnston, at the helm of the OECD, it will be possible to insist more forcibly that the OECD is at its most useful when it sticks to its area of comparative advantage—analysis and the elaboration of new ideas. Similarly, Canada has found the annual G7 economic summits to be a forum of limited utility on the trade front. While perhaps useful in addressing political and economic issues of most immediate concern to political leaders, the summit has proven more of an annual media event than a place where thorny issues are resolved or difficult policy choices coordinated. More useful has been the trade policy offshoot of the summit, the periodic—often quarterly—Quadrilateral meetings of the trade ministers of the U.S., EU, Japan and Canada. Although some may question Canada's participation in this forum, its access to the other major players at these meetings has been adroitly used to advance its interests. Canadian participation in trade discussions at the WTO, at the OECD, at the G7 and the Quadrilateral trade ministers' meetings, and at APEC and FTAA summits, all indicate the extent to which Canada continues successfully to project its interests as a global trader. While the FTA and NAFTA seemed to indicate that Canada was prepared to

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throw in the towel and accept a more limited role as a regional trading power, events as they have unfolded over the past decade demonstrate the extent to which Canada's participation in the negotiations that led to the FTA, the NAFTA and the WTO represented a set of complementary initiatives designed to advance Canadian interests and enhance Canada's voice as a player in the global economy. CONCLUSIONS The global economy is rapidly becoming "denationalized," but governments continue to govern on the basis of national goals and frontiers. Over the past decade, they have sought to develop a new world order to accommodate the disjunction of a world in which political frontiers bear little resemblance to economic units. They appear to have taken a number of steps, some consciously, some not, to create a post-Cold War order centred on the World Trade Organization. Making the new order work effectively will not be easy. Governments will need to develop consensus on a potentially difficult group of issues, many of which challenge traditional concepts of sovereignty. New negotiating tools and techniques may be required as well as even more robust institutions and firmer approaches to the resolution of conflict. In effect, efforts are likely to continue to consolidate and deepen governance of the global economy. The political consensus essential for movement in this direction remains fragile, particularly in large countries, with supporters and detractors often working to different agendas. The political economy of global governance is still very much a matter of trial and error, with little consensus among various interests on priorities. The academic community remains confused about the issues raised by globalization and has provided disappointingly little in either positive analysis or useful normative advice. The first ministerial meeting of the WTO suggests, however, that more progress has been made than many analysts are prepared to admit. Both in the conduct of the meeting and in the range of topics addressed, member governments indicated a willingness to continue to push the envelope, but to do so cautiously and incrementally. In the words of Director-General Ruggiero, they have agreed to open a new chapter in international economic cooperation, acknowledging that in a "world of deepening integration and interdependence" there is need for "a new unity of vision."31 While that vision may not be as bold as some would like, its focus suggests that international

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economic discussions will be the defining element of interstate relations in the twenty-first century. For Canadians, the need to be active in the forefront of these developments cannot be overemphasized. Canada's dependence on and benefits from an effectively functioning trade and payments system have been well established. Its ability to play a constructive role has been equally well documented. But an ability to ensure that Canadian values and priorities are reflected in the evolving new regime requires that Canadians analyze the issues and make their contributions early in the process. This is where they, representing a comparatively small player, are most likely to influence the content and course of a negotiation. In short, they need to be quick, early and creative. Canada's recent performance at the WTO suggests that this lesson has not been lost on those charged with this responsibility. NOTES 1

The main findings as well as a report on its discussion by the WTO's Trade Policy Review Body can be found on the World Wide Web at www.wto.org.trpm, Press releases TPRB 48 and 50 of November 12 and 19, 1996. 2 Sylvia Ostry and Richard R. Nelson, Techno-Nationalism and Techno-Globalism (Washington: Brookings, 1995), 79. 3 See WTO, International Trade Trends and Statistics (Geneva: WTO, 1996), which is the source of most of the statistical material that follows. An abbreviated version can be found at www.wto.org. 4 See Jim Rohwer, Asia Rising: Why America Witt Prosper as Asia's Economies Boom (New York: Simon and Schuster, 1995) and United Nations Development Programme, Human Development Report 1996 (New York: Oxford University Press, 1996), for background information. Part of the problem with studies and statistics about poverty is that analysts keep moving the goal posts. Welfare criteria that described the middle class only a few decades ago are now used to measure poverty. The proportion of the world's population that is now able to satisfy basic needs has risen dramatically over the postwar years, despite the continuing rise in absolute levels of world population and thus absolute levels of people in real poverty. 5 This is the thesis convincingly explored by Nathan Rosenberg and L. E. Birdzell, Jr., in How the West Grew Rich: The Economic Transformation of the Industrial World (New York: Basic Books, 1986). 6 For an overview of the many voices opposed to the forces of globalization, see Jerry Mander and Edward Goldsmith, eds., The Case against the Global Economy and for a Turn Toward the Local (San Francisco: Sierra Club, 1996).

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7

8 9

10 11

12

13 14 15

16 17 18

19

This phrase is gaining increasing currency in Europe to describe the fact that those countries in Europe that may not yet be members of the EU are, nevertheless, adopting many of the regulatory and other standards developed in Brussels as the norm for doing business in Europe. See Fen Hampson with Michael Hart, Multilateral Negotiations: Lessons from Arms Control, Trade and the Environment (Baltimore: Johns Hopkins University Press, 1995) for a descriptive analysis of these negotiations. The Protocol of Provisional Application (PPA) was the GATT's grandfather clause. It was the technique used in 1948 to bring the GATT provisionally into force, requiring governments to implement their obligations under Part II only to the extent that they were not inconsistent with existing legislation. The PPA remained in force until December 31, 1994, and justified various departures from GATT disciplines. Canada used it until 1984, for example, to justify its aberrant customs valuation system. WTO Agreement, Article XVI: (4). For a discussion of the dynamic and often, but not always, constructive interaction between regional and global approaches, see Michael Hart, Doing the Right Thing - Regional Integration and the Multilateral Trade Regime, Occasional Paper #39 (Ottawa: Centre for Trade Policy and Law, 1996). The report of the WTO's General Council to the Ministerial Conference, (i.e. the background material prepared by Geneva-based specialists), was posted on the WTO's web site at the end of November. Available in two volumes, the report mines these themes in great detail. The WTO Ministerial Declaration, adopted on December 13, 1996 and the Chairman's statement summing up the Conference are both available at the WTO website. Statistics Canada, Historical Statistics of Canada, 2d edition (Ottawa: Supply and Services Canada, 1983), Tables G81 and F75. Department of External Affairs, A Review of Canadian Trade Policy (Ottawa: Supply and Services, 1983), Table 13. For the background to and the course of the negotiations, see Michael Hart with Bill Dymond and Colin Robertson, Decision at Midnight: Inside the Canada-U.S. Free Trade Negotiations (Vancouver: University of British Columbia Press, 1994). Mander and Goldsmith, The Case against the Global Economy and for a Turn Toward the Local. Anne Krueger, American Trade Policy: A Tragedy in the Making (Washington: AEI Press, 1996) and Jagdish Bhagwati and Anne Krueger, The Dangerous Drift to Preferential Trade Agreements (Washington: AEI Press, 1995). See, for example, "Competitiveness: A Dangerous Delusion," Foreign Affairs, vol. 73, no. 2 (1994), 28-44; "Does Third-World Growth Hurt First World Prosperity?" Harvard Business Review, July-August 1994, 113-21; and with Robert Lawrence, "Trade, Jobs and Wages," Scientific American, April 1994, 44-49. In a spirited rebuttal of both declinists and America-firsters, Acting U.S. Trade Representative Charlene Barshefsky told the U.S. House Ways and Means Committee on September 11, 1996, that "Trade (exports plus imports) in goods and services (including earnings on foreign investment)

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20 21 22 23 24 25 26 27

28 29 30 31

has risen from a value equal to 25 percent of Gross Domestic Product (GDP) in 1992 to one equal to nearly 30 percent of GDP in 1995, from $1.6 trillion to $2.1 trillion." She added that, "We need to knock down two misconceptions. First, that trade agreements like the WTO are bad for U.S. workers and economic growth, and the second that the WTO erodes U.S. sovereignty. Neither of these contentions is true." The Globe and Mail, November 20, 1996, B6. See the excerpt quoted at the beginning of this paper. Current statistics can be found on the World Wide Web at statcan.ca; historical data can be found in tables at the back of Michael Hart, Trade Why Bother? (Ottawa: Centre for Trade Policy and Law, 1992). Officials at Statistics Canada recognize this problem, and its task force on globalization is examining ways and means to factor in this phenomenon and to further improve the quality of Canada's trade data. "The borderless world," The Globe and Mail, July 6, 1996. Speaking to the Trade Policy Review Body. WTO Press Release TPRB/50 of 19 November 1996. An overview of ongoing dispute settlement cases is maintained by the WTO on its website under Dispute Settlement. Notes for an Address, "Can Canada Maintain Its Cultural Identity in the Face of Globalization?" Osgoode Hall Law School, York University, January 27, 1997. Ottawa: Department of Foreign Affairs and International Trade Statement 97/3. See Michael Hart, "A Multilateral Agreement on Foreign Direct Investment: Why Now?" in Pierre Sauve and Daniel Schwanen, eds., Investment Rules for the Global Economy (.Toronto: C.D. Howe Institute, 1995), 36-99. "Ruggiero says China talks near final phase," Reuters NewsMedia, February 4, 1997. Through the Centre for Trade Policy and Law at Carleton University, the author has been actively engaged in a number of these training and technical assistance programs. The speech is available at the WTO Ministerial Website.

IV Canada and the Clinton White House: Looking Back and Looking Ahead at Canadian-American Relations

DONALD E. ABELSON

livery four years, Americans are summoned to reflect on the state of the nation and to consider who is best suited and equipped to provide presidential leadership. In the 1996 election, despite repeated attacks on his character by Republican critics, President Clinton received a clear mandate from the electorate to prepare the United States for the new millennium. Although the election did not ignite the emotions and spirit of the American people as other presidential contests have done, it did generate considerable interest among America's allies and adversaries. Recognizing the increasingly important linkage between domestic politics and foreign policy behaviour, policy makers outside the United States paid close attention to the political platforms and ideological orientation of the candidates.

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Policy makers in Canada were particularly interested in the outcome of the campaign. Painfully familiar with how changing political winds in the United States can influence the nature of Canada-U.S. relations, officials in Ottawa had no alternative but to evaluate and predict how policy initiatives generated by a new administration could lead to greater cooperation or discord between the two countries. Indeed, shortly after the primary season got underway, concerns were expressed about the early, but nonetheless enthusiastic, support for Republican presidential hopeful Pat Buchanan. Among other things, Buchanan stated repeatedly that, if elected, he would abrogate the North American Free Trade Agreement (NAFTA) and pursue a more protectionist trade strategy. These policy pronouncements only served to heighten concerns that arose in Ottawa, following the November 1994 U.S. mid-term elections, that the U.S. would revert to a policy of isolationism—a concern which still exists in many advanced industrialized nations.1 Despite assurances from seasoned observers of Washington politics that Buchanan's rhetoric would not translate into an election victory, Canadian policy makers continued to closely observe the potential spillover effect Buchanan's remarks might have on other presidential and congressional candidates determined to use trade policy and other instruments of statecraft to advance U.S. political interests.2 The purpose of this chapter, however, is not to evaluate the reaction of Canadian policy makers to the various candidates who entered the 1996 presidential election, nor is it to speculate on what a Dole victory would have meant for Canada. It is rather to assess the state of Canada-U.S. relations during the first term of the Clinton administration and to consider the potential impact of the second Clinton term on the Canada-U.S. dialogue. Particular emphasis will be placed on the way in which U.S. economic/trade, foreign/defence and environmental interests—interests that have traditionally shaped and dominated Canada-U.S. relations for decades—could foster conflict and collaboration between Ottawa and Washington in the coming years. If President Clinton's second-term portfolio of domestic and foreign policy initiatives is similar to the one he revealed to the American public during his first four years in office, and there are few reasons to suspect it will not be, it is unlikely that a major change in Canada-U.S. relations will ensue. The outcome of the 1996 congressional elections is also unlikely to have a direct impact on the relationship between the two countries. Congressional leadership

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has remained unchanged. Senator Trent Lott (R-Mississippi) and Congressman Dick Armey (R-Texas), will hold on to their respective positions as Senate and House of Representatives majority leaders. This has not generated considerable concern in Ottawa, nor has the prospect of Newt Gingrich (R-Georgia) continuing to serve as Speaker of the House. Indirectly, however, freshman and incumbent Republicans and conservative Democrats in the House of Representatives and the Senate could attempt to constrain the Clinton administration's ability to link future trade agreements to improvements in environmental and labour standards, a policy which Canada has endorsed. Should this occur, Canada and several of the United States' other trading partners could be forced to reevaluate their priorities in international trade. In an attempt to deflect further criticism regarding his questionable management of international relations, President Clinton and his newly recycled foreign policy team3 will likely assign a higher priority to advancing American economic, political and security interests in many regions, including Asia and the Pacific. Indeed, rather than succumbing to pressures from an increasingly conservative Congress to adopt a more isolationist foreign policy, President Clinton will in all likelihood identify and vigorously pursue America's global agenda. Some observers of Washington politics have speculated that the possibility of indictment charges being laid against the Clintons, combined with the steadfast opposition of several Republican members to a more internationalist foreign policy, could undermine the President's ability to manoeuvre in the international arena. However, even if Clinton were removed from office, it is unlikely that his successor, Vice-President Al Gore, would radically depart from his chiefs pledge to resist domestic pressures to turn U.S. attention inward. The quintessential Washington insider, Gore is well positioned, should Clinton fall from grace, to build the coalitions he requires to sustain the administration's foreign policy commitments. Gore is, after all, a strong advocate of American internationalism. With four years of foreign policy experience to draw on, Clinton is no longer a novice in international affairs. Moreover, by surrounding himself with seasoned Democratic and Republican foreign policy advisors who have received broad-based support from Congress, Clinton will have the confidence, but perhaps more importantly, the political support he so desperately needed in his first term, for embarking on a truly bipartisan foreign policy. A reinvigorated

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American foreign policy may help Clinton improve his report card, but as this chapter will demonstrate, it may also propel him into occasional conflicts with Canada and other allies of the U.S. As under previous administrations, it is unlikely that Canada will endorse or for that matter condone, every American foreign policy initiative in the international community. Nonetheless, while it must be recognized that potentially vociferous disputes (primarily in the area of trade) will periodically arise between Canada and the United States, there is little to suggest that the close and enduring relationship the two countries have enjoyed for decades will be seriously tested. As Joseph Jockel recently observed, the relationship between Canada and the United States "has entered into a period of enduring calm,"4 a state which is unlikely to be disturbed in the next four years. In fact, as is evidenced by Canada and the United States' willingness to challenge the European Union (EU) over several trade matters at the World Trade Organization (WTO), trade objectives between the two countries need not necessarily collide. Notwithstanding some common interests between Ottawa and Washington in international economic relations, President Clinton will likely continue to treat Canada with the same measure of benevolent indifference that he has demonstrated since entering the Oval Office. Indeed, if the minimal (bordering on non-existent) attention Clinton paid to Canada during the election is any indication of the importance he assigns to events taking place north of the U.S. border, it is doubtful that Canada-U.S. relations will figure prominently on his administration's agenda. Furthermore, despite some passing interest in Congress regarding the potential implications for Canada-U.S. relations should Quebec separate, there are few signs that Canadian domestic and foreign policy initiatives will attract considerable attention in Washington in the near future.5 President Clinton and Prime Minister Chretien have established and maintained a close personal and working relationship which will likely become even stronger in the next four years. Short of a policy dispute that fundamentally divides the two countries, it is unlikely that there will be a major falling out between the two leaders. Unlike Ronald Reagan's opposition to many of Pierre Trudeau's domestic policy initiatives, including the Foreign Investment Review Agency (FIRA) and the National Energy Program (NEP), and Prime Minister Trudeau's antipathy to Reagan's foreign policy in Central America and the Caribbean and to the Strategic Defense Initiative (Star Wars), there

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are few signs that either Clinton's or Chretien's domestic and foreign policy initiatives will generate significant conflict between Ottawa and Washington. In large part, this is because both leaders are attempting to accomplish similar domestic and foreign policy objectives, which, with few exceptions, have not directly collided. This may be the reason why Chretien and Clinton have publicly supported each other's mandate. It may also help to explain why their mutual admiration has not had a discernible impact on Canada-U.S. relations. In fact, it is difficult to identify any defining moments in Canada-U.S. relations since the two leaders came to power. This is in stark contrast to the extremely warm ties which developed between Canada and the United States during the Mulroney-Reagan/Bush period and the rather frosty climate which permeated Canadian-American relations throughout much of the Kennedy-Diefenbaker, Johnson-Pearson and Nixon-Trudeau years. Clinton's adoption of an attitude of benevolent or passive indifference towards Canada, despite his respect for its leader, does not mean that he has, or will, ignore concerns expressed by Canadian officials regarding U.S. domestic and foreign policy. As he has demonstrated on several occasions, including the bitter reaction of Canadian policy makers to the controversial Helms-Burton law, Clinton is prepared to do some backpedaling to appease his North American and European allies. At the very least, he appears willing to consider policy requests from Canada, an overture that some recent presidents have not been prepared to make.6 President Clinton's approach to Canada will likely continue to reflect his overall approach to foreign policy. He will be grateful if no serious policy grievances arise between Canada and the United States, but if they do, he will attempt, as he has done throughout his period of office, to pursue a policy of accommodation. In the first section of this chapter, an assessment of Canada-U.S. relations during Clinton's first term in office will be provided. In addition to discussing the relationship which has developed between President Clinton and Prime Minister Chretien, this section will highlight major policy issues that have emerged between Canada and the United States since the 1992 election. Once this has been done, attention will shift to an evaluation of Canadian and U.S. priorities after the 1996 election. This will serve to illustrate those policy areas in which tensions in the relationship could develop, or alternatively, those where a greater degree of cooperation might be achieved.

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CANADA AND THE CLINTON WHITE HOUSE

On the eve of the presidential election in 1992 Prime Minister Mulroney and his cabinet colleagues crossed their fingers that this would be one election that the self-proclaimed "comeback kid" would not win. However, Mulroney's preference for a second-term Bush administration likely had more to do with his allegiance to President Bush and his overt desire to tie Canada's future more closely to that of the U.S. than it did with his antipathy toward Governor Clinton's policy positions. In fact, in 1992, it was difficult to find any one issue in Clinton's policy arsenal that posed a serious challenge to Canada's economic, environmental and security interests. Clinton supported the North American Free Trade Agreement with appropriate environmental and labour side deals. While the Mulroney government would have preferred the side deal negotiations to be bilateral (the United States and Mexico) rather than trilateral, it deemed its participation necessary to secure ratification of the accord in Congress. On a related front, Clinton, along with his vice-presidential running mate Al Gore, a staunch environmentalist, favoured strengthening the U.S.-Canada Air Quality Agreement of 1991 (which Bush and Mulroney negotiated) and the Great Lakes Water Quality Agreement of 1972, something that Canadian policy makers and environmental non-governmental organizations (ENGOs) had advocated for decades. Moreover, given his active interest in reforming the American health care system, Clinton often praised Canada for its commitment to providing universal health care coverage. Such a platform could hardly be viewed as undermining Canada's domestic and foreign policy agenda. Mulroney may not have considered Clinton an ideological soul mate, but it is doubtful that he viewed him as a threat to Canada's national interests. Some scholars speculated that Mulroney was concerned that a Democratic victory in the U.S. would convince Canadian voters to oust the Conservatives in favour of the Liberals. Yet, as noted, Mulroney's less than enthusiastic support for Clinton appears to have been more deeply rooted in his personal ties to President Bush than in his fears about Clinton's impact on Canada. In short, it is not surprising that as Mulroney became increasingly frustrated and despondent because of his low approval ratings at home, he was not looking forward to establishing relations with a new president in the White House, particularly one, who according to most polls taken at the time, was more popular with Canadians than he was.7

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Historians will have little to write about his relationship with President Clinton. Mulroney resigned from office in February 1993, just weeks after Clinton assumed the presidency. While Mulroney's wish did not come true in the 1992 election, four years later, Prime Minister Chretien's did. Securing a second-term in office was "reassuring for Chretien," who can continue to look to President Clinton to strengthen Canada-U.S. relations.8 However, before Canadian policy makers celebrate Clinton's victory, it is important for them to review what has transpired between Canada and the United States over the past four years. Only then can they be certain that the outcome of the 1996 presidential and congressional elections will be favourable for Canada. President Clinton first took the oath of office on January 20, 1993, but it was not until two years later that he made his first official state visit to Ottawa. Although it has been recent practice for newly elected presidents to meet with the prime minister shortly after assuming office, Prime Minister Chretien was not disappointed that Clinton delayed his visit. Preferring to distance himself from Prime Minister Mulroney, who frequently boasted about his cosy ties to Presidents Reagan and Bush, Chretien had also refrained from making an official visit to Washington, despite having frequently met and spoken by phone with Clinton on several occasions. However, rumours about the "cool relationship" between the two leaders were put to rest during their two-day summit which culminated in the signing of the Open Skies Agreement expanding commercial air travel between the two countries.9 The friendly tone for the two days of meetings was set early by Prime Minister Chretien who, in welcoming President Clinton to Parliament on February 23, 1995, remarked: the cold weather outside that we normally have may be typically Canadian, but so is the warm welcome for you inside today. It is a warmth that we reserve only for our closest friends.10

Chretien's gracious comments about Clinton clearly signalled to many that the Prime Minister was prepared to recant his statement that "there is no room for friendship in politics," a remark that he made during his first meeting with Clinton at the Asia Pacific Economic Cooperation (APEC) summit in Seattle in November 1993. Chretien was even prepared to go a step further by praising Clinton's presidency. In what

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amounted to a clear endorsement for President Clinton's reelection bid which, following the November 1994 mid-term elections, looked anything but promising, Chretien stated: Mr. President, you may not know it, but among your predecessors who have addressed the Parliament of Canada during your lifetime are Harry Truman, Dwight Eisenhower, Richard Nixon and Ronald Reagan. They all had one thing in common. They were all elected for a second term. Now, that might not seem like such a remarkable coincidence. But look at the recent presidents who have not addressed the Canadian Parliament: Gerald Ford, Jimmy Carter and George Bush.11

In addressing Parliament, President Clinton reciprocated Chretien's kindness by paying homage to his leadership and vision. He also reaffirmed the strong and lasting ties between Canada and the United States. In echoing John Kennedy's remarks about the economic, geographic and historical links which bind the two countries, Clinton noted, "We are neighbours by the grace of nature. We are allies and friends by choice ... We are two nations blessed with great resources and great histories."12 But he also acknowledged that despite "our most remarkable relationship" we have our differences, some of which are "complex enough to tear your hair out."13 Still, with the exception of a handful of contentious policy disputes between the two countries during the past few years, neither leader has experienced much hair loss. TRADE RELATIONS When policy disputes between Canada and the U.S. have surfaced they have normally been in the area of trade. This is hardly surprising given the extent to which the Canadian and American economies are linked.14 Indeed, as each country seeks to advance its economic and political interests at the expense of the other, allegations regarding the use of unfair trading practices by both sides are inevitable. In the past four years, despite the ratification of the NAFTA, there has been no shortage of allegations or trade disputes. The softwood lumber dispute between Canada and the United States continues to top the list of bilateral trade grievances. This is followed by lingering concerns in the United States over Canada's supply management of a number of agricultural commodities including dairy, poultry and eggs15 and alleged subsidies of Canadian wheat and steel exports. The U.S. has also expressed its antipathy to Canadian state enterprises such as the Canadian Wheat Board.

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Conversely, in Canada, policy makers have expressed and continue to express concerns about U.S. split-run magazines such as Sports Illustrated,16 the opening of U.S.-owned book stores in Canada and market access for the Nashville-based Country Music Television. Clinton's determination to make Asia Pacific the centrepiece of his second-term foreign policy could also generate some concerns in Ottawa, which is equally committed to expanding its trade and cultural ties to the region.17 For instance, it is conceivable that, in an effort to advance U.S. economic interests in Asia Pacific, the Clinton administration could attempt to undercut Canadian wheat exports to China. There is also a possibility that the administration's desire to contain Iran and Libya through a wide range of sanctions could adversely affect Canadian trade interests. Among other things, Canada is interested in securing access to the oil and gas sectors in these countries in order to export its technology. In short, efforts by the United States to vigorously pursue its foreign policy objectives in these and other regions could trigger serious disputes between Ottawa and Washington. These issues represent but a handful of trade disputes that have arisen or could erupt between the two countries. However, no policy move has generated more controversy since Clinton came to power than the passage of the Helms-Burton Act. Formally known as the Cuban Liberty and Democratic Solidarity Act, this legislation was signed by President Clinton on March 12, 1996, ostensibly in retaliation for the downing of two unarmed civilian aircraft on February 24 by Cuban fighters. The purposes of the Act "are to increase economic pressure on the Cuban government and to discourage foreign investment in expropriated properties in Cuba, the claims to which are owned by U.S. nationals."18 By signing the Helms-Burton bill Clinton was able to accomplish two important political objectives. First, he was able to demonstrate to the Republican-controlled Congress that, contrary to the assertions of many of his critics, he was capable of making important foreign policy decisions, even when those decisions were made contrary to the advice and recommendations of his closest political advisers.19 Second, and perhaps more importantly, given the timing of the legislation, Clinton was able to generate significant political support from the large and vocal Cuban-American community in two key electoral states, Florida and New Jersey. Since his coming to power highly mobilized Cuban-American interest groups had been pressuring his administration to apply even tighter economic

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sanctions against the Castro government. In the 1996 election Clinton was rewarded for his efforts. While Clinton's support for Helms-Burton was widely applauded in some policy-making circles it has been sharply condemned by many of America's trading partners. Canadian policy makers in particular are outraged by the Act which they consider an overt attempt by the American government to impose a domestic law extraterritorially. Prime Minister Chretien and his Minister for International Trade, Art Eggleton, have repeatedly expressed and conveyed their government's opposition to the Act. Raymond Chretien, Canada's Ambassador to the U.S., has also worked closely with his Mexican counterpart in Washington, Jesus Silva Herzog, to challenge the controversial law. Among other things, Ottawa is concerned that several Canadian companies which invest in Cuba "will be sued by U.S. citizens and companies for using property seized from Americans during the Cuban revolution."20 This, after all, is a key component of Helms-Burton. A provision under this law also allows U.S. Customs and Immigration to bar any foreigners and their families from entering the United States if their businesses are thought to violate the legislation. To date, only one Canadian company, Sherritt International Corporation, has been targeted by Helms-Burton.21 Canada is considering several options to challenge the law, including triggering the NAFTA dispute resolution process. The Canadian government has already introduced amendments to the Foreign Extraterritorial Measures Act (FEMA) to protect Canadian companies targeted by the law. In response to pressure from several of America's trading partners President Clinton agreed to delay the right of American citizens to sue foreign companies for violations under Helms-Burton until June 1997.22 As a result, in the weeks leading up to the U.S. presidential election, the Canadian government maintained a relatively defensive posture. Nonetheless, this could change quickly if President Clinton decides to carry out his campaign promise to apply additional economic and political pressure on Cuba. Canada's opposition to the Helms-Burton Act goes beyond its concerns about the treatment of Canadian companies. For decades, as U.S. administrations have sought to dismantle the Castro government through various economic and military policies, Canada has remained convinced that little can be gained by isolating Cuba in the international community. Several Canadian prime ministers, including Pierre Trudeau and Jean Chretien, have in fact consistently supported

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peaceful change in Cuba, a policy that has occasionally brought Ottawa into conflict with the United States. In January, 1997, Foreign Minister Lloyd Axworthy made a quick trip to Cuba, a visit which generated different interpretations of the importance Canada was attaching to the improvement of human rights in Cuba.23 It is premature to predict how this dispute will be resolved. Nevertheless, it is unlikely that Canada will be prepared to acquiesce in the American position. With the support of several European and Latin American countries, including its NAFTA partner Mexico, that have condemned the Act, Canada will continue to pressure the Clinton administration to do some additional backpedaling. Despite the simmering dispute over Helms-Burton and continuing grievances over several bilateral trade issues some cooperation between Canada and the United States has taken place in various multilateral economic forums. For instance, both Canada and the United States are challenging the EU's import ban on beef and livestock injected with "growth promoting hormones" at the WTO. Moreover, both countries have stated that they will challenge the EU at the WTO if the EU proceeds with its import ban on furs taken from animals caught in leg-hold traps. Canada has also openly supported the United States' desire to discuss the linkage between trade agreements and environmental and labour standards at APEC and the WTO. The possible expansion of the NAFTA is another trade policy issue which has engaged Canadian and U.S. policy makers in the last four years. Indeed, as early as December 1994, Canada, the U.S. and Mexico announced their intention to include Chile in the agreement. Canada has clearly signalled its desire to fulfil this commitment. On November 14, 1996, following several rounds of negotiations, Canada and Chile signed a free trade agreement which closely parallels the NAFTA. The accord, which is expected to come into force on June 2, 1997, includes side deals on environmental and labour cooperation.24 However, it is unclear if the Clinton administration will push hard for Chile's accession. Since early 1995 President Clinton has been reluctant to commit himself or his administration to expanding the trilateral accord. Clinton has also been reticent about fulfilling his commitment to pursuing the Free Trade Agreement of the Americas' (FTAA) initiative. Recognizing that he may encounter considerable difficulty in securing Republican support in Congress as long as the side deals are required for Chilean membership he had been relatively silent on the issue. This silence ended in late February 1997, however, when,

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during a visit of Chilean President Eduardo Frei to Washington, President Clinton announced his support for Chilean accession to NAFTA. Since the election, some of Clinton's aides, including Counselor to the President Thomas (Mack) McLarty, have publicly stated that if the NAFTA is expanded to include Chile "it is very likely" that environmental and labour issues will be addressed.25 However, Senator Majority Leader Trent Lott (R-Mississippi) "hinted that he is not likely to support a bill which would allow the Clinton administration to negotiate agreements covering labor and environmental issues."26 If Clinton is prepared to expand the NAFTA to include Chile without side deals (assuming of course that such a concession is necessary to secure ratification) he will no doubt alienate several Democrats in Congress including Representative Richard Gephardt (D-Missouri) and Senator Max Baucus (D-Montana), not to mention Vice-President Gore, who advocated the inclusion of stronger environmental and labour standards in the NAFTA. Such a strategy would also generate criticism among policy makers in Ottawa and Mexico City who, under considerable pressure from the Clinton administration in 1993, agreed to become signatories to the NAFTA side deals. During the 1992 campaign, in an attempt to distance himself from President Bush's position on the NAFTA and to appease U.S. labour and environmental constituencies in the process, Clinton proposed the negotiation of side deals or parallel agreements on labour and environmental cooperation.27 However, since the Republicans maintained control over both houses of Congress folio wing the 1996 elections, Clinton no longer has to satisfy labour unions and ENGOs in order to generate sufficient political support for an expanded NAFTA. Indeed, without side deals, it is unlikely that he will receive their endorsement. Clinton must now decide if he is prepared to alienate several Democrats and to contradict his earlier policy pronouncements at APEC and other multilateral economic forums in favour of linking trade agreements to environmental and labour standards. The political costs of pursuing this strategy could be high if the Democrats regain control of either or both houses of Congress in 1998. Still, as Clinton discovered in the first two years of his administration, even with a Democratically controlled Congress there is no guarantee that his initiatives will succeed. A more serious consequence of alienating his allies is the potential impact it could have on the Democratic party in the next presidential campaign. Offending Gephardt, a leading contender for the Democratic presidential nomination, and

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Vice-President Gore, who no doubt also has presidential aspirations, could lead to considerable divisiveness within the Democratic party. Clinton's decision on how and when to expedite NAFTA's expansion will ultimately depend on the importance he assigns to establishing a legacy as the president who oversaw and indeed facilitated the expansion of the world's largest trading bloc. In early February, 1997 the Clinton administration remains in a holding pattern on this issue; no time frame for the commencement of negotiations for Chile's accession has yet been announced. Canada has taken the first tangible steps toward bringing Chile into the accord. In the next several months policy makers in Ottawa may encourage Washington to act in similar fashion. However, it is more likely that Canada will wait patiently for Clinton's next move. Although he has been cautious about committing himself to NAFTA's expansion, he has expressed a willingness to continue to work at the WTO to reduce further barriers to trade. This sentiment has been echoed by the Chretien government. FOREIGN AND DEFENCE POLICY President Clinton came under serious attack for his ad hoc approach to foreign policy during the first term of his administration, but he found a wealth of support among Canadian policy makers. His efforts to promote and facilitate the peace process in the Middle East, to reduce the threat of nuclear proliferation in North Korea, to return Jean-Bertrand Aristide to power in Haiti and to restore peace in war-torn Bosnia, were, for the most part, well received in Ottawa. Clinton's commitment to North Atlantic Treaty Organization (NATO) enlargement was also shared by Chretien, who has endorsed expanding the Western alliance to include many states previously aligned with Russia. Even Clinton's mishandling of the Somalia conflict was not highly criticized in Ottawa, which suffered through its own internal assessment of the role the Canadian military played in that country. Moreover, Clinton's decision to grant China most favoured nation (MFN) status, despite his 1992 campaign promise to refuse it until the Chinese leadership significantly improved its human rights record, and to mobilize a naval presence in the area to closely monitor the recent conflict in the Taiwan Straits28—a subject explored by Shannon Selin in this volume—also generated little opposition in the Chretien government, which has devoted considerable resources in recent months to expanding its economic ties to the region.

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Having made significant contributions to United Nations peacekeeping operations for four decades, Canada was pleased that Clinton reaffirmed his support for the UN operation in Bosnia. On November 15, 1996, Clinton announced that he had no intention of pulling American troops from the region immediately, but also made it clear that he expected the troops to be removed no later than eighteen months hence. As John Kirton points out in this volume's chapter on recent changes in the Canadian foreign policy-making establishment, Prime Minister Chretien may not be as ardent a supporter of the United Nations as many of his Liberal predecessors were. He is nonetheless pleased that the U.S. is participating in several UN-sponsored multilateral peacekeeping operations, including the aborted Canadian-led mission in Zaire. Despite repeated demands on the part of several members of Congress not to place U.S forces under UN command, a promise that was made by the Republican leadership in the Contract with America, Clinton has remained steadfast in his desire to work with the UN to restore peace in volatile regions. Should Clinton bow to Republican pressure to reduce America's commitment to peacekeeping operations, Canada and other middle powers may be pressed to make an even more important contribution to the maintenance of international peace and security. Unlike the Nixon and Reagan years, when dozens of peace movements and public advocacy coalitions in Canada mobilized to condemn U.S. foreign policy in several areas, including Southeast Asia and Central America, the Clinton administration's time in office has not been characterized by widespread criticism among the Canadian public. This is largely because the U.S. has not been willing, as it has been under previous administrations, to propel itself into a protracted military conflict. Even in Bosnia, the Clinton administration has been cautious about committing additional ground and air forces to help bring an end to hostilities. President Clinton, like former President Jimmy Carter, came to power with no experience in foreign affairs. But more disturbing for some critics was in fact that in his first term, Clinton demonstrated little interest in this area. Yet, while Carter was inundated with one foreign policy debacle after another, Clinton has been fortunate in that no one foreign policy crisis has emerged that has seriously tested his leadership. As America's first post cold-war president, Clinton has, to date, not been forced to make critical foreign policy decisions. This could change, however, in the second-term, when a number of

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political developments in Central Europe, China, Russia and the Middle East might require a decisive American response. Except for the reevaluation of their commitment to NATO, Canada and the U.S. have had little to discuss in the area of defence policy during Clinton's first term in office. The NORAD agreement, which expired in May, 1996, has since been renewed. However, as Joseph Jockel points out, the "disappearance of the Soviet threat"29 has all but removed Canada from the North American security equation. In Jockel's words, "Canada has ceased to be the strategic glacis of the U.S."30 Although there have been a number of defence policy grievances between the two countries in recent history, over the past four years few issues have surfaced which have generated much attention. ENVIRONMENTAL COOPERATION President Clinton and Prime Minister Chretien have accomplished little in the area of environmental cooperation. With the exception of the NAFTA parallel agreement on environmental cooperation which came into effect in September 1993,31 weeks before Chretien became prime minister,32 Canada and the United States have not embarked on any significant bilateral environmental initiatives. During his visit to Ottawa in February 1995 President Clinton reaffirmed his commitment to strengthen the Air Quality Agreement and the Great Lakes Water Quality Agreement, but in the last four years no major advances have been made. The Montreal-based Commission for Environmental Cooperation could conceivably become a forum to promote environmental protection in the international community, as Clinton noted in his address to Parliament. Still, it is too early to predict how willing Canadian and American policy makers will be to use this institution to facilitate environmental cooperation. In the three most important and relevant policy areas for Canadian-American relations it appears that President Clinton's domestic and foreign policy initiatives have, with few exceptions, been well received by the Chretien government. As noted, there have been some occasional disputes in trade relations that the two governments have had to navigate their way around, but for the most part Canada-U.S. relations have remained close. They may not be as warm and cosy as they were when Prime Minister Mulroney and Presidents Reagan and Bush were in power, but they have certainly not resulted in much frostbite.

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Given the Clinton administration's record in its first four years it is not surprising that Prime Minister Chretien was reassured by the President's election victory. In looking ahead to the next four years, however, Canadian policy makers must consider whether there will be a dramatic change in Clinton's political agenda which may or may not foster closer ties between Canada and the United States. CANADA AFTER THE 1996 U.S. ELECTION Clinton's platform in the 1996 election was not dramatically different from the one he relied on four years earlier. In numerous speeches during the campaign he returned to several common themes: reforming America's health care system, crime and drug prevention and education. On the foreign policy front, he acknowledged the important role and responsibility of the United States in promoting and preserving world peace and in reducing additional barriers to trade. He also reaffirmed his commitment to working with the United Nations to restore order. In assembling his foreign policy team for the second term Clinton has clearly signalled that he is more interested in maintaining the status quo than he is in embarking on new and challenging foreign policy initiatives. Apart from encouraging Republican Senator William Cohen to postpone his scheduled retirement by becoming Secretary of Defense and inviting William Richardson (D-New Mexico) to abandon his House seat to represent the United States at the United Nations, Clinton has simply reshuffled the portfolios of his first-term foreign policy advisers. Madeleine Albright has left her position as U.S. Ambassador to the United Nations to become Secretary of State. A strong advocate of NATO expansion and a firm believer in relying on a military response in Bosnia, Albright has a philosophy of international relations that closely resembles Clinton's. What remains unclear though is how she will manage U.S. foreign policy in Asia and the Pacific; this is a region—unlike Europe—in which she has very little experience. Samuel Berger, a former trade lawyer at the prominent Washington, D.C. law firm of Hogan and Hartson, has been promoted from Deputy Adviser to the President for National Security Affairs to National Security Adviser, replacing Anthony Lake.33 Berger's considerable knowledge of international economic issues will undoubtedly help the Clinton administration define and promote its trade interests34 in many regions, including Asia and the Pacific. Albright will certainly benefit from Berger's experience.

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Aside from Richardson, the only other new member of Clinton's foreign policy team is William Cohen, the former three-term Senator and Representative from Maine. With an extensive background in foreign and defence policy and a lifetime of experience on Capitol Hill, Cohen is well positioned to generate bipartisan support for Clinton's foreign policy agenda. It remains unclear, however, what, if any, new initiatives he will pursue in the international arena.35 In the event that Clinton sticks closely to his election platform in the second term of his administration, and there is good reason to suspect he will, it is unlikely that his domestic and foreign policy initiatives will jeopardize the relationship of goodwill he has established with Canada over the past four years. There will inevitably be a number of trade policy disputes that may or may not be satisfactorily resolved by Canadian and U.S. negotiators, and the Helms-Burton law, if stringently enforced, could result in tensions in the bilateral relationship. Nonetheless, it is unlikely that a second Clinton term will adversely affect Canada's core trade, foreign policy and environmental interests. However, since Clinton's newly assembled foreign policy team have rarely spoken individually on Canada, it is difficult to assess how they will approach a number of bilateral issues including the possible secession of Quebec. In fact, other than Samuel Berger and Charlene Barshefsky, who has been confirmed as the United States Trade Representative (USTR),36 no other members of Clinton's foreign policy team are well-versed in Canadian-American relations. The important question Canadian policy makers have to address, however, is not whether periodic disputes will arise between Canada and the United States, but what domestic and international pressures could convince Clinton to pursue a less predictable course in the next four years. One of the major concerns that Canadian policy makers expressed in the months and weeks before the 1996 elections was related to the extent to which presidential and congressional candidates were relying on protectionist platforms to secure electoral support. This makes it clear why many officials in Ottawa expressed anxiety about Pat Buchanan's candidacy. It also helps to explain why policy makers in Ottawa continue to speculate about what President Clinton promised several members of Congress in exchange for their support of the NAFTA. Did he tell senators and representatives from the Midwest that he would take stronger action against Canadian exports of durham wheat? Did he give undertakings to other members that he would instruct his trade representatives to take further trade action against Canadian steel exports?

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Canadian concerns about growing trade protectionism in the United States may be legitimate, but it is unlikely, as previously noted, that Clinton will succumb to protectionist elements in Congress. An avowed free-trader, Clinton has endorsed Chile's accession to the NAFTA even if it means alienating some Democrats in Congress. He also realizes that introducing protectionist policies while at the same time encouraging NAFTA's expansion, could, and likely would, send a clear signal to other Latin and American countries that the U.S. is not committed to reducing barriers to trade. If Clinton is sincere about enlarging the NAFTA, he may also be less inclined to strictly enforce Helms-Burton. Since he is unable to seek reelection and therefore is less likely to be concerned about maintaining the support of Cuban-Americans, he may be willing to further delay the enforcement of some provisions of this controversial law. As evidenced in his flip-flop policy toward Cuban refugees,37 he is not averse to reversing prior foreign policy decisions when such action suits his short-term political interests. It is also unlikely that Clinton will yield to pressures from some Republican members of Congress, including House Speaker Newt Gingrich, to refuse to place U.S. forces under UN command. Since coming to office, the President has learned one important lesson in foreign policy from his predecessor George Bush. It is far more politically astute to lead or participate in a UN-supported military operation, than it is to engage in a unilateral expedition. This approach to foreign policy will continue to be well received in Ottawa. If a regional crisis erupts Clinton will demonstrate U.S. resolve; but unlike many of his predecessors, he has few incentives to deploy U.S. troops to a foreign country in order to solidify domestic support. For the first time in his political career, he does not have to worry about the next campaign. For the next four years, Canadian policy makers need not worry either. As the first Democratic president in over forty years to win a second term in office, Clinton has a vested interest in being favourably recorded in history. Consequently, he may, as many political pundits have predicted, simply try to maintain the status quo. If the scenario outlined above holds true, Canada-U.S. relations after the 1996 election will look very much like they did before the election. Even if President Clinton is forced from office by the many scandals that have arisen in recent months, it is difficult to foresee a dramatic change in the relationship between the two countries.

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CONCLUSION The outcome of the 1996 presidential and congressional elections will likely be favourable for Canada. Neither President Clinton, who has established close ties to Prime Minister Chretien, or the Republicancontrolled Congress is likely to embark on any major domestic and foreign policy initiatives that will be profoundly at odds with Canada's core political, economic and security interests. Periodic disputes, primarily in the area of trade relations, will likely arise. However, it is doubtful that even the Helms-Burton law, or U.S. political, economic and security interests in Asia Pacific and the Middle East will threaten to derail the special relationship between the two countries. As he stated repeatedly during the campaign, President Clinton is committed to building a solid bridge for the United States to cross into the twenty-first century. In constructing that bridge, his administration will, despite its best efforts, likely alienate many Democrats and Republicans in Congress along the way. President Clinton may also alienate some allies of the United States in the process. Still, it is unlikely that in his attempts to prepare the United States to enter the new millennium he will ignore the close and lasting ties between Canada and the United States. After all, one route to the bridge that Clinton wants so desperately to build will of necessity lead to Ottawa. Since coming to power, President Clinton and Prime Minister Chretien have been relatively successful in maintaining cordial relations. How successful the two leaders will be in navigating their way through some turbulent waters in the next four years, (assuming that Chretien holds on to power after the next federal election) will ultimately depend on whether their domestic and foreign policy initiatives are on a direct collision course. The argument of this article has been that a collision is unlikely, although from time to time one leader may have to yield to the other.

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NOTES The author would like to thank Christine Carberry and Stephen de Boer for their helpful comments on an earlier draft of the paper. He would also like to acknowledge the research assistance of Adam Dean. 1

2

3

4

5

6

Part of the Republicans' success in the mid-term elections has been attributed to the "Contract with America," a Republican blueprint for improving the efficiency of government. One of the Contract's provisions stipulated that no American forces should be placed under the command of the United Nations—a signal to many of America's allies that the United States would systematically withdraw its support for multilateral peacekeeping operations. See Anne Swardson and Molly Moore, "Canada, Mexico keeping wary eye on Buchanan: anti-NAFTA stance worries members of pact," The Washington Post, February 19, 1996, A7 and Michael Hiltzik and James Gerstenzang, "Buchanan stirs debate on trade wars in N.H.," The Los Angeles Times, February 14, 1996, 1. In the first term of the Clinton Administration, Madeleine Albright served as U.S. ambassador to the United Nations, Samuel Berger was Deputy Adviser to the President for National Security Affairs, and Anthony Lake was National Security Adviser. The newest member of Clinton's team is William Cohen, the three-term Senator from Maine. Joseph T. Jockel, "Canada and the United States: Still Calm in the 'Remarkable Relationship'," in Fen Osier Hampson and Maureen Appel Molot, (eds.), Canada Among Nations 1996: Big Enough to be Heard (Ottawa: Carleton University Press, 1996), 112. In September 1996, the House of Representative's Foreign Affairs Subcommittee on Western Hemispheric Affairs held a one day hearing to look into national unity problems confronting Canada. Among the concerns raised by the Committee was how disruptive Quebec's secession from Canada would be to the NAFTA. The hearings received little coverage and were poorly attended. For more on this see Robert Russo, "Rare hearing on Canada falls on deaf ears," The Toronto Star, September 23, 1996, Al6. A more detailed discussion of why the United States may want to pay more attention to the possible separation of Quebec from Canada is provided by Charles F. Doran in "Will Canada Unravel?," Foreign Affairs 75 (5), September/October 1996, 97-109. Eager to come to the assistance of refugees in Zaire, Prime Minister Chretien approached President Clinton with a request for U.S. support to this humanitarian relief effort. Although Clinton stated initially that he would not allow any country to force America's hand, he acknowledged that he would give this request serious consideration. Within days of Chretien's request Clinton deployed 4,000 troops to Zaire. See Jeff Sallot and Paul Knox, "Canada pushes U.S. for support," The Globe and Mail, November 13, 1996, Al.

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7

8 9

10 11 12 13 14

15

16

17 18 19

For more on Mulroney's reticence about a Clinton victory see, Georges A. Fauriol, (ed.), "Clinton and Canada," in Center for Strategic and International Studies (CSIS) Policy Papers on the Americas, Vol. 4, Report Number 1, 1993See Graham Fraser, "Clinton sweeps to easy victory," The Globe and Mail, November 6, 1996, A15. For more on the Open Skies Agreement and Clinton-Chretien meetings see Craig Turner, "Pact to expand air travel caps Clinton Canada visit," The Los Angeles Times, February 25, 1995, 1; Clyde H. Farnsworth, "U.S.-Canada pact ends restriction on air travel," The New York Times, February 25, 1995, 1; and John F. Harris, "U.S.-Canada sign 'open skies' accord to ease air travel across the border," The Washington Post, February 25, 1995, A25. House of Commons Debates, Volume 133, Number 159, February 24, 1995, 10036. Ibid., 10037. Ibid., 10038. Ibid., 10038. For the first 10 months of 1996, total Canadian exports to the U.S. were C$180 billion. Total imports from the U.S. to Canada during the same period were C$146 billion, bringing total two-way trade to C$326 billion. Statistics compiled by the U.S. Census Bureau International Trade Statistics. On December 2, 1996, a five-member binational panel ruled unanimously that high Canadian tariffs on U.S. dairy, poultry, egg, margarine and barley sales are consistent the NAFTA and can therefore be maintained. Despite this ruling, the U.S. has vowed to continue its fight against Canada's supply management of various agricultural commodities. See "NAFTA panel's final ruling unanimously backs Canadian farm tariffs," Inside U.S. Trade 14 (49), December 6, 1996, 13. In January 1997, the WTO panel hearing the U.S. complaint against the Canadian prohibition of split-run editions handed down an interim ruling that the Canadian policy violated WTO rules. See Drew Fagan, "White House beaming over magazine ruling," The Globe and Mail, January 20, 1997, Bl. For more on the Clinton administration's interest in fostering closer ties to the Asia Pacific region see Nigel Holloway, "Same Game, New Team," Far Eastern Economic Review, November 21, 1996, 18-20. United States Information Service, "Background on the Helms-Burton Bill," U.S. Embassy, Ottawa, September 5, 1996. David E. Sanger, "U.S., enforcing Cuba curbs, punishes Canadian company," The New York Times, July 11, 1996, 1. Several scholars have criticized Clinton's handling of foreign policy. For instance see, Larry Berman and Emily O. Goldman, "Clinton's Foreign Policy at Midterm," in Colin Campbell and Bert Rockman, (eds.), The Clinton Presidency: First Appraisals (New Jersey: Chatham House Publishers, 1996), 290-324; Jeffrey Gedmin, "Clinton's touchy-feely foreign policy," The Weekly Standard, 1 (34), May 13, 1996, 19-24; William G. Hyland, "The Clinton Report Card: A Mediocre Record," Foreign Policy 101, Winter 1995-96, 70-75; Richard H. Ullman,

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20 21

22

23

24 25 26 27 28

29 30 31 32

"A Late Recovery," ibid., 76-79; and Michael Mandelbaum, "Foreign Policy as Social Work," Foreign Affairs 75 (1), January/February 1996, 16-32. Scott Feschuk, "Ottawa acts on Helms-Burton," The Globe and Mail, September 17, 1996, B14. Under Helms-Burton Washington has already banned Sherritt International Executives from entering the U.S. The mining company's nickel venture in Cuba makes it that country's largest foreign investor. For more on this see Sanger, cited in endnote 19 and Laura Eggertson, "Eggleton ready for fight over Cuba," The Globe and Mail, January 4, 1997, Al. Despite this announcement, Trade Minister Art Eggleton is seeking cabinet support to challenge this controversial legislation under NAFTA. Unlike Canada, the EU appears to be moving closer to the U.S. position and apparently is prepared to pressure Cuba to adopt democratic and free market reforms. See Laura Eggertson, "Eggleton ready for fight over Cuba," The Globe and Mail, January 4, 1997, Al. The EU is challenging Helms-Burton at the WTO. On February 20, 1997, the U.S. announced that it will not appear at a WTO panel established to investigate European complaints over Helms-Burton. David E. Sanger, "U.S. rejects role for World Court in trade dispute," The New York Times, February 21, 1997, Al. See Laura Eggertson and Paul Knox, "Cuba law swaying Canada, U.S. says," The Globe and Mail, January 22, 1997, Al, A10, and Anthony De Palma, "A top Canadian visits Cuba, nettling Washington," The New York Times, January 23,1997, A3. See Scott Feschuk, "Canada, Chile strike trade deal," The Globe and Mail, November 15, 1996, Bl. See, "McClarty says administration will seek broad fast-track authority," Inside U.S. Trade 14 (50), December 13, 1996,1. "Senate selects committee members; Lott signals fast track support," Inside U.S. Trade 14 (49), December 6, 1996, 12. See "Expanding Trade and Creating American Jobs: Remarks by Governor Bill Clinton," (Raleigh, North Carolina, October 4, 1992). For more on U.S. foreign policy toward China and Taiwan see Thomas J. Christensen, "Chinese Realpolitik," Foreign Affairs 75 (5), September/ October 1996, 37-52 and Chas. W. Freeman, Jr., "Sino-American Relations: Back to Basics," Foreign Policy 104, Fall 1996, 3-17. Jockel, 119. Jockel, 120. With little fanfare, Prime Minister Kim Campbell signed the NAFTA side deals in Ottawa on September 14, 1993During the 1993 federal election, Jean Chretien did not make the NAFTA or the side deals a campaign issue. For instance, see "The Liberal Approach to Governing in the 1990s: Speech by the Honourable Jean Chretien to the University of Ottawa Law Faculty," January 27, 1993. Canada and Mexico were reluctant, albeit for different reasons, to participate in trilateral side deal negotiations. However, both countries realized that their participation was necessary to ensure ratification of the NAFTA in Congress. See Donald E. Abelson and Blanca Torres, "The Politics of Environmental Cooperation:

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33

34

35 36

37

A View from Ottawa and Mexico City," in Rafael Fernandez de Castro, Michael K. Hawes and Brian J.R. Stevenson, (eds.), Relating to the Powerful One: How Canada and Mexico Relate to the United States, forthcoming. Anthony Lake was nominated to fill the position of Director of the CIA, but on March 17, 1997 withdrew his nomination. Tim Weiner, "Lake pulls out as nominee for CIA, assailing hearings as endless political circus," The New York Times, March 18, 1997, Al. George J. Tenet, Deputy Director of the CIA since July 1995 was nominated to head the Agency. Tim Werner, "Clinton proposes acting C.I.A. chief as agency leader," The New York Times, March 20, 1997, Al. William Daley, the son of legendary Chicago mayor Richard Daley, has been nominated as Secretary of Commerce. Daley, a Chicago lawyer, played a pivotal role in mobilizing support in Congress for the NAFTA. He may be called upon to perform the same function again if Clinton decides to enlarge the agreement. More detailed coverage of Clinton's new foreign policy team can be found in Alison Mitchell, "Albright to head State Department; Republican in top defense job," The New York Times, December 6, 1996, Al and B6-B8. Charlene Barshefsky was confirmed as USTR on March 5, 1997. There was some concern in Congress that, having represented the Vancouver-based Canadian Forest Industry Council and the Canadian government at various stages in the softwood lumber dispute she could be in a conflict of interest position. For more on the controversy surrounding Barshefsky see, "Barshefsky status under lobbying bill unclear despite nomination," Inside U.S. Trade 14 (51), December 20, 1996, 6; Alissa J. Rubin, "Senate Confirms Barshefsky, Praises Tough Negotiating, Congressional Quarterly, March 8, 1997, 582. On Clinton's policy toward Cuba see, David Rieff, "From Exiles to Immigrants," Foreign Affairs 74 (4), July/August 1995, 76-89 and "Cuba Refrozen," Foreign Affairs 75 (4), July/August 1996, 62-76.

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V Canada and Asia Pacific

THE HONOURABLE RAYMOND CHAN

On October 26, 1993, a day after my election as a Member of Parliament, I was hurried aboard a red-eye flight to Ottawa at the request of the newly elected Prime Minister Jean Chretien. For the first time in its history, the government of Canada would have a Secretary of State for Asia Pacific. The Prime Minister was determined to fulfill Liberal campaign commitments to increase exports and get more of Canada's small- and medium-sized enterprises (SMEs) trading, particularly in the rapidly expanding markets of the Asia Pacific. It has been a busy, but exciting, three years and as Secretary of State for Asia Pacific I have had to wear many hats. I have been something of a travelling salesman in the region promoting Canadian expertise and opening doors for our business people. I have travelled across Canada, alerting Canadians to the vast opportunities in the region and demonstrating the importance of these economies to our future prosperity. For other foreign policy objectives, such as the

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protection of our security, the projection of our values and culture abroad, and respect for human rights, democracy and the rule of law, the Asia Pacific region is a major theatre in which these objectives will be played out. I want to take a brief look at the region today, highlight opportunities for Canadians, and review Canada's progress at community-building in the Asia Pacific. Since we are hosting the Asia Pacific Economic Cooperation (APEC) leaders' meeting, I also want to look at some of the challenges ahead and outline the significant initiatives our government is planning for 1997 to increase awareness of the region in Canada. After a hiatus following the creation of the Colombo Plan and our participation in the Korean War in the early 1950s, Canada moved to strengthen its ties with Asia Pacific in the early 1970s. This was prompted mainly by a widely held view that normalization with China was long overdue and the recognition of the emerging power of Japan's economy. The acceleration of Asian economic growth in the 1980s and its projection on to the world stage through shifting exchange rates and financial flows have further highlighted Asia's importance to Canadian and global prosperity. More recently, economic reforms and trade liberalization in such countries as China and India, as well as Pakistan and Vietnam, have promised new opportunities for exporters and offered the prospect that growth will broaden beyond the Northeast Asian seaboard. Even countries such as the Philippines and Bangladesh, so long beset with severe economic difficulties, are displaying modest but promising signs of vigour. As we approach what many are calling the "Pacific Century," strengthening Canada's relationships with Asian economies becomes crucial to our economic security. By 2020 seven of the world's largest economies, and 60 percent of world trade, will originate in the Asia Pacific region. The region continues to grow at double digit rates, outpacing North America and Europe in gross domestic product and exports. By 2005, growth in the Asia Pacific market will represent an additional $20 billion in exports for Canada and the creation of over 280,000 new jobs. If Canada does not increase its capacity to participate in this booming market, it risks losing out. A recent study of Canadian trade noted that the job intensity of our trade with Asia Pacific—142 person-years per $10 million of exports—is much higher than for any other region of the world.

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Early in the next century, Asia will be home to the world's largest and most affluent middle class, with additional discretionary spending power for value-added consumer items, education and training, and cultural industries. The region represents the world's fastest growing market for outbound tourism; its share in arrivals in Canada has more than doubled to over one-third of all incoming passengers in just the past decade. Asia also provides four of Canada's top five sources of business immigrants. Canadians are doing well in the region, better than ever before.1 After a one-year increase of 19 percent in 1994, our 1995 exports to the Asia Pacific rose by another 30 percent to $26.5 billion, over half of our non-U.S. trade. There have also been some remarkable success stories in bilateral trade with several Asia Pacific economies. Last year, our sales to Japan rose by a remarkable 24 percent to over $12 billion in 1995; in Hong Kong our sales increased by 50 percent; in Malaysia, by 96 percent; in India, by 64 percent (almost two-thirds in one year); and in Pakistan by over 100 percent. While trade figures for the first half of 1996 were down compared to 1995, exports are still more than 10 percent higher than they were during the same period in 1994 and significantly higher than in 1993— a more realistic comparison and one that confirms the upward trend. The decline in trade from 1995 is attributed mainly to a decrease in exports to Japan, where demand for construction materials and other goods returned to normal levels. In finance, Canada continues to perform solidly in attracting Japanese portfolio investment, with consistently over $50 billion in holdings despite some retrenchment in other capital markets. It is also increasingly attractive to investors in Hong Kong and to traders in Singapore and Australia. In the past decade, the stock of direct investment in Canada from Asia Pacific sources has increased almost fourfold, to $11.8 billion in 1995. The key reasons for the limitations on Canada's economic success have been a lack of awareness at home of the opportunities in the region, and a lack of a visible Canadian political and business presence in Asia Pacific. That is why our government has stepped in to exercise political leadership and made the Asia Pacific a priority for ministerial travel and, of course, Team Canada trade missions. The Prime Minister's Team Canada trade missions have now visited eight countries in the Asia Pacific region and helped companies to generate 439 new commercial agreements worth over $19 billion. Team

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Canada missions and other ministerial travel have heightened our prestige in Asia and demonstrated to Asian leaders that Canada is committed to the region for the long term. A very successful Team Canada visit to South Korea, the Philippines, and Thailand took place in January 1997. Despite the recent success of Team Canada we still have much work to do. For too many in Canada Asian markets appear difficult to penetrate. The language, the society and the business culture are very different from those of North America. As a result, awareness of Canada is limited in the region. We risk losing some of our traditional areas of strength, such as agri-food, at a time when the chances of making sales in value-added form are better than ever. Markets are opening, incomes rising, and consumer tastes changing. Asian economies will spend $200 billion a year for the next ten years on infrastructure projects to accommodate this population shift, but time and again there are too few Canadian firms bidding on these projects. The Canadian private sector is well suited to succeed in Asia. Over the past several years, every Canadian government minister, every trade mission, every corporate leader returning from Asia Pacific has returned with a similar message: when it comes to infrastructure, Canadian areas of expertise match up perfectly with the sectors Asian economies are trying to build up, such as energy, telecommunications and transportation (including aerospace and mass transit). For example, the Montreal-based companies Bombardier and SNC Lavalin both signed contracts recently to develop rail transit systems in Malaysia. Developing economies, such as China, India, Pakistan, the Philippines, and Vietnam, will require massive upgrading of their capacity to produce energy in order to sustain economic expansion. China purchased two Canadian Candu nuclear reactors in October 1994 and Calgary-based Interprovincial Pipeline International signed a contract for pipeline development during Team Canada's 1996 visit to Indonesia. Asian business and government leaders are impressed by what they have seen of Canadian expertise. There is great potential for many more sales, and many more Canadian jobs; we must be better salespeople and do a better job of promoting our technology. Where we perhaps need to improve the most is in our participation in booming research and development activity in the region, particularly in Japan. Our efforts have been hampered by negative or misleading perceptions on both sides. In the region, Canada is seen as being a resource producer, without state of the art research

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capacity outside a narrow range of sectors. Perceptions of the region in Canada are typically that Asia Pacific nations live on borrowed technology, and are incapable of original innovation. Not only are these views misleading in themselves, but the attitudes they produce place Canada at the margins of Asia's booming service economy and disengage us from its industrial and technological development. Again, many of Asia's developing economies provide our greatest opportunities. The countries, with a well-established economic base, can be ideal partners for Canadian SMEs in research and development. Cooperation in this area could further contribute to the development of the resource base. Some countries, such as Vietnam, are eager to obtain higher levels of technology and support. Canadian SMEs can provide technology through partnerships with local firms and gain entry into these markets. Look for significant efforts in 1997 to remedy these mistaken perceptions. As I will explain later in more detail, the Vancouver Asia Pacific Economic Cooperation leaders' meeting and the designation of 1997 as Canada's Year of Asia Pacific will change forever the way Canadians see Asia, and the way Asians see Canada. ASIA PACIFIC: SOCIETIES IN TRANSITION Asia Pacific economies are undergoing the most profound social, economic, and political transformation in their history. When we look at Asian cities today, we see the home of Asia's rising middle class. As incomes rise, they are turning more to considerations of sustainable economic development and a higher quality of life, as well as improved human rights and political accountability. Cars, power plants, and industrial development, the fruits of Asia's economic miracle, have also turned many cities into major health hazards. The World Health Organization has reported that after 20 years of rapid economic growth, some of Asia's biggest cities, from Bombay to Bangkok and Jakarta to Beijing, are endangering human health. The report also noted that five of the world's seven worst cities for air quality are in Asia. Sustainable development in Asia is critical to global environmental security and clearly must also be an integral part of our policy towards Asia. It is estimated that by the year 2000 there will be 30 Asian cities with populations of more than five million people. By the year 2015,17 of the world's 27 mega-cities will be in Asia. The impact of these changes on the world's ecosystem will be substantial.

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Already governments in Asia, as well as the private sector, are beginning to address the problem. In fact, they have no choice. It is estimated that the cost of lost productivity and health care due to environmental problems is $2 to $3 billion per year in Thailand alone, and double that figure in South Korea. For Canadians there are lessons to be learned and experiences to share. Last year, I had the pleasure of attending GLOBE 96, an international trade fair on environmental technologies, in Vancouver. Canadian environmental firms are some of the best in the world. Our government is working hard to help them position themselves in Asia, which could become one of the most important markets for environmental technologies and mass transit systems. The trend towards urbanization is also accelerating the rate at which decision-making is trickling down from central governments to local authorities and sometimes away from government altogether. Central governments are still prominent in Asian economies, but not to the extent they once were. More and more decisions are decentralized downwards to local authorities and outwards to the business sector. Today in China projects valued at $30 million or less do not need central government approval and, therefore, development of contacts with regional leaders gives Canadian firms an important competitive edge. Canada has to focus on our ability to identify and cultivate these new decision makers. That is why, in May 1996,1 led more than 40 Canadian companies on the first Canadian trade mission to focus on China's emerging regional markets. While we visited the traditional centres of Shanghai and Beijing, we also travelled to Dalian, Jinan, Fuzhou and Shenzhen. These vibrant cities are key to China's rapidly developing regions in the north and south. Economic growth rates are surpassing the national average. Per capita income is advancing by about 10 percent a year. Ambitious modernization projects in real estate, transportation and the environment are underway or in various planning stages. What became increasingly evident as the visit progressed was that if we do not pay attention to the various regional markets in Asia Pacific, we will exclude ourselves from important opportunities. The urban middle class is also leading the drive for greater political freedom and the development of civil society. In Asia today, as rural migrants move to cities, they are exposed to ideas about democratic society. The increasing importance of cities is likely to be the driving force behind political development in Asia. Ruling parties, most of

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which are rural in origin, will have to adjust to the massive changes resulting from urbanization. Cities tend to side with the opposition. Tokyo, Taipei, Bangkok, and Jakarta are all less supportive of the national government than is the country as a whole. I am proud that respect for human rights is an essential part of our government's foreign policy. The promotion of human rights is the main reason for which I became involved in politics. For the past three years the Liberal government has worked to promote human rights in Asia Pacific, while at the same time clearly enunciating that our relationship cannot be reduced to a simplified trade versus human rights argument. We believe systematic and wide-ranging contact will lead to calls within Asian societies, such as China, for greater openness and freedom. Certainly, there is evidence that increased political flexibility, as well as social mobility, is a by-product of economic liberalization, and governments that have opened their markets to international trade are more sensitive to the views and reactions of other countries.2 An inward-looking society that depends little on trade and international investment is less likely to respond to concerns raised by foreigners. Trade reduces isolationism. Trade also expands the rule of law and generates the economic growth required to sustain social change and development. Take the example of China; there have been 18 years of economic reform which have gradually resulted in a much more open society. Today many cities are on the path towards economic liberalization. Coupled with economic reform, human rights reforms have produced positive long-term trends. Decentralization of economic control is itself an important step towards political reform. I disagree with those critics who say political reform is non-existent, as I believe that economic reform represents an early manifestation of political reform. Moreover, the decentralization of economic control to the regions and to local governments has lessened the reliance of people on the central government and empowered them through a greater degree of economic choice and free will. There is now much less state control over career choice, there is greater freedom of travel, and food rationing has been largely eliminated. Nevertheless, the treatment of dissidents and political activists remains harsh. It is imperative that we as a government use every opportunity to continue raising the matter of human rights with authoritarian governments. As a matter of policy, our government will continue to

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work with other countries to ensure that Asian economies respect their obligations under the United Nations Declaration of Human Rights. The Canadian government also expresses its concerns directly to Asian leaders. Indeed, wherever appropriate, I have pointed out to Chinese officials that they are in violation of international standards on human rights, that China lacks the rule of law, and that this has hindered China's economic development and contributed to the corruption of government officials. A great deal of our development assistance throughout Asia has focused on contributing Canadian expertise in institution-building. As institutions develop within a country a better respect for the rule of law will emerge. We have to recognize that many countries do not have the benefit, as we do in Canada, of policy-making institutions that allow them to measure the impact of policies and predict results. The Canadian International Development Agency (CIDA) has supported The Centre for Criminal Law Reform in China to assist the process of judicial reform and the training of senior judges. CIDA has supported the Chartered Accountants Association of Canada in its cooperation with Chinese accountant groups, leading to the development of accounting institutions in China. Statistics Canada is working with its Chinese counterpart to improve statistics gathering and analysis. In Thailand and in other member countries of Association of Southeast Asian Nations (ASEAN), CIDA supports a number of economic and sectoral institutes. In Vietnam, Canada is supporting the development of a language training capability to facilitate Vietnam's participation in ASEAN. A similar level of support for institutional development is reflected in CIDA's programs throughout Asia. Indeed, the greatest contribution Canada can make to improved human rights, good governance and the rule of law in Asia is to continue to assist these developing economies to develop and strengthen their own institutions and to fully participate in international institutional frameworks. COMMUNITY BUILDING IN ASIA PACIFIC In the 1990s, the demise of the cold war brought uncertainty in the region about ways of preserving peace. As ideological and strategic confrontation has abated and the U.S. security umbrella has thinned, issues of arms control, maritime boundaries, human rights, ethnic/ religious conflict, disorderly migration and environmental tension have found themselves without models and without agencies for

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resolution. Serious causes for concern remain and other potential sources of dispute and conflict also exist. Despite the outstanding growth of the past two decades, large disparities remain and a majority of the world's poor live in the Asia Pacific region. Until recently, the region's affairs have been largely directed by bilateral relationships, particularly those between the U.S. and Japan and China and between Japan and the nations of Southeast Asia. Within Asia Pacific there are few mechanisms available that provide the region with a capacity to deal with issues in a collective manner. Perhaps the most encouraging development in recent years is the growing willingness to address security issues and potential problems multilaterally, using institutions such as the ASEAN ministerial consultative process in which Canada is a "dialogue partner." But the process of multilateral consultation among regional governments is still in the early stages and much more work needs to be done before the region will develop practical mechanisms for resolving conflict and disagreement. Promoting the multilateral approach to problem-solving in preference to bilateral (or even unilateral) solutions has been a major theme of Canada's foreign policy efforts in the Asia Pacific. This explains why Canada has played a leading role in the emergence of the APEC forum.3 APEC promotes economic dialogue where none had existed and operates working groups in numerous crucial sectors of the regional economy. For Canada APEC provides, as does the ASEAN Regional Forum on the security side,4 an essential complement to our bilateral business development and market access efforts. APEC helps to position us in a region that, through rapidly growing intraregional trade and investment patterns, is becoming profoundly more integrated in economic terms. Indeed, driven by rapid economic growth, the share of Asia Pacific countries' global trade that was "intraregional" increased fourfold from 1955-1990. Fifty-two percent of Asian trade is now intraregional. This trend has accelerated since the mid-1980s with the rising value of the yen and associated dramatic expansion of foreign direct investment within region. APEC also offers a critical offset to the tendency toward exclusionary bilateral and/or subregional arrangements that threaten to derail our trade and investment drives. These arrangements include not only bilateralism in dispute settlement but also the possibility of subregional groupings potentially prejudicial to Canada's role in the region and, more practically, to our export interests.

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Politically, our active participation in new institutions such as APEC for trade and economic issues and the ASEAN Post-Ministerial Conference, and more recently the ASEAN Regional Forum, for security matters, have helped to enhance an otherwise weak Canadian profile in the region and have to reverse the perception of Canada as a part-time player, rather easily distracted by domestic concerns and by other international preoccupations. Now we are expanding ties in both official and non-official channels—"track one and track two"— while at the same time expanding our efforts to share expertise in such areas as peacekeeping, arms control and search and rescue and widening our naval presence in the region. APEC leaders' meetings, which began in 1993, have accelerated the pace of trade liberalization within APEC. In fact, at the 1994 meeting in Bogor, Indonesia, APEC economies agreed to achieve free and open trade and investment in the region, by 2010 for developed economies and by 2020 for those which are developing. In 1997, Canada will be steering APEC's progress towards this goal as we host the APEC leaders' meeting in Vancouver in November. In addition to the leaders' meeting, Canada will host five APEC ministerial meetings and three senior officials meetings. These will include the Ministers of: Transport (Victoria); Energy (Edmonton); Environment (Toronto); Small Business (Ottawa); and Foreign Affairs and Trade (Vancouver). Senior officials meetings, which will take place in Victoria, Quebec City and St. John's, will focus on areas of economic and technical cooperation, such as harmonizing customs procedures. These efforts will be focused on making exporting to other APEC economies easier for small- and medium-sized business. The Canadian government will also promote sustainable development as a significant new focus of APEC activity. We will encourage the private sector to participate in all levels of APEC. We have already established an APEC Business Advisory Council, which will meet with the APEC leaders in Vancouver. Throughout the year, each of the ministerial meetings will have a parallel business event, such as a trade show or a business conference, where Canadian business leaders can network with Asian contacts. Approximately 75-80 different ministers and hundreds of senior business people will visit Canada for these meetings. We will work with provinces and municipalities to showcase Canadian expertise in areas such as environmental technologies, transportation, telecommunications, and energy.

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Another key sector where Canada has shown great improvement is the attendance of Asian students at our universities and colleges.5 We still face stiff competition, particularly from Australia, which has been marketing its educational services much more aggressively for several years now. However, with the opening of a network of Canadian Education Centres (CECs) across the region in Jakarta, Kuala Lumpur, Hong Kong, Seoul, Taipei, New Delhi, Bangkok and Singapore, Canadian education now enjoys a much higher profile in the region. The centres are integrated into diplomatic missions as a result of a partnership between the government and the Asia Pacific Foundation of Canada. Eventually, Canadian universities and colleges will pay the full cost of running the centres through subscriptions and other fees for service. The CECs have helped to dramatically improve Canada's performance and demonstrate that when Canadians work together to effectively market our goods and services they can succeed. Take the example of South Korea: before the CEC opened in Seoul in 1993 only 640 South Korean students went to Canada; in 1995, more than 5400 applied. CANADA'S YEAR OF ASIA PACIFIC: A TURNING POINT Our efforts to succeed in the Pacific century must begin at home. Our challenge in the region is as much a domestic effort as it is an international one. In defining goals for future approaches to Asia Pacific, we must recognize the diversity of the region, the scope of changes that are occurring, and the depth of inter-relationships within the framework of the issues we encounter. Japan is different from China. Business practices can vary widely between Indonesia, India and Taiwan. Market access issues are different in Australia from what they are in Korea. Hosting the APEC leaders' meeting in Vancouver in November 1997 presents the perfect opportunity to increase our understanding of the region and to promote permanent partnerships between Canadians and the various peoples of Asia Pacific. The idea for Canada's Year of Asia Pacific (CYAP) came out of a series of one-onone meetings and discussion groups with companies, cultural groups, journalists, academics and government officials with an interest in Asia Pacific. Participants expressed an overwhelming desire to take advantage of our APEC year to demythologize the countries of Asia Pacific and demonstrate to Canadians that our youth, our

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entrepreneurs and our corporations have the ability to compete and win in these markets. There will be three categories of events during the Year: • Events built around the APEC related ministerial conferences, and senior officials' meetings. Staggered throughout the Year, in cities across Canada, these events will include the ministers of environment, transport, energy, small-and medium-sized business, and foreign affairs and trade. At these meetings there will be a broad outreach program emphasizing the participation of youth and small business. • Canada's Year of Asia Pacific special events. These will feature a wide range of cultural and youth activities, including Asia Connects, a major conference for Asian and Canadian youth in Winnipeg that will be linked to twelve other cities by teleconferencing. • Perennial events that include Asia Pacific as a theme during 1997. These may include anything, from the Alliance of Manufacturers and Exporters Canada adding an Asia Pacific focus to their annual general meeting to a children's book festival focusing on stories by Asians and Asian Canadians. Canada's Year of Asia Pacific will be a truly national effort spanning the entire calendar year. It will include all APEC economies, as well as other countries of South Asia and Indochina that currently are not APEC members. The Year began with the January 1997 Team Canada Trade Mission to Asia and will end with the APEC leaders' meeting in November. The three types of events I just described will focus on four areas, all of them complementing one another: • Trade promotion, especially for small- and medium-sized exporters CYAP is about jobs and growth for Canadians. Our objective is to have more Canadian firms, especially among SMEs from traditional and non-traditional sectors, participating in these markets. • Cultural activities To reach as wide an audience as possible, CYAP will include a broadly based cultural program. In all, we project that over two million Canadians will attend the live performances, exhibitions, forums, and other activities. Millions more will be reached through the mass media. Canada's cultural industries will find

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new audiences at home and develop the basis for future crosscultural exchanges in a region that includes the most exciting markets for cultural industries in the world today. Youth For the Year of Asia Pacific to have a lasting impact the region must capture the imagination of our youth. CYAP's youth component is another plank in the government's jobs strategy that will help young people prepare for the global marketplace of tomorrow. CYAP activities are intended to increase awareness of Asia Pacific and show young people how the shift in global economic power to the region will affect their future. With conferences on topics ranging from education to regional security, CYAP will demonstrate to Canadians that cooperation on human rights and the development of a civil society are key areas in our relations with Asia and that security issues in the region are of critical importance to world peace. The culture component will also provide an excellent opportunity to engage, and indeed, showcase Canada's large and growing Asian Canadian population. Every region of the Asia Pacific is well represented in Canada's cultural mosaic. In all, there are almost 2 million Canadians of Asia Pacific descent in Canada. Asian Canadians add empathy to our relations with countries in the region. They have, moreover, the social, economic, and political ties to the Asia Pacific that are so important to commerce. New arrivals from Asia also inject an entrepreneurial spirit into our economy and add new ways of doing business. Business people from the Asia Pacific are more inclined than Canadians to quickly seize upon promising opportunities in the region. The language, cultural skills and market knowledge that many Asian Canadians bring to Canada can provide the critical link in securing export contracts. That is why we need CYAP to raise public awareness of our Asian Canadian advantage and to start profiting from it. A report issued recently by the Asia Pacific Foundation entitled, "Asian Canadians: Canada's Hidden Advantage,"6 found that most Asian Canadians still conduct business primarily within their own ethnic community and their country of origin. By raising the profile of Asian Canadians in Canada and abroad, CYAP will help to make them an integral part of Team Canada's efforts in Asia. Our success in this ambitious project will be judged in the months and years following 1997 not only by lists of trade figures and contract

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signings but also by the lasting legacy of Canadian involvement in the region—the partnerships, the exchanges and perhaps, an increase in the quality and the amount of coverage Asia Pacific receives in the Canadian media. We must fill in the gaps, wherever they exist. We need an effort that is fully commensurate with the rising status of the region in international affairs and our capacity as a nation, the effort that our competitors are willing to make. We have to prepare not only for the Asia Pacific of today but also for the Asia Pacific of 2010 that will contain seven of the world's ten largest economies. In the end, we believe our government's focus on Asia, and particularly Canada's Year of Asia Pacific, will demonstrate to our partners and friends in Asia Pacific the seriousness of our commitment to the region. And perhaps more importantly, it will show Canadians that our future economic success will very much depend on our ability to be a full participant in the "Pacific Century." NOTES 1 2 3 4 5 6

For a critical look at Canada's economic ties to Asia see Chapter 14 in this volume by Bijit Bora. For a discussion of human rights in Asia see Chapter 8 by Errol Mendes. For further discussion of Canada's role in APEC see Karen Minden, Chapter 6, Andrew Cooper, Chapter 7 and Bijit Bora, Chapter 14. See Chapter 11 by Amitav Acharya. For a critical discussion of Canada-Asia educational linkages see Chapter 10 by Martin Rudner. "Canada's Hidden Advantage: Asian Canadians," Summary of Round Table Consultations, sponsored by the Asia Pacific Foundation of Canada, November, 1994.

VI Canada's Role in APEC

KAREN MINDEN, NICOLE GALLANT AND PAUL IRWIN

... forget all the Apec hype about 2020. Don't even try to wade through the 18 different Individual Action Plans. And when the region's ministers appear on your TV screen droning on about the value of the Apec "process," feel free to click to the football game.1

Reading bureaucratic documents is not riveting at the best of times. Asia Pacific Economic Cooperation (APEC) documents are particularly bland, full of platitudinous phrases and devoid of anything related to action. The Canadian press response to the most recent Leaders' Meeting in Subic Bay—low profile coverage of Filipina nuns protesting that APEC is anti-Gospel and anti-poor; Prime Minister Chretien focused on the Rwandan refugee crisis—reflected the sense that APEC is not a very exciting business story. The Far Eastern Economic Review ran a series of editorials ranging from explanations of "Why Apec doesn't matter"2 to "The spectacular failure of the Asia

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Pacific Economic Cooperation forum to agree to any substantive implementation of its free-trade-by-2020 agenda."3 Beneath the lacklustre Summit and the banality of APEC documents there has, however, been a flurry of activity which is changing the way governments in the region do business with each other. As the same editorial in the Review argued, "a goodly share of Asia's most dynamic companies are forced to go into battle with one hand tied behind their backs, in the form of domestic rules designed for a time when borders were physical and competitors more easily identified and kept at bay."4 Officials in technical departments, who previously would never have been involved in international relations, are now working on multilateral committees to transform those domestic rules as part of the trade liberalization and facilitation agenda of APEC. This chapter examines Canada's goals in the APEC forum, and its role as a North American member of this trans-Pacific organization. Canada's role in APEC is considered in terms of the institution, its agenda, and the way in which the APEC forum intersects with Canadian domestic interests. In conclusion, the chapter discusses the challenges for Canada's year as Chair of APEC. CANADA'S GOALS IN APEC

Canada is a Group of 7 (G7) economy, with the fourth largest gross national product (GNP) in the APEC community. In APEC, Canada is more than a bit player. It has no history of imperialist aggression in Asia, and therefore does not carry the heavy historical baggage of Japan or the U.S. It can boast world-class capability in infrastructure building, including scientific and technical capability, and it is an important access point to North American markets and technology. As an export-based economy dependent on U.S. markets, Canada can only gain by diversifying its trade and investment partnerships. As a country burdened by enormous debt, it has no choice but to seek economic growth. In his commentary on the Second Report of the APEC Eminent Persons Group (EPG), John MacDonald, Canada's representative to the EPG in 1994-5, concluded that "our national attitude of Canadian inferiority, a view that is only found in Canada," is the primary impediment to a stronger role in the region.5 In 1997, Canada is poised to take a leadership position in APEC, and government has developed a coordinated strategy for doing so. While APEC is the focus of this chapter, it should be understood in the context of a "set of strategies," as described by Len Edwards, Canada's

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senior official to APEC, which includes regional security, bilateral relationships and cultural and personal ties that are mutually reinforcing.6 The Canadian government has identified three key objectives for Canada in its international relations: the promotion of prosperity and employment; the protection of our security within a stable global framework; and the projection of Canadian values and culture.7 In the Asia Pacific, through its involvement in multilateral fora such as APEC, Canada is in a position to work towards the achievement of its national objectives while simultaneously promoting progress and stability within the larger trading community. Still, some ask, how did Canada become involved in APEC? And once at the table, does Canada pursue strategic policies to influence the APEC agenda in accordance with our economic interests? Initially, Canada was not included in Australia's proposal for a regional dialogue on freer trade. Senior ministers in Ottawa lobbied intensely, targeting their Japanese counterparts, and implemented public relations and image building initiatives such as Pacific 2000.8 Japan responded by lobbying the conceivers of what would become known as APEC to include Canada (and also the United States) in the forum.9 Pursuing inclusion in the APEC forum was consistent with Canada's record of multilateralism. And while ASEAN and other East Asian economies voiced concern regarding Canada's participation in both APEC and the Free Trade Agreement (FTA) with the United States—later the North American Free Trade Agreement (NAFTA)— belonging to both organizations further reinforces Canada's commitment to an open, rules-based international trading system. Participating in both regional and multilateral trading organizations reflects Canadian efforts to adapt to changing international circumstances and still serve our own domestic objectives of promoting and sustaining economic growth by securing a stable international trading system. It is therefore not surprising that the Canadian government is an active promoter of APEC, and hopes to see the institution strengthened and well-managed, thus assuring greater predictability in the Asia Pacific environment than would be the case if it were left to the interplay of American, Japanese and, increasingly, Chinese preoccupations. Multilateralism has been a cornerstone of Canadian foreign policy since the postwar period of the 1950s.10 "All countries are not created equal, and one way to help level the playing field is to have rules of the game." Such was the explanation offered by the Right Honourable

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Joe Clark, former Prime Minister of Canada, and Secretary of State for External Affairs.11 This is why Canada is fundamentally committed to multilateralism, and multilateral institutions, which provide "safety in numbers" for "small" countries like Canada.12 With multilateralism as the foreign policy of choice, and Canada seated at the table of this Pacific Rim forum, there are six strategic goals which this country pursues, implicitly or explicitly, in APEC: 1. APEC can serve as a "trailbreaker" for progress in the World Trade Organization (WTO). 2. It is used as an accessory to strengthen a broad range of multilateral conventions, agreements and institutions. 3. It is a useful venue in which to explore politically sensitive, controversial issues. 4. APEC meetings, especially the Ministerial and Leaders' meetings, provide an opportunity to pursue bilateral relations. 5. The "soft side" of the APEC agenda—economic and technical cooperation—works to strengthen the environment in which trade takes place. 6. Participation in APEC serves the domestic political and economic agenda. Canadian emphasis in APEC has been on assuring its consistency with the WTO, and its potential to accelerate the pace of global trade liberalization.13 Canada proposed at the 1995 Osaka Summit that APEC trade ministers prepare joint initiatives for presentation to the WTO Ministerial Review Conferences, beginning in 1996.14 The goal was to "export APEC's momentum to the global trading system."15 While this may be somewhat premature, it echoes the recommendation of the Second APEC EPG Report, which stresses the need for APEC to work with the WTO in a supporting role.16 Canadian policy makers have recognized the practical arguments for APEC's role in the trade arena as a "shock absorber" between the different cultural values, political and negotiating styles and foreign policy objectives of East and West.17 Roy MacLaren, Canada's Trade Minister in 1995, noted that the WTO's focus on "formal negotiation leading to binding disciplines is often at variance with the Asian preference for informal deliberation and consensus building .... APEC might provide a path forward in areas for which the World Trade Organization ... is still ill-equipped."18 In addition to providing a culturally acceptable venue for working out trade issues, APEC encourages developing economies, so it has

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been argued, to join the multilateral trading system.19 It offers countries like China an understanding of WTO disciplines, and appreciation of the ways and means of compromise in the interests of more open trade and investment.20 While the WTO and the General Agreement on Tariffs and Trade (GATT) are based on Western concepts of multilateralism, including "adversarial adjudication ... reform and redemption," Asian approaches to dispute resolution involve "harmony and consensus ... and the virtues of continuity."21 The APEC forum provides a valuable opportunity to develop collective problem solving and a sense of community.22 Besides providing support for the WTO APEC is, in Canada's view, a valuable ally in the process of reinforcing a host of multilateral agreements. In the area of product standards, Canada links Individual Action Plan (IAP) commitments to its adherence to the disciplines of the International Standards Organization, the Codex Alimentarius Commission, and the International Electrotechnical Commission, to name a few. In the environment domain, APEC commitments support Canadian endorsement of the Montreal Protocol, the Basel Convention and the Convention on International Trade in Endangered Species (CITES). In the sphere of bilateral and multilateral trading agreements, the IAP commitments underscore Canadian commitments to NAFTA, the Canada-U.S. ETA, GATT, the General Agreement on Trade in Services (GATS), the Organization for Economic Cooperation and Development (OECD), and bilateral Foreign Investment Preferential Agreements (FIPAs).23 In spite of the fact that most APEC members, including Canada, resist the inclusion of regional security in the APEC agenda at this stage, its geopolitical role cannot be denied.24 The link between economics and security is well-recognized,25 and APEC serves in particular to engage the U.S. in Asia, to bring peer pressure to bear in bilateral disputes, and to enhance the formation of personal networks among leaders for the pursuit of personal diplomacy. In this sense it can be used to work out relationships and build consensus prior to entering binding agreements in other fora. Further, in a geopolitical sense, it is a valuable tool for confidence building in a region which is fraught with existing and potential conflicts. Like other economic fora, APEC gives leaders an opportunity to discuss political issues which impinge on economic relations. Unlike other fora, it permits the leaders to discuss such issues in a voluntary, non-binding and non-confrontational dialogue process.

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Improved bilateral relations are the subsidiary results of APEC's regional meetings. As Canadian Senator Jack Austin states, "Any forum that brings our Prime Minister and China's President together on an annual basis is obviously of immense value."26 The sideline bilateral meetings at the recent Manila meetings of APEC Leaders were reported to be a substantial feature, with U. S. President Clinton and Chinese President Jiang Zemin discussing U.S.-China trade issues, and leaders from Japan and Korea engaging in personal diplomacy on contentious questions.27 According to Charles Morrison of the EastWest Center in Hawaii the political factors override the economic factors in assessments of the outcome of APEC meetings.28 From Canada's perspective, now that entry has been obtained to a multilateral forum which includes the big and small players in the region, the opportunity to advance bilateral diplomacy is a derived benefit.29 APEC's economic and technical cooperation agenda addresses the basic infrastructure for global trade: the legal framework; human resources (including workforce issues); civil society; hard infrastructure such as transportation and telecommunications; and the myriad issues which affect the sustainability of economic growth and development—population, health, food, energy, and the natural environment. In this regard, the analytical work of the Economic Committee and the APEC Study Centres provides assessments of the impact of growth, and the options for sustainable development, as a context in which to develop trade and investment regimes. The development cooperation agenda is regarded as the glue for cementing an Asia Pacific community, a concept which seems to have great appeal to Asian leaders. Rather than the cold, hard rules-bound trade organizations which characterize Western institutions, the voluntary, consensus-based nature of APEC allows the gradual development of personal relationships. Extended to international relations, APEC as a "community builder" injects Asian particularism into EastWest relations. From a domestic political perspective, Canadian goals in APEC involve efforts to gain broad-based support for government's role in APEC, from the business community, the academic community and a broad range of non-governmental organizations (NGOs). It attempts to address the national unity challenge, particularly through Canada's Year of Asia Pacific (CYAP) plans, which attempt to parcel out geographically the benefits of Canada's role as chair of APEC during 1997. And there is a concerted, if sometimes haphazard effort, to involve

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and educate Canadian youth through student involvement in APECrelated activities. Economically, our profile in APEC is viewed as enabling us to showcase our competitive advantages: environmental technology, infrastructure expertise and natural resource management, among others. It also provides an opportunity to liberalize trade and investment regimes for the obvious purposes of improving access and attracting investment; and building on Canadian capabilities for managing a modern trading system, it promotes trade through Working Group (WG) projects such as the simplification of customs procedures, facilitation of business travel and development of regional cooperation on trade dispute resolution. Since there is a federal election in June 1997, a focus on Liberal government accomplishments in promoting international trade, such as the success of the Team Canada trade missions to Asia Pacific, will likely be a prominent characteristic of the Canada-APEC agenda.30 A most interesting outcome of Canadian involvement in the APEC process has been the dramatically increased interest in and awareness of the Asia Pacific on the part of Canadians in general and, in particular, of government departments not accustomed to dealing with Asia. The enhanced Asia Pacific focus of the bureaucracy is perhaps one of the most serendipitous results of APEC's complex network of functional Working Groups and committees. The development of personal networks, mutual awareness, and perhaps even understanding, should not be underestimated as an effective lubricant of regional trade and political relations. CANADA'S ROLE IN APEC Taking the strategic goals previously listed as a framework, we now consider the specific objectives pursued by Canada when it seeks to influence the development and the agenda of APEC as an institution and to increase its usefulness for the advancement of Canada's interests, both regional and domestic. An overview of Canadian participation in APEC committees and working groups will be found in the Appendix. Building the Institution Membership One of APEC's primary purposes is to serve as a strong multilateral forum in support of the multilateral trading regime. In the first

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instance, this can be achieved by ensuring the trans-Pacific nature of APEC membership. This not only strengthens Canada's credentials as a Pacific player, but also engages the members of NAFTA—the United States and Mexico—in the Pacific Rim. A recent development at the Subic Bay Leaders' Meeting is a case in point: ministers from the ASEAN Free Trade Area (AFTA) and NAFTA met in Manila to discuss potential linkages. Although the membership moratorium was lifted at the Manila ministers meeting in 1996, the current conservative approach to membership has resulted in a de facto, if not de jure, extension of the membership moratorium. Canada has been relieved of the pressure of dealing with new admissions to the APEC forum. It has been agreed that current members need more time to strengthen their relationships and therefore the next year will be used for defining membership criteria which will be announced at the Vancouver Summit in 1997, with the decision on who is admitted deferred to the Malaysia Summit in 1998, and actual admission to be granted at the New Zealand Summit in 1999.31 Rules-based trade Although Canada's regional profile in APEC is identified more with the "soft" aspects of the agenda—environment, human resource development, gender issues—there is substantial commitment to the "rules of the game" component of APEC consensus building. In particular, Canada has promoted the development of dispute mediation as a key aspect of the work program of the APEC Committee on Trade and Investment (CTI). In 1997 Canada will chair the Standards and Conformance Working Group. Commitment to the facilitation aspects of trade, expressed through the effort to build supporting mechanisms which will bring about a convergence of trade and investment practices, is an important feature of Canadian involvement in APEC. Building the "well-managed" institution Although Canadians have been accused of an obsession with process in APEC committees, they have been motivated, in part, by a desire to ensure that they inherit a well-managed and healthy institution in 1997. APEC is a new organization, and includes members who passionately reject institutionalization (Malaysia) and members who would welcome the establishment of legally binding economic integration (the United States).

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On balance, there is substantial resistance to developing an OECD-like infrastructure to support the research and coordination needs of APEC.32 Given that APEC has a small Secretariat in Singapore, staffed by persons seconded from member governments and operating on a minimal budget of about U.S.$4 million annually, there is no regular, professional support for the myriad projects which the forum undertakes. This in turn heightens the challenge of ensuring continuity and consistency as there is always someone new to the game. It may be added that increased demand from APEC members for the assessment of programs and follow-up activities has shed light on the increasing inadequacies of the minimalist APEC structure. Canada's leadership of APEC falls between that of two countries which are not committed to the institutional strengthening of APEC: the Philippines (1996) and Malaysia (1998). It is therefore imperative, from the Canadian viewpoint, to inject regular management practices into a relatively informal organization with a modest Secretariat, in order to ensure continued effectiveness and a return on Canadian investment in APEC fora.33 The management of APEC Working Groups and committees has been ad hoc, with ill-defined rules of rotation of leadership, reporting structures and Secretariat support. Industry Canada undertook a survey of WG management practices in 1996 with a view to identifying areas for improvement.34 Canada offered, and was subsequently invited, to establish and chair the Task Force on Management Issues in 1996. This group has addressed practices and procedures for budget allocation, administration, evaluation and reporting of WG projects, overall coordination of activities, the role of the Secretariat, communications, non-member participation in WGs, and other related issues.35 The Task Force has recommended that, instead of developing the required research and analysis capability in the Secretariat (as in the OECD), the APEC approach will be to coordinate with APEC Study Centres, the Pacific Economic Cooperation Council (PECC), and persons doing contract research, to support the research and analysis requirements of APEC WGs and committees.36 Revamping the management structure of APEC to maximize the limited resources available to the institution will continue to be a Canadian priority in 1997.

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Influencing the Agenda Of the "three pillars" of APEC's agenda, economic and technical cooperation ("ecotech") has to date been ranked behind trade facilitation, which is in turn secondary to trade liberalization. Trade liberalization is the aspect of APEC which captures most media attention and the commanding interest of the United States. But it is also the element of APEC discussions which has the longest time horizon. On the other hand, the relatively rapid achievements of technical working groups in addressing the business of doing business has been impressive. Reducing transaction costs has been cited by private sector representatives themselves as a greater contribution to reducing trade barriers than the tariff reductions of trade liberalization.37 The challenge for APEC will be to translate their achievements into tangible results which can be easily and effectively communicated the to business community. Likewise, the "ecotech" agenda contributes to building an intricately linked and increasingly convergent community. There is no agreement on the role of the economic and technical cooperation or the development cooperation agenda among APEC members. Developing economies stress the latter agenda as being critically important to the equitable adoption of trade liberalization policies. The APEC work program has been particularly strong in the area of human resource development (HRD), and there is considerable activity in working groups on infrastructure building, telecommunications, development of small and medium enterprises (SMEs), and environmental protection and sustainable development policies. The rationale for these emphases is that they contribute to stronger regional links, and a regional support system for increased trade and investment. There has also been much sharing of "best practices" among the APEC members, further contributing to the building and maintenance of regional networks. The various aspects of Canada's approach to the APEC agenda are discussed below. Environment: The Canadian Hallmark Canadian officials in APEC are sensitive to the need to delink trade and environment in this forum. The developing economies view environmental regulations as a potential non-tariff barrier to trade, and resent the imposition of such regimes by the industrialized economies, which achieved growth without the constraints of environmental concerns or thoughts of sustainable development. The

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Economic Committee (EC), chaired by Canada, leads the efforts to develop the environment/sustainable development aspect of the APEC agenda as one of the so-called cross-cutting themes of APEC. A highlight of 1997 will be the advancement of the "FEEEP" agenda: "The impact of growth in Population and Economic Activity on Food, Energy and the Environment in APEC."38 In the context of economic and technical cooperation, the environment, nonrenewable resources and social cohesion are viewed as assets. This approach to the measurement and assessment of wealth over and above that measured by GNP is very much in line with the approach the Asian Development Bank is taking in its thirtieth anniversary year.39 Under the leadership of John Curtis, the Canadian chair of the EC, the FEEEP agenda will be developed early in 1997 and featured as a key aspect of Canada's year as Chair of APEC. Ecotech issues Two aspects of economic and technical cooperation which have been particularly championed by Canadian officials are gender issues and HRD. The former (with the unfortunate slogan of "Engendering APEC") has been successful in injecting consideration of women's issues into the Industrial Science and Technology Working Group (ISTWG), and more broadly through a conference of the Women Senior Leaders' Network (WSLN) from APEC economies. The gender and technology initiative is based on a paper drafted by Canadian analysts for discussion by the Science and Technology Ministers at their "Open Ideas Forum."40 The idea was to augment the technical aspects of ISTWG with a discussion of gender as an important workforce issue in knowledge-based economies. Canadian objectives for the WSLN Conference were to promote and support the integration of a gender perspective into APEC policies, programs and projects, and also to organize a group of experts to assist in identifying gender concerns in APEC. The Network Conference, a joint initiative of CIDA and the Philippines government, was a high profile event which represented the views of women in positions of leadership from fifteen APEC economies. The WSLN proposed that APEC Leaders recognize gender as a cross-cutting concern in APEC and integrate the gender perspective into the discussions in the various APEC fora. The meeting issued a "Call to Action" which will be followed up by Canada in 1997 and Malaysia in 1998.

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Trade and investment liberalization A review of Canada's Individual Action Plan for 1996 indicates the priorities in the area of trade and investment liberalization. The key features are transparency, comparability, and compatibility with GATT/WTO. Priorities for tariff reduction beyond the Uruguay Round are, as one might expect, information technology and trade in natural resources. The IAP states a particular interest in oilseeds, non-ferrous metals, wood and fish, and promotes an APEC joint initiative to the WTO Ministerial Meeting in Singapore. It is through the trade facilitation activities of APEC that trade liberalization will receive the greatest boost. The IAP highlights standards and conformance (priority products are condoms and medical gloves), customs procedures, intellectual property rights, competition policy, deregulation, rules of origin, mobility of business people, and implementation of Uruguay Round outcomes. Trade facilitation Technical cooperation and assistance in the procedural and policy aspects of trade and investment are seen as key deliverable items by the Committee on Trade and Investment. The Osaka Action Agenda listed fifteen issue areas, fourteen of which are the responsibility of the CTI for the development of Collective Action Plans (CAPs) by all the member economies. The established areas of collaboration include customs procedures, standards and conformance, and government procurement. The CTI also identifies a "new wave" of issues such as competition policy, deregulation and intellectual property.41 Canadian interests Broad-based domestic support NGOs It is important to Canadian political leaders that their participation in APEC is supported by a broad range of NGOs. Private sector NGOs are viewed as serving in a supporting role—for example, PECC and business organizations like the Pacific Basin Economic Council (PBEC). Other NGOs with a social orientation challenge APEC to broaden its agenda to represent the interests of labour, environmentalists, women and aboriginal groups and to support human rights advocacy in general.

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Essentially, the main criticism leveled at APEC by socially oriented NGOs on the international scene is that the vision of this forum is myopic and excludes the negative social and environmental impacts of free trade and economic development. The major part of the discourse includes issues such as the environment, labour rights and labour standards, human rights, and gender issues. Such issues are often formulated in the context of North and South, Developed and Developing. There are those who wish to influence the APEC agenda, and those who condemn the organization outright. Critics claim that APEC is undemocratic and unaccountable and operates behind closed doors, and that the neoliberal framework that it represents has high human and ecological costs.42 NGO participation in APEC Working Groups/Committees is relatively uncommon, except in the case of the HRD Working Group, where NGOs design and implement many of the programs. The U.S. delegation to the July 1996 APEC Ministerial Meeting on Sustainable Development included a representative of an environmental NGO, as did the delegations from the Philippines and Canada.43 In 1996, the United States formed a U.S. NGO Working Group to participate in the NGO forum organized by the Manila People's Action Forum. A key issue for the Manila People's Action Forum is how NGOs can best coordinate their efforts to maximize their influence on the APEC agenda. In view of the Canadian government's commitment to open foreign policy formulation, NGOs are likely to play a significant role during Canada's year as chair of APEC. Issues which are not mainstream in the current APEC agenda—labour rights and standards, human rights, women's rights and environmental concerns—will likely have a higher profile during 1997. The National Roundtable on Environment and the Economy has already played a role in linking environment with the APEC agenda in Canada, and plans to organize a meeting of comparable organizations in the Asia Pacific.44 The International Centre for Human Rights and Democratic Development (ICHRDD) is involved in the planning of an NGO forum to coincide with the APEC Leader's meeting in Vancouver. In keeping with its mandate the ICHRDD plays an advocacy and educational role both in Canada and abroad. It has been active in global campaigns promoting women's rights and the integration of workers' rights provisions into international trade agreements. Its recommendations to APEC include: broadening APEC's consultation process beyond the business and university communities to include NGOs and trade

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unions; addressing labour rights violations through the work of the Human Resources Development Working Group; ensuring that key United Nations (UN) human rights covenants and International Labor Organization (ILO) conventions are ratified by all APEC members; and urging business, including transnational companies, to adopt codes of conduct with respect to social policies.45 Business Although primarily an exclusive government forum APEC has sought advice and support from regional business leaders, first through the Eminent Persons Group and the Pacific Business Forum, and subsequently through the recently established APEC Business Advisory Committee (ABAC), which replaces the former two groups. In addition to the formal mechanism of ABAC, Working Groups and Ministerial Meetings have increasingly opened part of their proceedings to the business community. While few WGs or Ministerials include business participation, their meetings increasingly offer a parallel forum for the local business community. Transportation, Telecommunications and Human Resource Development are the three WGs which have taken the lead in including private sector participation. In addition, business has been included in some of the activities of the Ad Hoc Policy Group on Small and Medium Enterprises, the Investment Experts Group, and a dialogue on APEC Cooperation in Infrastructure. Canadian policy stresses the opening up of the APEC process to business, outside the limits of the formal ABAC mechanism, to include "grassroots" business participation.46 DFAIT has been concerned with justifying APEC to the business community in Canada by explaining the benefits of Canadian participation. By methods ranging from the publication of an APEC brochure in 1995, "Opening Doors for Canadian Business," to the creation of an information line in Ottawa and a worldwide website on APEC, government has attempted to explain the link between APEC and tangible benefits for business. Canadian officials have taken the lead in encouraging private sector representation as a rule rather than an exception in the APEC Working Groups.47 Although DFAIT officials have been keen to involve Canadian business in support of the Vancouver Summit government has been slow to respond. Appointments to ABAC were delayed to the point of embarrassment for the Canadian participants and their government colleagues. A Prime Minister's Advisory Council on APEC has been off

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to a slow start, and it is not certain how successful it will be in securing corporate sponsorship to host the plethora of meetings across the country in 1997, and the events surrounding the Vancouver Summit. At the same time, the Prime Minister's commitment to Team Canada has been strong, and the first official business event of 1997 was a government-led trade mission to Asia. In terms of the APEC agenda, Canada is pressing for "deliverables" which will facilitate business and meet the recommendations of the first ABAC report, "APEC means Business: Building Prosperity for our Community." The highlights of the report include easing cross-border flows for business travellers, service industries, and patents and trademarks; promoting APEC's non-binding investment principles; and addressing the needs of SMEs in the global market. Academics Outreach to the academic community is achieved through several channels: the APEC Study Centre, the Pacific Economic Cooperation Council, and CYAP Youth Programs, including a major Youth Conference planned for 1997. The APEC Study Centre was established in November 1994, with the designation of a new Research & Analysis division at the Asia Pacific Foundation of Canada. Unlike a number of other APEC member economies, which set up competitions or designated one or more universities as APEC Study Centres, Canada decided to designate a national organization as a hub of APEC research for the research community. The APEC Study Centre in Canada promotes collaborative research, and links business, government and academic experts in the analysis of APEC-related issues. With limited funding the Study Centre has been able to mount a modest research agenda and bring together national study teams from across the country. In 1997, Canada chairs the APEC Study Centre Consortium, and hosts the Consortium's annual conference. PECC's academic network has frequently been called on to support APEC's research and analysis needs. The Committee on Trade and Investment, for example, worked with PECC's Trade Policy Forum to publish a survey of trade impediments in APEC. Industryrelated fora and a workshop on competition policy are other examples of PECC-APEC collaboration. The Canadian Secretariat for PECC coordinates Canadian academic participation in these activities.

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Efforts are underway to augment the shrinking financial resources for Canadian research on Asia Pacific. At a time when Canada is increasingly involved in Asia Pacific, federal and provincial support for all university research has shrunk to unprecedented low levels. Government research capability is limited by budget cuts, and collaborative research is hampered by the fierce competition for limited funds. However, there may be an expansion of research driven by the requirements of APEC Working Groups and Committees and the growing involvement of Canadian business in Asian markets. Canadian officials involved in APEC Working Groups have been charged with involving Canadian youth in their planned activities throughout 1997. A number of Ministerials and WG meetings have developed a youth component, including graduate students in business, with policy forums planned to augment the official government meetings. The APEC Study Centre Consortium meeting includes a graduate student forum as part of the annual conference in May 1997. The highlight of APEC-related activities focused on students is the Youth Conference, a national event in Winnipeg in May, with several hundred students from across the country participating in crosscultural events, a model APEC Summit, and other activities shared with their peers from the other APEC member economies. The rationale for a "youth" component in Canada's Asia Pacific policy was underscored by the recommendations of a consultative meeting held by the Asia Pacific Foundation in February 1996. There was strong consensus that a priority was to engage a broad spectrum of Canadians in the acquisition of skills and knowledge required to understand the region. It was pointed out that a critical aspect of building an Asia Pacific community—the overarching theme for Canada's Year of Asia Pacific and leadership of the APEC forum—is the advancement of Canadians' knowledge of the cultures, economies and societies of the Asia Pacific region. The legacy of CYAP, through its youth programs, will in part be the education of the next generation of business, government and academic leaders in Canada. CHALLENGES DURING CANADA'S YEAR OF ASIA PACIFIC The Canadian government is concerned that participation in APEC should be a worthwhile investment. Canadian participation spans a range of government departments and is coordinated by the Department of Foreign Affairs and International Trade (DFAIT). Canadian input into the APEC process has been not only substantive,

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but organizational, with an emphasis on maintaining an effective forum with a complex set of working groups and committees, and a modest Secretariat with limited bureaucratic structure. The critique of Canada's APEC strategy centres on its identification with the so-called "second tier agenda," the "soft issues" of APEC such as economic and technical cooperation, rather than the "hard" trade liberalization agenda. Some argue that the trade liberalization goals of APEC could easily be derailed by this inappropriate concentration on non-trade issues.48 Moreover, the diffuse and sweeping agenda may make it difficult to deliver tangible benefits to the business community, who might then lose interest, along with national leaders who may not continue to be engaged in a forum which is concerned with process and intangible benefits rather than breakthroughs in trade deregulation. A significant challenge, therefore, will be to develop assessment protocols for the Individual Action Plans that are consistent with APEC's voluntary, consensus-based, non-binding modus operandi. Canadian expertise in data analysis and comparability will be stretched to the limit in the process of evaluating action plan outcomes across a variety of economic, trade and legal systems. To make the assessment process even more difficult, the nature of lAPs is such that they are notional at best, non-binding, and amorphous. Assessing a moving target will add to the challenge. Although the addition of new members loomed as a challenge for 1997, the decision in Manila to extend, in effect, the membership moratorium until 1998 will allow Canada to focus instead on the critical task of defining membership criteria.49 However, whatever criteria for future membership are selected, the reality is that decisions will be based largely on political considerations. A more challenging issue will be creating the momentum which will carry through to 1998 as Canada passes the torch to a less than enthusiastic successor host, Malaysia. There will likely be a substantial amount of bilateral activity between Canada and Malaysia, as there was between Canada and the Philippines, in order to enhance Malaysia's capacity to take over the Chair of APEC in 1998. Within Canada, government must sell the value of APEC to Canadians. Meetings and events across the country will heighten Canadian awareness and knowledge of Asia Pacific. A more difficult task will be to improve Canada's trade and investment profile in the

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region. Canadian business is preoccupied with American and transAtlantic markets, which are more familiar and accessible than those in Asia. Canadians require more knowledge about Asia Pacific, and unless media coverage improves significantly they will remain woefully uninformed about political and economic developments in the region. The lack of coverage of the APEC Summit in Manila, in spite of the fact that there Canada assumed the role of Chair for 1997, suggests that capturing Canadians' attention and focusing it on the Pacific Rim will be a difficult task. In spite of the compelling data about Asia's economic dynamism and its future as an economic centre of global trade, the tremendous potential for Canadian products and services in Asian markets, and the imperative to diversify our trade and investment and lessen our overdependence on American markets, Canadians may still choose to click to the football game, even with APEC on their doorstep. National unity has been presented as one of the themes of Canada's Year of Asia Pacific, and plans to hold APEC meetings leading up to the Vancouver summit have focused on national participation in hosting these events. Ministerials, Senior Officials' Meetings and Working Group meetings have been liberally distributed to cities across the country. The message to the provinces, particularly Quebec, is that APEC is a key to lucrative Asia Pacific markets, and federal government efforts to open these markets for Canadian business is of benefit to all the provinces. In addition, Canada's image as a united country strengthens its hand in business negotiations in Asia.50 Moreover, government is attempting to involve Canadians across the country in hosting the myriad Asian delegations who will be visiting Canada in 1997. Canada's goals for APEC, as it moves towards the Vancouver Ministerial and Leaders' Meetings in November 1997, are to promote greater focus, discipline, orientation towards results and transparency. The themes of economic and technical cooperation are closely linked with trade goals: "developing human capital; fostering safe, efficient capital markets; strengthening economic infrastructure; harnessing technologies of the future; promoting environmentally sustainable growth; and encouraging the growth of SMEs."51 The ever-expanding APEC agenda threatens to overwhelm the viability of the organization, and the Chair of the Senior Officials' Meeting, Leonard Edwards, called for an emphasis on quality over quantity in 1997. Canada's leadership of APEC intends to impose priority setting and management discipline

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on the development of the APEC agenda. This will be a move in the direction recommended by those who criticize Canada's encouragement, to date, of the second tier development cooperation agenda in preference to the first tier of trade liberalization issues. Although it can be argued that the "Asian Way" is an imprecise and not very useful concept, it must be acknowledged that there are fundamental differences between Asian and Western institutional and organizational behaviour. The relevant differences in the APEC context are the Asian preference (in spite of intra-Asian cultural differences) for "dialogue and confidence building in contrast to the Western preference for formal plans or clear cut formula."52 While Canada is known in APEC for its fixation on process, both seasoned and neophyte officials seem to be amenable to compromise and patience in dealing with their Asian counterparts; some of this may be in part due to DFAIT's provision of cross-cultural training to those representing Canada in the APEC WGs. Canadian officials have found ways to establish rules and procedures through functional working groups and the consensus model that may well achieve some of the same results as legally binding agreements, while minimizing the clash of cultures. Indeed, since its inception, Canada has maintained that APEC remain a consultative rather than a negotiating forum. Even if APEC does not achieve its stated goals of trade liberalization, or transforms itself into a regional trading bloc, or becomes nothing more than a "talk shop," Canada cannot afford not to be at the table. It will be up to the majority of APEC members to determine the future vitality of the organization.

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Appendix OVERVIEW OF CANADIAN PARTICIPATION IN APEC

Canadian goals and priorities have been discussed in the preceding sections of this chapter. What follows is a brief overview of Canada's active participation in most of the ongoing work program of APEC, including Ministerial and Senior Officials' meetings, as well as APEC's policy committees and sectoral working groups. Canada chairs the Economic Committee, which advises APEC Senior Officials on key trends affecting growth in the region. The Economic Committee prepares reports on overarching policy issues for APEC, including an annual Economic Outlook, and a report on the state of economic and technical cooperation in APEC, a new initiative proposed by Canada. Canada is also taking the lead on a number of Economic Committee projects, including Economic Instruments for Environmental Protection, a Foreign Direct Investment Database, and an Information Society initiative co-chaired with Korea. Within APEC's other policy group, the Committee on Trade and Investment, Canada has taken the lead in developing APEC approaches to dispute mediation. Canada chaired a meeting of dispute mediation experts in April 1996, which defined the scope of APEC's work on dispute mediation services. Canada is vice-chair of the Subcommittee on Customs Procedures (SCCP), which is developing an action plan for harmonizing and simplifying customs procedures, including an implementation plan and a technical assistance framework. Canada has also hosted a meeting of the CTI's Subcommittee on Standards and Conformance (SCSC) and chairs that Subcommittee's Working Group on Good Manufacturing Practices (GMPs) for Active Pharmaceutical Ingredients (API). In keeping with its characteristic interest in APEC management issues, Canada convenes the CTI's work on Information Gathering and Analysis, tasked with reviewing the various strands of research and information gathering within APEC, as well as the information sources available from other fora such as PECC, the WTO, the United Nations Conference on Trade and Development (UNCTAD) and the APEC Study Centres. Canada participates in all of the ten sectoral WGs of APEC. In January 1996 it assumed the role of lead shepherd of the HRD Working Group. Through its four networks the HRD Working Group

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seeks to address regional training needs from the perspective of business management, economic development management, industrial training and education in the kindergarten to grade 12 sector. Canada is particularly interested in enhancing the WG's role in labour market analysis and data collection, which provides an opportunity to demonstrate this country's considerable expertise in this area. Until April 1996, Canada was also the lead shepherd of APEC's Marine Resources Conservation Working Group. With a mandate to enhance the conservation and management of ecologically and economically important marine resources, Canada steered several of the Working Group's projects on sustainable coastal zone management and management of red tides. In addition to its leadership roles, Canada participates actively in APEC's other working groups. Highlights of its participation are outlined below. Canada will assume the role of lead shepherd of the Telecommunications Working Group in 1997. It has taken the lead in the Working Group's initiative in building an Asia Pacific Information Infrastructure, hosting a joint APEC-OECD-PECC Symposium on this subject in February 1995. It prepared the final report on the survey and analysis of the development of information infrastructure in APEC economies. The Telecommunications WG has been particularly successful in attracting the interest and participation of the private sector. Canadian companies such as Nortel, Newbridge, Teleglobe, Unitel, Lanser Technology, the EDI Council of Canada, Videotron International and Feuneil Inc. have participated in its meetings. Also within the Telecommunication WG Canada is leading a major initiative on distance learning, which will launch a pilot project to encourage the APEC economies to work cooperatively and to provide APEC with practical experience on which to base deliberations on further distance learning activities. Canada will be hosting the 12th Industrial Science and Technology Working Group meeting in March 1997 in Vancouver, including an industry seminar on high-tech services. It has also drafted a paper on women in science and technology, which has been recommended to the ISTWG as an emerging policy issue for ministerial discussion. Canada hosted the 9th Meeting of the Transportation Working Group in April 1996 in Vancouver, involving 170 delegates from all 18 member economies. The meeting coincided with a seminar on aviation safety and security, an area in which Canada has taken a leading

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role, working to compile by 1997 a survey and analysis of aviation safety and security problems in the APEC region. At the Working Group meeting, Transport Minister David Anderson offered to host the 2nd Transportation Ministers' Meeting in British Columbia in mid-1997. Within the framework of the Regional Energy Cooperation Working Group Canada will be hosting the next meeting of APEC Energy Ministers in Edmonton in August 1997. APEC has struck three ad hoc experts' groups to give advice on a number of cross-cutting issues within the organization, most notably small and medium enterprises and the environment. SMEs have been identified by Canada as a sector of emphasis for APEC in 1997, and the federal government will host an SME Ministerial Meeting in September 1997. This will provide an organizational structure and support for Canada in facilitating the active participation of SMEs in the APEC Action Agenda. The SME Policy Group also approved two Canadiansponsored project proposals, namely stage three of the "SME Statistical Indicators" project and a feasibility study to create a pool of information on SME performance. Environment and sustainable development has also emerged as a key cross-cutting issue related to the Canadian objective of strengthening economic and technical cooperation in APEC. Having hosted the first meeting of APEC ministers responsible for the environment, Canada has been effective in identifying a number of specific areas for potential cooperation on environment within APEC, including sustainable cities and urban management, clean technologies and clean production methods, and sustainability of the marine environment. Following an APEC Sustainable Development Ministerial held in the Philippines in July 1996, Canada is planning to host a meeting of APEC ministers responsible for the environment in April 1997. In addition to active participation in the committees and working groups, Canada has supported the strengthening of APEC's institutional framework. In early 1996 it proposed a special meeting of senior officials to focus on management issues and the future of APEC and lead a task force to review the role of the APEC Secretariat. Through the Budget and Administration Committee (BAG), Canada has been active in seeking to regularize APEC's financial and program processes, including revisions to tendering procedures, greater management control over APEC projects, improvements to publication policies, and the resolution of the current impasse on the formula for member contributions.

MINDEN, GALLANT & IRWIN

ORGANIZATION FOR APEC PARTICIPATION Overall coordination for Canadian involvement in APEC rests with the Department of Foreign Affairs and International Trade. Leonard Edwards, the Department's Assistant Deputy Minister for Economic and Trade Policy acts as Canada's APEC Senior Official and oversees all aspects of Canada's role as Chair of APEC in 1997. An APEC Bureau within the Department will manage the substantive aspects of Canada's involvement in the APEC process. DFAIT officials also serve as the main Canadian representatives on APEC's two policy committees, the Economic Committee and the Committee on Trade and Investment. Canadian participation in the activities of the APEC Working Groups is coordinated by the respective federal line departments involved in a specific sector, most often through their international policy branches. Industry Canada is particularly active in APEC, with different units within the department coordinating involvement in the Telecommunications, Tourism, and Industrial Science and Technology Working Groups, as well as APEC's work on investment and SMEs. Canadian participation in other Working Groups is coordinated by Human Resources Development Canada (HRD Working Group), Natural Resources Canada (Energy Working Group), Fisheries and Oceans (Fisheries and Marine Resource Conservation Working Groups), Statistics Canada (Trade and Investment Data Working Group) and DFAIT (Trade Promotion Working Group). Environment Canada and Agriculture and Agrifood Canada are involved in APEC's work on environment and agricultural technology, respectively. The Canadian International Development Agency has been actively involved in supporting the development of the HRD Working Group's network structure. With HRDC now assuming the role of lead shepherd, CIDA has reoriented its involvement in APEC, providing support to "ecotech" initiatives across the APEC Working Group structure, in fulfillment of CIDA's objectives. To ensure that Canadian input into the APEC work program is coordinated and complementary an Interdepartmental Coordination Group, chaired by DFAIT, meets regularly to review the work of the senior officials' meetings and to share information on their activities. A range of other advisory and coordinating bodies have been struck to take care of various aspects of Canada's responsibilities as Chair of APEC and Host of the next Economic Leaders' Meeting in November 1997. These include a Prime Minister's Council on Asia Pacific, a B.C.

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Coordinating Group (principally focused on the November events), and Committees for APEC Operations, Communications, Special Events, Fundraising/Sponsorship, and Business Programs/Events. Canada's role as APEC Chair in 1997 is an integral part of the federal government's overall plan to promote 1997 as Canada's Year of Asia Pacific. A schedule of APEC Ministerial and Working Group meetings taking place throughout the country will be augmented by other Asia Pacific-related events for business, youth, NGOs and academics. NOTES The authors wish to thank Yuen Pau Woo and Angela Chotka at the Asia Pacific Foundation for their assistance in the research, as well as John Curtis, Ron Macintosh and Richard Stubbs for their helpful criticism of the draft manuscript. Any errors in fact remain the responsibility of the authors. 1 2 3 4 5 6 7 8 9

10 11 12 13

"Just Do It; Why APEC doesn't matter," Far Eastern Economic Review (PEER), October 31, 1996, Website: http://www.feer.com. "Just Do It." PEER, October 31, 1996. "Mr. Shimura's Revolution," PEER, November 21, 1996, 7. "Mr. Shimura's Revolution," PEER, November 21, 1996. John S. MacDonald, "The Second Report of the APEC Eminent Persons Group," Vancouver, 1995, 7. Leonard Edwards, "Canada and APEC," CANCAPS Bulletin, no. 8, March 1996, 13-14. Canada, Department of Foreign Affairs and International Trade, Canada in the World: Government Statement. (Ottawa: Canada Communications Group, 1995), i, 10. A.F. Cooper, R.A. Higgot, K.R. Nossal, Relocating Middle Powers: Australia and Canada in a Changing World Order, (Vancouver: UBC Press 1993), 106. For a more detailed discussion of membership, see John Kirton's "Institutional Arrangements in the New Asia: Possibilities for Canada in APEC," in Asia Pacific Papers (Vancouver: Asia Pacific Foundation of Canada, forthcoming 1997). Ron Macintosh, "Canada and APEC: The Multilateral Approach to Asia Pacific," notes for remarks, Kingston, Ontario, February 11, 1995. Joe Clark, Speech at Makerere University 75th Anniversary Dinner, Winnipeg, Manitoba, November 16, 1996. Denis Stairs, "Choosing Multilateralism: Canada's Experience After World War II," CANCAPS Papiers, no. 4, July 1994 3-4. Andre Ouellet, "Opening remarks, APEC Seventh Ministerial Meeting," Osaka, Japan, November 16, 1995; Department of Foreign Affairs and International Trade (DFAIT), "Osaka Summit Media Briefing Kit," Ottawa, November 1995; APEC, Achieving the APEC Vision: Free and Open Trade

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14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

32 33 34

in the Asia Pacific, Second Report of the APEC Eminent Persons Group (Singapore: APEC Secretariat, 1994), 5,7, and passim. DFAJT Homepage: http://www.dfait-maeci.gc.ca, "Discussion Paper: Canada and APEC," 1995. DFAIT Homepage: http://www.dfait-maeci.gc.ca, "Discussion Paper ... APEC, Achieving the APEC Vision ... 3. Macintosh, "Canada and APEC MacLaren, Roy, "Notes for remarks to Asia Pacific Heads of Mission Meeting," Vancouver, British Columbia, January 12, 1995. Edwards, "Canada and APEC," 13. Edwards, "Canada and APEC," 13. Macintosh, "Canada and APEC ... " Macintosh, "Canada and APEC ... " "Summary: Canada's Individual Action Plan," Manila Action Plan for APEC (MAPA 1996) Vol. II, November 1996. Website: http://www.apecsec.org.sg/mapa/vol2/volume2.html. James M. Lambert, "Institution Building in the Pacific—Canada in APEC," unpublished paper 1996; Leonard Edwards, "Canada and APEC," 13-14. See Job et al, "Security, Stability and Business in Asia Pacific," Issues for APEC no 3, (Vancouver: APEC Study Centre in Canada, 1996), 4, 5, 26-7. The Globe and Mail, Report On Business Magazine, November 1996, 41, "Canada's year of Asia Pacific: Defining our role as a Pacific nation." Dan Slater, "Lights, Camera, Action Plans," Rim Focus Feature, (Seattle: APEC Study Center University of Washington) November 23, 1996. CNA, "APEC Spotlight Shifts to Diplomacy in the Wings," in Taiwan Headline News (Hong Kong), November 21, 1996. See Ernie Keenes, "The Myth of Multilateralism: Exception, Exemption and Bilateralism in Canadian International Economic Relations." International Journal, Vol. L, no. 4 Autumn 1995, 755-78. Peter C. Newman, "How a Vancouver summit fits Liberal strategies," Maclean's, July 29, 1996, 32. APEC Ministerial Meeting, Manila: Joint Statement, No. 88, November 23, 1996. For further discussion of membership issues, see Nicole Gallant and Richard Stubbs, "APEC Dilemmas: Institution-Building Around the Pacific Rim," Pacific Affairs, (1997, forthcoming), and Woo Yuen Pau et al., "APEC's Relations with Non-Members: The Many Faces of Open Regionalism," Conference on Unresolved Issues of APEC, Korea Institute for Economic Policy, Seoul, October 29, 1996. For a more detailed discussion see Sylvia Ostry, "APEC and Regime Creation in the Asia Pacific: The OECD Model?" in Charles Morrison, ed., APEC and Regime Creation in the Asia Pacific (Stanford University Press, forthcoming). John Klassen, "Prospects for Changing APEC in 1997," University of Toronto, Centre for International Studies, Conference on "The Future of APEC," Toronto, May 1996. APEC, "Management Practices within APEC Groups," Draft 3, Ottawa, May 9, 1996.

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35 APEC Task Force on Management Issues, Official Chairman's Report, Manila, October 19, 1996. 36 APEC Task Force ... , 3 (e), Recommendation 11. 37 Klassen, "Prospects ..." 38 APEC Economic Committee, "Interim Report on The Impact of Growth in Population and Economic Activity on Food, Energy, and the Environment in APEC." Draft, October 1, 1996. 39 Asian Development Bank, "A Study of Emerging Asia," Draft Outline, Manila, November 1996. 40 APEC, "Gender, and Science and Technology in Knowledge-Based Economies: Some Considerations for APEC," Draft Discussion Paper for the llth ISTWG to Prepare the APEC Science and Technology (S&T) Ministerial Meeting "Open Ideas Forum," Seoul, November, 1996. 41 Chair, APEC Committee on Trade and Investment, "APEC Collective Actions/Progress as at July 1, 1996," Wellington, New Zealand, July 2, 1996, 1. 42 "Statement of the Philippine People's Organization-NGO Summit on APEC: Hidden Costs of Free Trade," Focus on APEC, no.6 (2/3), August 7, 1996. 43 Excerpts from a report by Lyuba Zarsky on "APEC Ministerial Meeting on Sustainable Development," Manila, July 9-12, 1996, Focus on APEC, no.6 (2/3), August 7, 1996. 44 National Roundtable on the Environment and Economy, Asia Pacific Foundation of Canada, and Philippines Institute for Sustainable Development, Proceedings of conference on "The Environment and the Economy in APEC: Realizing Convergence," March 25-26, 1996, Vancouver, British Columbia, 47. 45 International Centre for Human Rights and Democratic Development, "APEC: The Challenge of Human Rights," on website: http://www.ichrdd.ca/PublicationsE/Publications-Menu.html, November 22, 1996. 46 Klassen, "Prospects ..." 47 Canada was the first APEC economy to include private sector representatives in an APEC Working Group; Trade Promotion Working Group at Seoul, in 1990. 48 Sylvia Ostry, "APEC: Challenges and Capabilities," speech to APEC Senior Officials Meeting, Victoria, British Columbia, January 25, 1997, 9, 10, 11, passim. 49 See discussion on membership criteria earlier in this chapter. 50 Quebec Premier Lucien Bouchard's participation in the Team Canada mission demonstrates that Quebec is convinced of the promise of Asia Pacific markets; however, the role of his domestic political agenda in the mission is open to question. 51 APEC, "Summary Conclusions of the First Senior Officials' Meeting, for the Ninth APEC Ministerial Meeting," Victoria, Canada, January 27-28, 1997, 5 item 20. 52 Susan L. Shirk and Christopher P. Twomey, (eds.), Power and Prosperity: Economics and Security Linkages in Asia Pacific (New Jersey: Transaction Publishers, Rutgers University, 1996), 42-43.

VII Australia and Canada View the Asia Pacific

ANDREW F. COOPER

LJ p to the 1990s, both Australia and Canada were on the edge of, but not quite in, the Asia Pacific region. Australia has long suffered from a sense of loneliness in terms of its physical location. Through the 1950s and 1960s it remained the "misplaced continent"1—caught between its extant geographical presence in Asia-Pacific and its traditional close sociocultural, economic, and defence connections with Britain and the United States. Even as Australian trade and investment ties with the Asia-Pacific region became increasingly significant through the 1970s and into the 1980s, the relationship was marked by an embedded psychological or cognitive distance. Only through a deliberate effort towards the relocation of Australia in terms of policies and politics, designed and directed by the Hawke/Keating Australian Labour Party (ALP) governments (1983-1996), did Australia make a decisive move to become engaged with the region in a comprehensive fashion. With

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the recent accession to power of the Liberal/National coalition (March 1996), however, the firmness of this relocation process will be tested once again. Australia's level of comfort with its transition from a "wanderer" to a fully accepted member of the Asia Pacific region has remained unsteady. While in many ways the rationale of accentuated integration and the dynamics of the drive towards it seem so powerful as to make this movement irreversible, some tensions have resurfaced, surrounding the question about where Australia fits into the international system. Canada's situation has been very different. Instead of being lonely, Canada has been torn by the dilemma of closeness with the United States, its major partner in the spheres of security, culture and economics. While the benefits of the multi-faceted set of ties ingrained in the Canada-U.S. relationship are evident, at the informal and the institutionalized levels, the problems associated with this preeminent relationship have stemmed from its exclusiveness. In order to mitigate the hazards of closeness, therefore, Canada has repeatedly played up the notion of counterweights to the pull of the United States. While leaving some room for Asia-Pacific, this drive for diversification focused in the past mainly on multilateralism and the notion of an Atlantic Community. Under both the Mulroney and the Chretien governments, however, a new importance has been attached to Canada's place within Asia Pacific. Indeed, the Chretien government has accorded an elevated status to the region by naming 1997 as Canada's Year of Asia Pacific. Although ascendant, nonetheless, the Asia Pacific region has not yet been raised to a privileged position in Canadian official discourse and action. This dimension of regionalism has to compete and co-exist with a number of other components in Canadian foreign policy. In their approaches to the Asia Pacific the two countries act as foils to each other. Whereas the Australian Asia-Pacific agenda has been advanced in the 1980s and 1990s through giant and often jarring leaps, the Canadian strategy has been implemented through a series of more limited and somewhat distracted steps. The risks attached to the Australian approach are far more acute; yet because of its concentrated focus Australia has developed some forms of comparative advantage in the region over Canada. The Canadian approach, on the other hand, is far less exposed to forms of domestic controversy. Nevertheless, there remains a need for Canada to solidify its

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credentials as a nation of the Asia Pacific through a sustained process of regional engagement. A GIANT LEAP FOR AUSTRALIA

In seeking towards a better understanding of the distinctive Australian and Canadian patterns of behaviour account must be taken of their international and their domestic attributes. The explanation of the momentum towards Australian engagement in Asia Pacific requires comprehension of the context of crisis that initially precipitated this sea change in attitude. The 1980s proved to be a traumatic time for Australia. Far from confirming its place as a lucky country the view that took hold was that its luck had run out. Although the more pessimistic scenarios of decline, depicting Australia as the "Poor Nation of the Pacific" were clearly overblown and misleading,2 a sober assessment of the country's ability to manage change in the international economic system dominated the political and economic agenda. As Higgott has persuasively argued, Australia had become increasingly marginalized both in relation to the global economy and to the Asia-Pacific region.3 The 1980s jolted Australia out of its set ways of doing things. With the diminution of its performance in the international economy, accompanied by a number of interconnected shocks including a severe recession, a collapse in the terms of trade, a record balance of payments deficit, a massive foreign debt and a real fall of national income, came a process of reevaluation concerning the Australian model of development. The strategy of "protection all round" came under increasingly critical domestic scrutiny. Internationally, a concerted attempt was made to expand Australia's options. The ALP government, from the start of its mandate, did much to impart to the country's foreign policy a more regional focus. As one prominent Labour cabinet minister stated in the mid-1980s: "The challenge to Australia in the next 25 years will be to tie itself as closely as possible to the opportunities associated with the rapid growth of Asia's new industrializing countries."4 In changing its mind in this manner, political leadership in Australia, combined with political organization, demonstrated a capacity for embracing an alternative vision in terms of domestic goals. True, the set of policies implemented by Australian officialdom were not sufficiently coherent to entirely justify the claim that they represented a "grand design."5 Moreover, the reformist campaign

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continued to face some serious resistance. Still, it may be accurately said that the Hawke/Keating government had some considerable impact in implementing its purposeful agenda. In the words of Paul Kelly, a prominent Australian journalist: "The story of the 1980s is the attempt to remake the Australian political tradition. This decade saw the collapse of the ideas which Australia had embraced nearly a century before and which had shaped the condition of its people ... the central message shining through the convulsions was the obsolescence of the old order and the promotion of new political ideas as the basis for a new Australia."6 Set against this background, the Asia Pacific Economic Cooperation (APEC) endeavour, set in motion in 1989, constituted an important initiative. Initially, however, APEC was incorporated in the ALP's strategy as an instrument supplementary to the "main game" of fostering multilateral trade reform through the Uruguay Round. On the one hand, it was perceived as a new mechanism by which Australia could exert a form of collective pressure on the United States, the European Community/Union and Japan to deliver under the terms of the General Agreement on Tariffs and Trade (GATT). On the other hand, APEC was seen by the Hawke government as the foundation of a new form of loose Asia-Pacific group which could be put to use in the event of a multilateral breakdown. APEC was therefore originally treated by Australian policy makers as a means to an end rather than as an end in itself. Economically, it is important to note that its intended purpose was not to act as a precursor of trade-restricting regionalism but rather as a step towards greater regional understanding and cooperation and towards tradeinducing measures entirely consistent with the GATT. In the words of Stuart Harris, a former permanent secretary of the Australian Department of Foreign Affairs and Trade, the aim of the initiative was to secure "open regionalism."7 The idea was to make sure that Australia was a full player in any new regional grouping and that APEC itself was firmly attached to the ongoing drive for internal reform. In the process of linking the two issues the most important landmark was the Garnaut Report on Australia and the Northeast Asian Ascendancy.8 This study recommended that the entire Australian protectionist apparatus be phased out by 2000 so that the country could take full advantage of the abundant opportunities offered by the Asian, and particularly the East Asian, industrialization for Australian trade.

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It was only with the accession of Paul Keating to the post of Prime Minister in December 1991 and the reelection victory of the ALP in March 1993 that Asia Pacific became the "main game" itself. Keating wasted little time in staking out his own position, which was that a distinctive Australian identity was integral to Australia's position in the international marketplace. A new era of economic success would be linked directly to the ability of Australia to break free from the inhibiting factors associated with its historical pattern of development. Symbolically, the key elements of this push were on the identity issues of the Australian flag and republicanism. More tangibly, Keating attempted to move beyond the Hawke governments by accelerating the pace at which Australia was becoming "enmeshed" with Asia Pacific. Only by facing its future within the region head on, Keating argued, would Australia be accepted in its regional neighbourhood. Diplomatically, this sense of belonging was promoted by Keating's decisions to visit countries in the Asia-Pacific region (including Indonesia, Japan and Singapore) before travelling to the U.S. and Europe. In the economic sphere he upgraded APEC to the status of jewel in the crown of Australian foreign policy. More specifically, Keating moved to transform APEC from a vehicle of communication into a substantive trade and development group designed to pursue the goal of an integrated regional market. With regard to institutional arrangements, he stressed the need for the development of regular heads of state meetings. In policy terms, he focused on the need for a framework agreement and for the establishment of a work program to improve regional market access, the process of dispute settlement, and the harmonization of domestic legislation and rules.9 In downplaying multilateralism as the credo of Australian foreign policy in this fashion, Keating was to a considerable extent making a virtue out of necessity. The longer the GATT Round went on the more the traditional Australian faith in global solutions was drained away. Nonetheless, even a satisfactory GATT result would not eliminate the fact that Australia would still have to get involved in a range of detailed arrangements with various countries of the region. As Keating told the "Asia 2010" conference in July 1992: "while a successful GATT outcome is important, it won't begin to exhaust the trade growth possibilities in the region."10

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Parallelling the push towards an extended economic partnership with Asia Pacific came a series of initiatives to build a (fledgling) security community on a regional basis.11 Instead of continuing to look towards "a great and powerful friend" (whether Britain or the U.S.) for the provision of security against potential threats from within the Asia-Pacific region, Australia placed increasing emphasis on confidence and security building in concert with other countries from the region itself. The first major signal of this activity came via the effort by the foreign minister, Gareth Evans, to develop an extensive multilateral security dialogue in the region. When faced with opposition to a comprehensive approach, along the lines of a Conference on Security and Co-operation in Asia, Australia shifted to a more piecemeal set of activities through the Association of South East Asian Nations (ASEAN) Regional Forum, various issue-specific modes of action (as on Cambodia), and the utilization of a "two-track" security dialogue. Bilaterally, the sense of transition was marked by the signing of a security pact between Australia and Indonesia at the end of 1995. This pact marked an important watershed in several regards. Since its independence, Indonesia's own strategic intentions had been held in some considerable suspicion by Australia. Furthermore, the pact sent out a wider message that Australia could come to terms with the wider historical legacy associated with fears of invasion from Asia. SMALL STEPS FOR CANADA

In comparison with Australia, Canada has moved towards engagement with the Asia-Pacific region in the 1980s and early 1990s in a cautious and segmented fashion. Its preference has to a considerable extent remained what Douglas Ross in the 1980s termed "ad hoc bilateralism."12 Rather than shifting the prime emphasis to interaction with the countries of the Asia Pacific as components of a regional entity it has continued to deal with them essentially on a bilateral, and an issue-by-issue, basis. The main thrust of Canada's engagement with the Asia-Pacific area has not been exclusively (or even predominantly) state-led. A marked feature of Canada's cooperative endeavour with respect to the area has been "a bottom up or private sector approach."13 Members of the Canadian business community and academic communities, as well as state officials, actively participated in the array of informal bodies, most notably the Pacific Trade and Development Conference (PAFTAD), the Pacific Economic Cooperation Conference (PECC), and the Pacific

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Basin Economic Committee (PBEC), on which the main networks and linkages among Asia Pacific opinion leaders were built. After the launching of APEC a representative from Canadian business (the President of the Canadian Chamber of Commerce) has taken part in the more focused activity of the Pacific Business Forum, a private sector government advisory group. Included among the recent proposals put forward by this latter body have been the call for APEC country tradedispute "ombudsmen" to deal with trade disputes among members and the establishment of a permanent Business Council.14 This onus on the private sector fits well with Canada's preference for framing its relationships with the Asia Pacific area essentially in terms of economic criteria. While in many ways an accurate portrayal of the region, given its lack of cohesiveness in linguistic, religious, cultural, political, or ideological respects, this type of framework poses some ongoing problems from the perspective of Canadian foreign policy. Indeed, this approach may be counterproductive in that it may raise suspicions that Canada—like Australia before it—is merely trying to "hitch a ride" with the expanding Asian economies.15 Reinforcing this notion of opportunism has been the impression of weakness as opposed to strength in Canada's relationship with individual Asian countries within the Asia-Pacific region. There has been, of course, an increased flow of people, products, and services between Canada and the Asian component of Asia Pacific over the last decade. Canada's trade with the Asia Pacific has surpassed its trade with Europe since 1983, and is now almost 50 percent greater. Ten of Canada's 25 top trading partners are Asia Pacific countries. The area has also become an increasingly important (and diversified) source of foreign direct investment and immigrants. Yet, for all the apparent promise, the impact of these changes should not be exaggerated. As a recent Department of Foreign Affairs and International Trade Policy Staff Paper has pointed out: "Despite the greater importance of Asia to Canada's merchandise trade, Canada remains a marginal trading partner for Asian countries. Canada, for example, accounted for only 2 percent of South Korea's exports and imports in 1993."16 These structural limitations contributed to the impression that Canada was not only still different from the Asian countries but that it remained the unimportant part of (or junior partner in) North America. To its credit, the Mulroney government put some serious effort into trying to alter the stereotyped images. Economically, ongoing attempts were made to try to dispel the country's image as a producer of "logs

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and rocks." Ottawa's prestige was lent to the marketing of Canadian technology (Candus, short take-off and landing-STOL aircraft, communications technology and equipment, light rapid transit, engineering expertise) on a project/contract basis. New consulates were opened in commercial hubs of the region (Shanghai and Osaka, for example). Diplomatically, the Mulroney government tried to differentiate Canadian policy from that offered by the U.S. Canada has tried especially to maintain an equidistant approach with respect to the disputes between the U.S. and Japan. On specific measures, Canadian ministers with responsibility for international trade have expressed disapproval of American methods. On the Super 301, as on other cases involving U.S. action directed at specific sectors, Canada came down firmly on the side of constructive forms of dispute resolution rather than coercive action. Pat Carney, the former Progressive Conservative trade minister, expressed Canadian disapproval of American "excesses" on one of many sensitive issues (semiconductors) in U.S.-Japan trade negotiations: "I want to say very bluntly that Canada is not engaged in Japan-bashing, publicly or privately ... we do not go and beat up on the Japanese the same way our American colleagues [have just done"].17 In the same vein, the Mulroney government was also willing to put a more positive interpretation on Japan's changing role in the world. For one thing, Mulroney strongly supported Japan's accession to a permanent seat on the Security Council of the United Nations and an enhanced role within international organizations. Moreover, the Progressive Conservative government tried to include Japan in a number of coalitions of the "like-minded" (including those concerned with cooperation on peacekeeping). Neither the economic nor the diplomatic efforts have been unqualified successes. Notwithstanding Canada's bid to sell itself to Asia as a technologically rich country, much of the trade with Asian countries has remained resource-oriented. Most significantly, only a small proportion of Canadian exports to Japan is represented by end products. As H. Edward English detailed at the beginning of the 1990s: "On the export side, trade is still dominated by natural resources in raw and processed forms, reflecting Canada's diverse natural endowments. Among the top six categories of exports to Japan ... all four major resource sectors— mining, agriculture, forestry, and fisheries—are represented."18

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Moreover, the constraints of the parameters with respect to the diplomatic initiatives Canada could pursue in the region was brought home by the fate of the proposal for a North Pacific Cooperative Security Dialogue. This plan, parallelling the Evans initiative, was outlined by Joe Clark in three speeches delivered in Victoria, B.C., in Tokyo and in Jakarta in July 1990. Its essence was a call for a "process" of confidence-building in the North Pacific area through the establishment of a regional multilateral dialogue. Ottawa was careful to assert that this notion was not simply an adaptation of the Conference on Security and Co-operation in Europe structure to the North Pacific region. Nonetheless, the initiative was commonly viewed by other players in the region as little more than an inappropriate attempt to transpose the European model into the Asian context. For example, in a speech to an academic conference on the United States, Japan, and Canada in October 1990, the Japanese Ambassador to Canada sought to put some distance between his government and the Canadian proposal, arguing that the conditions in the Asia Pacific region were so different from those in Europe that a multilateral dialogue would "become more realistic once a favourable atmosphere has been created and major issues have been resolved through bilateral dialogue."19 SIMILAR MINDSETS AND COMPETING INTERESTS

In many ways, Australia and Canada have continued to view Asia Pacific through similar mindsets. In scope, neither country wants the region to be split into a "western" hemisphere grouping and an "East Asia" grouping. While making it explicitly clear that Australia's future lay primarily in an engagement with Asia Pacific, driven by a complex form of plurilateral diplomacy centred on APEC, Keating made it clear that his country did not want to be locked into any particular subregion. Australia's preference continued to be for a non-discriminatory form of trans-Pacific regionalism which would allow it to hedge its bets.20 It continues to favour a loose regional system on a pan-Pacific basis over a tighter form of Asian institutionalism. As Gareth Evans emphasized with regard to this sense of being geographically "in between" sense of place, Australia's identity is with Asia Pacific, not Asia: "there are always going to be some limitations on the extent to which Australia is, or can be, part of Asia. Geographically—or geomorphologically—we are not so much in Asia, but alongside it. What we are unequivocally part of is the Asia-Pacific embracing East Asia, Oceania, North America (and in some accounts at least, the Pacific coast of Latin America as well)."21

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The Keating government, even as it did so much to relocate Australia in the international system, conducted in many ways a flexible and multifaceted foreign economic strategy. In bold strokes, Keating expressed the notion of breaking away not only from the vestiges of the constitutional connection with Britain but shifting Australia's economic followership from the U.S. to Japan. During his official visit to Japan in September 1992, he identified Australia's "core interests" as maintaining the most favourable environment for its trade with Japan and the Asia-Pacific region. However, he did not do anything which might limit Australia's option in the international arena. For example, he mooted the possibility of his country taking on a close association with the North American Free Trade Agreement (NAFTA) countries. Canada also wants to keep its options open in Asia Pacific (or, as it has often been termed in Canadian discourse, the Pacific Rim). To maintain this leeway the Chretien government has not only promoted the expansion of NAFTA within the Americas but a "NAFTA-plus" arrangement via expansion to other regions. It has, of course, suggested the idea of a NAFTA-European Union free trade agreement. Given its overlapping membership, though, a scenario has been put forward concerning some formal connection between NAFTA and APEC.22 Though they are very similar countries, Australia and Canada retain distinctive (and often competitive) profiles. Their sense of competition is motivated to a considerable extent by the different locations of the two countries in the international system. From an Australian perspective, Canada lacks many of the credentials for belonging to the Asia-Pacific region. Behind this attitude lies an awareness of Canada's ability to make separate economic deals and also that Canada lacks well-defined and exclusive security interests in the region. Although Australia still maintained strong links (and identity) with countries outside the Asia-Pacific region, ALP governments at least were drawn towards the position that it was within the region that Australia's concerns and obligations lay. In Canada, by way of contrast, there has developed a growing appreciation of the gap between the resources that Australia has targeted for deployment in the Asia-Pacific region and its own relatively modest efforts. As Australia under the Hawke/Keating governments moved towards a concentrated view of the source of its future prosperity, the perception grew that Canada was falling behind in its own engagement with the region.23

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A sense of competition, accentuated by these differences, came out in the formative stages of APEC. Irritated by Canada's ambivalent stance within the Cairns group (on the question of the liberalization of agricultural trade), Australia initially signalled a lack of enthusiasm for Canadian participation in the 1989 Canberra ministerial meeting that launched APEC. Canada certainly had to wage an intensive campaign to ensure that it was not excluded. Subsequently, there emerged a clear difference between the Australian and Canadian perspectives on APEC. Australia, under Keating, kept accelerating the pace of institutional development for APEC (as witnessed by the move from meetings at the ministerial level to the meetings of heads of government). Canada, although supportive of APEC's efforts to create a habit of regional consultation, remained more sceptical about its capacity for delivery. Whereas Australia tried to tackle the "hard" questions relating to regional market access and extended harmonization of domestic rules, Canada placed more emphasis on agendasetting on "soft" issues such as sustainable development and the participation of NGOs within APEC. A REVERSAL OF POSITIONS? The final question that must be addressed is whether there are any signs of a reversal in the Australian and Canadian approaches to Asia Pacific. In the case of Australia, this question is prompted by the election victory on March 2, 1996 of the Liberal/National coalition under John Howard. Significantly, one of the main arguments that the Keating ALP government used in its attempt to hold on to office was that the coalition parties could not be trusted to advance Australia's further enmeshment with the Asia Pacific region. The Howard government acted quickly to try to dispel the claims that Asian leaders would not deal with the coalition. Within weeks of assuming office Howard and his foreign minister (Alexander Downer) had persuaded the Malaysian Prime Minister (Dr. Mahathir Mohamed) to stop in Brisbane for a meeting on his return from a visit to New Zealand. In doing so, the coalition was able to turn, the tables on Labour. For the most obvious gap in the Keating government's enmeshment strategy had been the absence of solid relations with Dr. Mahathir, and the challenge of the East Asian Economic Caucus to the ascendancy of APEC. This problem burst out into the open at the summit conference of APEC leaders held in Seattle in November 1993. Keating's outburst about Mahathir's "recalcitrance" undermined an

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otherwise successful event, by drawing criticism away from Malaysia for its non-participation and on to Australia for its insensitive diplomatic style. Yet notwithstanding this initiative (together with a number of other similar gestures, including Howard's choosing Indonesia for his first state visit), the notion that the coalition government will inevitably shift away from the concentrated focus on the Asia-Pacific region that characterized the ALP's foreign policy has not disappeared. On the contrary, some confirmation of a change of direction has been provided by the coalition's renewed emphasis on Australia's connection with the United States and Western Europe. With regard to the U.S., the change of emphasis has been signalled by the announcement (after high-level ministerial talks at the end of July 1996) that Australia and the U.S. will hold their largest joint military operation in over 20 years in Queensland in 1997. With respect to Western Europe, the coalition government has attempted to rebuild its severed relationship with France by ending most of the sanctions imposed because of the controversy over nuclear testing in the South Pacific.24 More generally, it has communicated its desire for a realignment with the European region. During a tour of European capitals in September 1996 Downer went to some lengths to signal that Australia's engagement with the Asia-Pacific region would not be at the expense of its older connections. These moves had some logic behind them. The AustralianAmerican war games could be justified as another means of solidifying the U.S.'s presence, at a time of enormous shifts in the strategic balance in the region (marked especially by the expansion of China's military).25 A move towards a more general rebalancing in foreign policy likewise had merit in that it countered the impression that Australia had gone too far in privileging Asia Pacific at the expense of Europe. In both cases, the Howard government could make a strong argument that there is no either-or scenario.26 The problem with this rebalancing effort has been that it has been accompanied by some signs of a retreat from Asia Pacific. Some of this retreat has come about more or less by default, as a side effect of the government's overall economic strategy. For example, as a cost-cutting measure the coalition government eliminated the Development Import Finance Facility (a soft-loan aid program to finance projects in the environment, telecommunications, transport, and rural energy sectors, with a budget of A$125 million). While overshadowed in Australian domestic politics by the impact of other forms

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of budgetary cuts, the move was interpreted as a tangible sign of the Howard government's disengagement from the Asia-Pacific region. As Peter Wallace, the President of the Australian and New Zealand Chamber of Commerce in the Philippines, put it: "At a time that Australia and Australian businessmen are only just beginning to realise that Asia exists we need all the help we can get. The timing is woefully wrong. Here's a government that's supposed to be probusiness saying 'no, we're an insular country, we're going to sneak back into our shell.' I think that's very short-sighted."27 In other ways, the shift in policy emphasis has come about by design. The Hawke/Keating governments hinged their policies of economic adjustment on unilateral reform in both the multilateral and the regional contexts. The Howard government has reverted to the older Australian strategy (associated most closely with Sir John McEwen of the Country/National party in the 1950s and 1960s) of holding back on its own concessions until it gained some tangible quid pro quo in return. Whereas the Keating government in particular was willing to push, through APEC, for a commitment to create a free-trade zone by 2020 the coalition government has pulled back from this goal. Immediately prior to the November 1996 (Manila) APEC forum, the Australian government announced that it would review "progress by APEC members" before moving to reduce its tariffs on industrial goods any further.28 Such an approach is based once more on a solid argument; that Australian objectives should be determined by the prospects of results rather than the pursuit of agreements.29 Yet inevitably this stance will bring with it further complications, especially if the Howard government is seen as moving to side with the U.S. in its attempts to lever open access to Asian markets by direct action rather than through consensus. Finally, it seems clear that this debate about Asia Pacific (or more precisely Asia) is enveloped in a number of wider questions relating to identity and immigration policy. The process of close enmeshment with Asia Pacific fostered by the Hawke/Keating governments was intended to send a clear signal both to neighbouring countries and to the domestic populace that Australia belonged to the region. The push towards solidifying Australia's relations with the region has, nevertheless, remained a delicate exercise. Internally, the redefinition of the Australian national identity has to be taken a number of stages further both in its economic and psychological dimensions. It is one thing to argue, as the Garnaut Report did in the late 1980s, that

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Australia's future is in the Asian-Pacific region (after all, approximately 60 percent of exports are directed to Asia-Pacific). It is quite another to get the support of the public to match the level of potential trade flows. As Henry Gelber pointed out, prior to the change of government, the danger is that the Australian diplomatic activity on Asia-Pacific will race too far out ahead of both "public and political enthusiasm."30 These problems are further aggravated by the coalition government's ambivalence about selling the message of Australia's changing identity at home. True, John Howard acknowledged while still in opposition that he was wrong in calling for a slowdown in Asian immigration in 1988.31 But there remains the risk that the coalition government will have to face a backlash about "Asianization," a backlash which the government might not explicitly condone but which it has already shown an implicit tendency to go along with, via incremental changes in policy. With their own recent memories of the "White Australia" policy, Australia's neighbours in the Asia-Pacific region will be not only watchful but often critical observers of this ongoing debate. Significantly, Alexander Downer has acknowledged that the negative publicity sparked by Australia's internal Asian debate has become a serious obstacle to economic integration in the region. In contrast to the signs that Australia is tilting towards some form of retreat (albeit far from a complete reversal) from its close enmeshment with Asia Pacific, there are equally strong indications that Canada is raising the level of its engagement with the region. In part, of course, this impression is derived from the Chretien government's hosting of the November 1997 APEC forum in Vancouver. In tandem with this activity, though, there have come a number of other important endeavours. Bilaterally, the Chretien government has targeted three of its "Team Canada" missions at various segments of the Asia Pacific region (China, Hong Kong, Indonesia and Vietnam in November 1994; India, Pakistan, Indonesia and Malaysia in January 1996; and South Korea, Thailand and the Philippines in January 1997). From the time of the November 1993 Seattle Summit (to which Prime Minister Chretien made his first international trip as Prime Minister) Canada has stepped up its efforts to advance a trade liberalization agenda within APEC. Transparency and consensusbuilding have been promoted through the meetings of the APEC summits in Bogor, Indonesia (1994) and Osaka, Japan (1995), the meeting of APEC finance ministers, the work agendas on trade and investment issues, and the "Eminent Persons" task force report.

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With respect to security issues, the Chretien government has expanded Canadian initiatives in conflict resolution. The first track of this approach, through the interstate diplomatic route, has been directed towards the ASEAN Regional Forum. The second, nongovernmental track, has involved a sustained enterprise to "build informational bases and to promote more sophisticated understanding of national attitudes and perceptions regarding security issues."32 Both tracks have an issue-specific focus, as illustrated by Canada's effort to support the implementation of a maritime dispute settlement in the South China Sea. Politically, this strategy played well from a national unity standpoint. All of these initiatives show that Ottawa is fully appreciative of the multifaceted processes of interaction featuring a vast myriad of personal and commercial networks and interdependencies—that have developed between the Western region of Canada generally, and British Columbia and Alberta more specifically, and the AsiaPacific region. A key element of this signalling exercise has been the appointment of Raymond Chan as Secretary of State for Asia Pacific. Furthermore, these initiatives provide Ottawa some added leverage in its struggle with the Quebec sovereignty movement. On the one hand, Prime Minister Chretien sent out an explicit warning that "if it separates" Quebec would "not be a Pacific nation any more."33 On the other hand, the federal government could use selective instruments (the Team Canada trips, along with the use of Canadian diplomatic missions) to try to draw the Parti Quebecois government back into some form of constructive engagement. The utility of this approach was enhanced, it must be mentioned, by the Quebec government's own process of international disengagement. Whereas British Columbia has continued to strengthen its institutional commitment to Asia Pacific (most notably, through the opening of a trade office in Osaka), Quebec has cut back (with a single delegation, in Tokyo, left within the region).34 From a foreign policy perspective, a greater commitment to the Asia Pacific fitted well into the Liberals' tradition of diversification, associated with Pierre Trudeau and Mitchell Sharp. By a process of regional relocation towards alternative spaces of activity the Chretien government hoped to offset the weight of the U.S. As Andre Ouellet stated, during his time as Foreign Minister: "From the start, Mr. Chretien indicated that he wanted an independent foreign policy, one that would be original and certainly very different from the Tory

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administration. It was maybe a coincidence that the first visit abroad [by the Prime Minister] after the election was to the APEC. But that allowed us the chance of our 'Third Option' which we felt was sadly neglected over the last nine or 10 years. We are truly committed to playing a role in Asia."35 Economically, the heightened stature given to Canada's AsiaPacific profile by the Chretien government constituted a bid to catch up in competitive terms. Rather than taking full advantage of the dynamic regional growth, over the last decade, Canada was perceived to have missed opportunities. To redress this situation the onus has been increasingly placed on a combination of domestic mobilization and international validation. Internally, the Chretien government has used the opportunity afforded by hosting the 1997 APEC summit as a centrepiece of a concerted approach to strengthening the notion of Canada as being in and of the Asia-Pacific. Canada's Year of Asia Pacific will encompass a whole series of events intended to reinforce this image. Externally, the emphasis is on enhancing Canada's credentials as a regional player. The two components of the strategy, in turn, intersect with each other. That is to say, the success of validation abroad will largely depend on the staying power of Canada's mobilization at home. Another test, highly symbolic, relates to the ranking of economic and social policy priorities in this engagement strategy. To facilitate economic and diplomatic access within the Asia-Pacific region the Chretien government has moved to play down the relative value of human rights. This tilt is manifested particularly in the evolving relationship between Canada and China. While the Chretien government has been willing to raise questions of human rights, this dialogue has been conducted through quiet bilateral diplomacy or through multilateral forums. Some forms of environmental protection have also been downgraded, as evidenced by the recent sale of two Atomic Energy of Canada Candu nuclear reactors to China. On this occasion, the environmental assessment process designed to evaluate the impact of such international deals was amended by order-in-council. This type of record has, inevitably, become the subject of considerable concern and unfavourable comment at the societal or non-governmental organization level. Whatever the merits of these trade-offs between economic and social priorities, it must be mentioned that there appears to be a convergence between the governmental agendas of Canada and

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Australia. Before coming into office, the Liberal and National parties adopted an assertive approach to human rights issues. During a visit to China in September 1990, for example, a delegation of Australian opposition leaders stated clearly that any future coalition government would tie aid and defence exchanges to human rights. After the March 1996 election, however, the coalition has retreated from the implementation of a linkage. The Australian Foreign Minister, Alexander Downer, has emphasized the need to deal with human rights issues with Asia Pacific leaders in a private, behind-the-scenes fashion rather than by way of public criticism or punitive action.36 This "softly softly" (as the Australian press termed it) was repeated by Prime Minister Howard in his September 1996 visit to Indonesia. While willing to raise human rights in a "general sense" with reference to developments in East Timor, the coalition leader expressed his reluctance to press this issue with a country so vital to Australia (and so different from it, in terms of political structure): "we are different societies and nobody pretends we're not ... and I think it is very important to recognize differences and focus on the common interest."37 CONCLUSION Australia and Canada will continue to share a desire to attach themselves more closely to the Asia-Pacific region. As they do so, the "mental maps" of the two countries with respect to where they fit in the world will broaden well beyond traditional boundaries. In general there are elements of a common purpose behind the adjustment process. Both countries attach considerable importance to the development of an "export culture," and hence a heightened competitive ability in terms of international market share, through forms of geographical reorientation. Both are also seeking to relocate as part of their reaction to an increasingly regionally focused international system. The methods that Australia and Canada have utilized to give shape to this dynamic have, nevertheless, diverged considerably. The form, scope, and intensity of Australia's "enmeshment" with Asia Pacific, pursued under the ALP governments, went well beyond Canada's more limited forms of engagement. This process of enmeshment was indicative of a perception shared by state officials and opinion leaders in the business community and the media that Australia had little choice but to embrace the Asia-Pacific region so as to reduce its continuing fears of isolation. Given the high stakes involved, considerable incentive was provided for a multifaceted bridge-building

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approach not only through the promotion of institutional structures and business and strategic linkages but also through academic, social, and cultural ties. The concentrated focus of Australia's approach has paid off in a number of ways. Domestically, the process of external relocation was complementary to the reformist efforts of the ALP to shift Australian industry from its defensive psychology towards innovation and expansion in areas of comparative advantage. Internationally, Australia's leadership in APEC and other regional initiatives won it not only symbolic recognition and kudos but also specific payoffs. A key role in the Cambodian peace process, to give just one illustration, could be translated into closer ties and a heightened commercial presence in Southeast Asia. The concentrated focus, however, also exposed Australia to some greater risks. It emphasized the narrowing of choice in Australia's decision-making; a selection process that could be contested as being both problematic and unnecessary. Critics could contend that, rather than demonstrating the skills of agility and nimbleness, this "eggs in one basket" stance showed just how rigid Australian foreign policy was when it was confronted with the "shock of the new."38 In the region, Australia's tendency towards exhortatory diplomacy has been viewed as underscoring a habit of confrontation. At home, the high expectations promised by way of this process of relocation has made it a delicate exercise. When such a close form of "neighbourhood" is promoted any contrary indications contribute to the momentum towards a rebalancing towards the U.S. and Europe in Australian statecraft. This sensitivity inevitably becomes more acute when attempts are made to turn the visions of regional free trade and a security community into reality. Canada has much further to go in thinking and acting as a nation of the Asia Pacific. To be taken seriously, Canada's pattern of engagement with the region must take on a sustained form instead of the episodic, on-again-off-again interest, as witnessed in the past. While one need not discount the activities centred on Canada's Year of Asia Pacific, or the geographic targeting of the Team Canada approach, they by themselves are not enough to produce an ingrained sense of regional identity and belonging. They need to be placed within a larger—and ongoing—bundle of initiatives. The lessons from Australia, in this context, are compelling. By Australian standards, Canada has lagged well behind in terms of the variety of instruments it has deployed to foster

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linkages with Asia Pacific. In contrast to the extensive array of mechanisms Australia has put in place, Canada has comparatively few such structures (with the Asia Pacific Foundation a notable exception).True, in some areas Canada has made some effort to catch up. A positive feature is that in the last few years, Canadian Education Centres have been set up in Seoul, Taipei, and Jakarta. But this effort still falls short in comparative terms. Not only is the Australian educational centre in Jakarta much bigger, for instance, it has a well-proven track record. Furthermore, in other areas, Canada has fallen back. Most significantly, the APEC Study Centre created in Canada (under a mandate from the APEC ministerial meeting) has been reduced in Canada to a "virtual" centre, less able to make the kinds of initiative expected from its Australian counterpart. Notwithstanding these comparative disadvantages, Canada is not burdened with Australia's dilemma, with its attendant mix of high expectations and anxiety. The Asia Pacific relationship does not constitute the pivotal issue in national affairs as it does in Australia. Nor does it carry the weight of so much historical baggage. Canada can afford, therefore, to adopt a much more encompassing view of its "identity" and interests. Culturally, the Canadian debate has not spilled over into arguments about an inter-civilizational divide (or even clash).39 Diplomatically, the emphasis in Canadian thinking and action has been on inclusion, not exclusion. In particular, the image of Canada within Asia Pacific has been outlined in such a way as to extend, rather than to limit, choice. This is not to minimize the degree of controversy the Asia-Pacific connection has begun to attract in the Canadian case (over the identification of opportunities, the trade-offs between goals, and the evaluation of the benefits and costs of engagement); these are controversies which will be increased as Canada tries to appreciably extend this dimension of a regional approach. Being, however, less emotionally preoccupied with this set of debates Canada has the comparative luxury of addressing these issues in a more instrumental fashion.

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NOTES 1 2

3

4 5 6 7 8 9 10 11

12

13 14

Bruce Grant, The Australian Dilemma: A New Kind of Western Society (Sydney: McDonald Futura, 1983). Jocelynne A. Scutt, ed., Poor Nation of the Pacific? Australia's Future? (Sydney: Allen & Unwin, 1985). Paul Keating, as Treasurer in the mid1980s, had issued a warning that Australia was moving down the road to becoming a "banana republic." Richard Higgott, "Australia: Economic Crisis and the Politics of Regional Economic Adjustment," in Richard Robison, Kevin Hewison and Richard Higgott, eds., South East Asia in the 1980s (Sydney: Allen & Unwin, 1987), 177-217; and "Australia and the New Division of Labor in the Asia Pacific Region," in James Caporaso, ed., A Changing International Division of Labor (Boulder: Lynne Reinner, 1987), 147-85. John Dawkins, ALP Minister of Trade (House of Representatives: Debates, 13 May 1985, 2149). Nancy Viviani, "Foreign Economic Policy," in C. Jennett and R. Stewart, eds., Hawke and Public Policy: Consensus and Restructuring (Melbourne: Macmillan, 1990). Paul Kelly, The End of Certainty.- The Story of the 1980s (St. Leonards, NSW: Allen & Unwin, 1992). Stuart Harris, "Regional Economic Co-operation: Trading Blocs and Australian Interests," Australian Outlook: The Australian Journal of International Affairs 43, 2 (August 1989), 16-25. Australia and the Northeast Asian Ascendancy (Canberra: AGPS, 1989). For background see Andrew Elek, "APEC: Motives, Objectives and Prospects," Australian Journal of 'International Affairs 46, 2 (November 1992), 174-81. Keating, speech to the Asia 2010 conference of the Australian Chamber of Manufacturers in Melbourne, quoted in Dennis Shanahan, "Regional trade vital regardless of GATT, says PM," Australian, July 21, 1992. See Richard A. Higgott and Kim Richard Nossal, "A Liminal State: Australia and the Search for Security Community in the 1990s," paper prepared for a workshop on Security Communities in Comparative Perspective, Carnegie Council on Ethics and International Affairs, New York, December 1-2, 1995. Douglas A. Ross, "Canadian Foreign Policy and the Pacific Rim: From National Security Anxiety to Creative Economic Cooperation," in F. Quei Quo, ed., Politics of the Pacific Rim: Perspectives on the 1980's (Burnaby, BC: Simon Fraser University, 1982), 28. L.T. Woods, "The Business of Canada's Pacific Relations," Canadian Journal of Administrative Sciences 4 (December 1987), 418. Neville Nankivell, "Business gives APEC leaders advice," Financial Post, 6 July 1995; "A 'road-map' for APEC leaders," FP, July 27, 1995; "Business forum hopes APEC ombudsmen will head off disputes," FP, August 29, 1995; "Practical advice from business on freer Asia-Pacific trade," FP, September 23, 1995.

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15 On this point see Richard Higgott, "APEC—A Sceptical View," in Andrew Mack and John Ravenhill, eds., Pacific Cooperation: Building Economic and Security Regimes in the Asia-Pacific Region (St. Leonards, NSW: Allen & Unwin, 1994), 91. 16 Stephen Wilson, "Changing Partners: Trends in Canada's Regional Economic Relations", DFAITPolicy Staff'Paper'95/2, March 1995, 9-10. 17 House of Commons Standing Committee on External Affairs and International Trade, April 9, 1987, 23:19. 18 H. Edward English, Tomorrow the Pacific (Montreal: C.D. Howe Institute, 1991), 65. 19 Quoted in Andrew F. Cooper, Richard A. Higgott and Kim Richard Nossal, Relocating Middle Powers: Australia and Canada in a Changing World Order (Vancouver: UBC Press, 1993), 155. 20 See Harris, "Regional Economic Cooperation, Trading Blocs and Australia's Interests," 16-25; Peter Drysdale and Ross Garnaut, "A Pacific Free Trade Area," in Jeffrey Schott, ed., Free Trade Areas and U.S. Trade Policy (Washington, DC; Institute of International Economics, 1989). 21 Gareth Evans, "The Challenge of Asia for Australian Foreign Policy," World Review 32, 4 (1993), 56. 22 "Canada's Trade Policy for the 21st Century: The Walls of Jericho Fall Down," Notes for an address by the Hon. Roy MacLaren, Minister for International Trade, to the Centre for International Studies and the Centre for International Business, University of Toronto, DFAIT Policy Staff Paper 95/2, Toronto, January 18, 1995. 23 On this sense of failure see, for example, Doug Nevison, Profiting in the Pacific Rim: Can Canada Capture its Share? (Ottawa: Conference Board of Canada, 1994); Wendy Dobson, "Canada invisible on Asian scene," The Globe and Mail, November 20, 1995; David Crane, "Canada's missing the boat to Asia," Toronto Star, October 8, 1995. 24 Don Greenlees, "Canberra plans peace with Paris," Weekend Australian, 67 April 1996. 25 Graeme Cheeseman and Ian McAllister, "Australian Opinion on International Trade and the Security Link with the United States," The Pacific Review 9, 2 (1996), 265-74. 26 The impression of an imbalance reached its height during the earlier controversy over nuclear testing in the South Pacific, when the ALP and the coalition opposition kept raising the ante in their efforts to bash the French. But it had also come out on the issue of the AustralianIndonesian security pact. Some critical observers contended that Australia should be mature enough not to replace the older "All the way with LBJ" mentality with an "All the go with Suharto." See, for example, "It's time for Australia to refocus on Europe," Australian Financial Review, December 15, 1994. 27 Quoted in Stephen Hutcheon, "Canberra's aid decision causes headaches," Sydney Morning Herald, July 20, 1996. 28 "Clinton urges APEC to cut trade barriers," The Globe and Mail, November 21, 1996.

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29 John Ravenhill, "Trade Policy Options Beyond APEC," Australian Quarterly 68, 2 (Winter 1996), 1-16. 30 Henry G. Gelber, "Advance Australia—Where?" Australian Journal of International Affairs 46, 2 (November 1992), 12. 31 See Greg Sheridan's "Howard's big regret," The Weekend Australian, January 7-8, 1995, 19. 32 Quoted in Cooper et al., Relocating, 155. 33 Quoted in Edison Stewart, "Split will cut access to Pacific, PM says," Toronto Star, September 14,1995. 34 Theodore H. Cohn and Patrick J. Smith, "Subnational Governments as International Actors: Constituent Diplomacy in British Columbia and the Pacific Northwest," BC Studies 110 (Summer 1996), 55. 35 Quoted in Jonathan Manthorpe, '"Third option' dusted off by the Liberals," Montreal Gazette, August 8, 1994. See also Frank Langdon's excellent account, "Canada's Goal in the Asia-Pacific," Pacific Review, 8, 2 (1995), 383-400. 36 "Go public on rights, Downer told," Sydney Morning Herald, October 12, 1996. 37 Quoted in Michael Millett, "Howard the diplomat succeeds—on his terms," Sydney Morning Herald, September 21, 1996. 38 Richard Leaver, "'The shock of the new' and the habits of the past," in Greg Fry, ed., Australia's Regional Security (Sydney: Allen & Unwin, 1990); "The Evolution of an Asia-Pacific Policy Community in Australia," The Pacific Review 8, 1 (1995), 173-89. 39 See, for example, Owen Harries, "The clash of civilizations," Weekend Australian, April 3-4, 1993.

VIII Canada, Asian Values and Human Rights: Helping the Tigers to Set Themselves Free

ERROL P. MENDES

Asia has a rich heritage of democracy-oriented philosophies and traditions. Asia has already made great strides towards democratization and possessed the necessary conditions to develop democracy even beyond the level of the West ... Asia should lose no time in firmly establishing democracy and strengthening human rights. The biggest obstacle is not its cultural heritage but the resistance of authoritarian rulers and their apologists ... Culture is not necessarily our destiny. Democracy is. Kim Dae-jung, "Asia's Destiny," December 31, 19941

(Canada is a crucial player in the debate raging in Asia as to whether universal conceptions of human rights are incompatible with "Asian Values." The most fervent promoters of this debate are the former Prime Minister of Singapore, Lee Kuan Yew, the present Prime Minister of Malaysia, Dr. Mahathir Mohamad2 and, more recently, President Jiang Zemin of the People's Republic of China.3 Except for

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China, the main protagonists in the Asian Values debate, Malaysia and Singapore, have formally democratic regimes with elected governments. Their systems are a legacy of the British parliamentary system and, ironically, are run by highly educated, "Westernized" elites. These elites, as will be discussed below, see themselves not as authoritarian dictators, but as promoters of a redefinition of human rights within an autochthonous Asian political and cultural framework which they call "Asian Values." In the 1995 Statement on Foreign Policy, Canada in the World the Government of Canada asserted that the three key objectives of Canada's foreign policy would be the promotion of prosperity and employment, the protection of our security, within a stable global framework, and the projection abroad of Canadian values and culture. All three of these are relevant to the role that Canada should play in the debate over Asian Values and human rights. As Canada in the World expressed it: ... Successful promotion of our values—respect for human rights, democracy, the rule of law, and the environment—will make an important contribution to international security in the face of new threats to stability. Acceptance of such values abroad will help safeguard the quality of life at home; Canada is not an island able to resist a world community that devalued beliefs central to our identity.4

The key question that begs to be answered is the following: In Canada's dealings with Asia, which are so vital to this country's strategic and economic interests, are the Canadian values of respect for universal human rights, democracy and the rule of law incompatible with Asian Values? Are we about to enter into a ring where civilizations clash? This chapter argues that the clash is a manufactured one and that Canada's strategic interests lie in promoting Canadian-Asian partnerships and public debate on what unites Asia with the West, rather than the clash of values. There has been an increasing stridency in the rhetoric over the "Clash of Civilizations."5 As the economies of Asia, in particular Southeast Asia, have rapidly grown, the promotion of Asian Values in preferene to Western notions of democracy and human rights has intensified. This trend has also coincided with the end of the Cold War. During the Cold War, many Asian governments took advantage of the geopolitical struggle to get the West to support their authoritarian systems as long as they were engaged actively in the struggle against

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communism. This is especially true of Indonesia, since the authoritarian government of President Suharto came to power through an anticommunist coup in 1965. Since then, under the New Order concept of "Demokrasi Pancasila," the President has maintained a form of guided democracy.6 Only after the recent street riots in Jakarta, and the award of the Nobel Peace Prize to two East Timorese human rights advocates, has the international community begun to really focus on how President Suharto's guided democracy may be antithetical to long-term peace and security in the region.7 With the end of the Cold War, many western governments and groups began to develop a more vocal and critical focus on the authoritarian Asian states. A new justification for the existence of such states was needed by their rulers.8 Asia, and in particular Southeast Asia and China, has experienced the strongest economic growth in the world. As will be discussed below, much of this growth occurred in political environments that discourage independent trade unionism, transparency and democratic accountability.9 As Ozay Mehmet has noted, both in Chapter 9 in this volume and elsewhere, a more hidden aspect of the East Asian developmental model is an unofficial form of redistribution through rent-seeking and gatekeeping. This includes privileged access to information and control over decision-making, based on issuing permits and licences in the political, economic, military and labour sectors.10 Concentration of coercive powers in the executive branch of government encourages rent-seeking by gate-keepers, and such concentration is the root cause of much of the abuse of human rights and the undermining of the Rule of Law in these societies.11 These authoritarian gate-keepers had, however, to come up with a more altruistic justification for their decisions. That justification came in the form of the defence of "Asian Values," in the face of alleged hegemonic campaigns by the West against the economically vibrant economies of Asia, using human rights as the main weapon. In 1994, Dr. Mahathir summed up this new defence as follows: It would seem that Asians have no right to define and practise their own set of values about human rights. What, we are asked, is [sic] Asian Values? The question is rhetorical because the implication is that Asians cannot possibly understand human rights, much less set up their own values.12

The question that arises from this rationale for Asian Values is whether they are being used, as one author puts it, to "promote not just

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nation-building, but regime legitimation and whether they are based on a contrived notion of a pan-Asian culture and value system."13 WHAT ARE ASIAN VALUES?

The most immediate criticism that the term Asian Values faces, even before it can be defined, is that it implies a homogeneous Asia. The reality is that this region has a kaleidoscopic panorama of languages, religions, cultures, histories, political systems and intra-Asian rivalries, prejudices, hatreds, affinities, etc. The reality of these differences must be kept in mind when examining the content of Asian Values. The most prominent advocates of Asian Values are those who belong to what can be termed 1) the Singapore School,14 and those who uphold it 2) the Mahathir Model and, more recently, what I term 3) the Chinese model. In the Singapore School the most articulate of this group include the former Prime Minister, Lee Kuan Yew, the present Prime Minister, Goh Chok Tong, a retired senior diplomat, Tommy Koh and the head of the Ministry of Foreign Affairs, Kishore Mahbubani. Their thesis is essentially that the West refuses to accept the legitimacy of Asian Values because it cannot accept that East Asia is becoming a centre of world power and that a psychological revolution is taking place in the region as Asians recover from their colonial past and discover that they can do things as well as, or even better than, the West.15 Asian Values should include, so Prime Minister Goh has stated: ... a sense of community and nationhood, a disciplined and hardworking people, strong moral values and family ties. The type of society determines how we perform. It is not simply materialism and individual rewards which drive Singapore forward. More important, it is the sense of idealism and service born out of a feeling of social solidarity and national identification. Without these crucial factors, we cannot be a happy or dynamic society.16

Tommy Koh admits the dark side of these values includes excessive materialism and an inclination to authoritarianism.17 The Singapore School has a tendency to contrast the socially and economically decaying West, its condition being due apparently in large part to the emphasis on individual rights and adversarial politics, with an East Asia that emphasizes social cohesian and duty. This contrast is not just highly simplistic, it is simply wrong. In many countries across Asia, we are seeing the familiar patterns of the industrialized

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West: breakdown of family ties and increasing societal problems, including rapidly escalating crime and drug use.18 Finally the Singapore School also questions the existence of universal human rights.19 Turning to the Mahathir Model of Asian Values, the present Prime Minister of Malaysia also emphasizes the social and moral decay of the West in comparison to the newly found alternative model of Asian development.20 Mahathir may well have developed his authoritarian Asian Values model for an internal reason linked to the potential for racial tensions in Malaysia. When he came to power in 1980 he was seen as a liberal whose early actions included releasing most of the people detained under the Internal Security Act and allowing more press freedom. However, by October 1980, faced with the possibility of race riots, he abandoned all liberal pretences, ordered the detention of over 100 people under the same Internal Security Act, and closed down three newspapers. In subsequent years, the constitution was amended several times, tougher laws were enacted at the expense of individual rights, and the opposition in Parliament to the dominant United Malays National Organisation-led coalitions was reduced to insignificance. Dr. Mahathir changed the fundamental constitutional system in Malaysia, concentrating unprecedented and, in the view of many leading critics, dangerous power in the hands of the executive.21 In a recent interview he stated he believed that the multiracial, multireligious, multicultural and multilingual differences among Malaysians made open debate dangerous.22 Stability and enforced social cohesion in a heterogenous society thus become internalized in the core of Asian Values for Dr. Mahathir, although he has shown some balance in his advocacy. He sees the Asian region as benefiting from, and strengthened by, the fusion of the best practices and values from many rich civilizations, Asian and Western; he believes that many Asian Values, including feudalism, excessive antimaterialism and excessive deference to authority should be destroyed, and that no one should be allowed to hide behind the cloak of cultural relativism.23 These pronouncements are a revelation from the chief architect of Asian Values that Asians themselves are searching for a global cultural modernity. Turning to what I term the Chinese model, the present Chinese preoccupation with fighting the West and its own dissidents over human rights and democracy stems from the international outcry and internal fallout occasioned by the Tiananmen Square massacre on

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June 4, 1989, as well as from the struggle for succession in the post-Deng Xiaoping era. In response to the international outcry over the Tiananmen Square massacre the Chinese government published the Human Rights in China White Paper.24 This was a document which attempted to show that China was incorporating human rights perspectives into its laws and policies, but that such perspectives would be informed by China's painful history and its present social and economic needs. Therefore, the government stated that its fundamental approach to human rights would place the greatest priority on the right to subsistence and economic development as a precondition to the full enjoyment of all other human rights. The underlying message of the White Paper was that stability of the system, which was providing the right to subsistence and development, was the highest priority for China. Individual human rights could be legitimately sacrificed to further the right to subsistence and development. Even before the publication of the White Paper China had begun to assert an Asia-wide role in championing the right to development. The Chinese participated in every session of the governmental experts, group organized by the UN Commission on Human Rights to draft the Declaration on the Right to Development and made positive suggestions until the Declaration was passed by the 4lst session of the UN General Assembly in 1986. In December 1991 China also scored a major coup for Asian Values when it engineered the organization of regional preparatory conferences prior to the 1993 Vienna Conference on Human Rights. Many Western countries opposed the regional conferences, arguing that since human rights were universal there was no need for regional conferences. An alliance, forged by China, achieved an expression of Asian Values, at the March 1993 Asia Preparatory Conference, in the Bangkok declaration signed by 49 governments. The "aspirations and commitments of the Asian region" were emphasized in the document, while the concept of the universality of human rights was downplayed.25 Japan and South Korea, while reluctant to do so, but unwilling to resist China's desire to show Asian solidarity against Western hegemony in the human rights sphere, finally signed on to the priority of Asian Values over universal conceptions of human rights.26 Asian non-governmental organizations (NGOs) have refuted their governments' claim that human rights are incompatible with Asian Values. Many of these representatives of Asian civil society have asserted that

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this emphasis on Asian Values as opposed to human rights is an attempt by governments to legitimize their authoritarian regimes.27 The final declaration of the World Conference on Human Rights in Vienna in the summer of 1993 affirmed the universality and indivisibility of human rights. However, the force of Asian Values from the Bangkok Declaration penetrated the final Declaration with several expressions of cultural relativism, including the incongruous affirmation that the Right to Development was as universal and inalienable a right as other fundamental human rights.28 More recently, in the struggle for succession in the post-Deng Xiaoping era, President Jiang Zemin and his politburo and military allies have attempted to revive the "spiritual civilization" and promote the "socialist ethical and cultural progress" of the Chinese people.29 One leading Asian review predicts that the use of these Chinese Values is an attempt by party chief Jiang Zemin to consolidate his power by dominating political discourse. In practice, this will mean more media censorship, patriotic exhortations and an emphasis on traditional virtues such as Confucianism and respect for authority.30 Ironically, Confucianism had been vilified and eradicated from mainstream culture by Mao Tse-tung. Now his successors, seeing a perceiving widespread cynicism in the population because of the failings of the Communist Party's record, including rampant corruption, are attempting to rehabilitate themselves through a rehabilitation of selective Confucianism.31 The return to the spiritual civilization of the Chinese people is also an attempt to "jump-start" nationalism by exploiting any forms of humiliation suffered by the Chinese people at the hands of foreign powers from the last century to the present. Such nationalism is increasingly focusing on criticism of foreign countries, particularly the United States, and is targeted primarily on the West's support of Taiwan, the refusal to admit China to the World Trade Organization (WTO) as a developing nation, the criticism of China's human rights record and the fomenting of "splittism" in Tibet.32 This new reincarnation of Chinese Values seems to be working. A widely publicized study showed that an overwhelming majority, of young Chinese consider the U.S. to be their country's archenemy. A crude antiforeign tract entitled "China Can Say No" is a national bestseller. As one senior Chinese newspaper editor stated, "Now, people can't separate criticism of the government from criticism of themselves. It's worrying."33

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The three "Asian Values" models outlined above can be merged to define the substance of the concept as follows: respect for hierarchy and authority, including a deference to such authority; centrality and cohesion of the family; social consensus, including an avoidance of overt conflict in social relations; an emphasis on law and order and a desire not to have individual liberty undermine personal security concerns; an emphasis on stability to promote economic and social development; a reverence for traditional values and culture; an emphasis on education and self-discipline; and acceptance of diversity of spiritual and philosophical authority in theory, but in practice enforced social consensus in the midst of such diversity.34 There are some who would argue that a large part of the political spectrum in the West, especially the conservative part, share many, if not most, of these values. Perhaps Asian Values are global conservative values. ARE ASIAN VALUES INCOMPATIBLE WITH UNIVERSAL CONCEPTIONS OF HUMAN RIGHTS? The Carnegie Council on Ethics and International Relations recently initiated a project on "The Growth of East Asia and its Impact on Human Rights." In March 1996, the Council brought together in Bangkok some leading thinkers from Asia (and some from the U.S.) to examine the cultural sources of human rights in East Asia.35 In the workshop, the Asian participants recognized that fundamental behavioural and ethical norms of some of Asia's distinct cultures and histories could form the basis of human rights. These included the Buddhist duty of "avihimsa" (non-violence), the importance that Islam places on "umma" (community) and equality before God, and the Confucian "ren" (humankind).36 Many of those at the meeting acknowledged that reliance on fundamental norms of these Asian traditions and teachings would not be an adequate method for understanding the basis of human rights in any Asian society, given that beliefs change over time and are not held by all in any particular Asian society, particularly in such heterogenous collectivities as Malaysia.37 One leading scholar, Abdullahi An-Na'im, also pointed out that material conditions are a component of culture as are other aspects of the struggle with modernization. It is clear that whether Asian cultural, philosophical and religious traditions are seen as compatible with human rights depends on who gets to interpret these traditions.38 Ruling elites can declare much of what are considered to be universal concepts of human rights

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unacceptable in each of the Asian cultures described above in order to enforce regime legitimation, silence dissenting voices and to maintain power. In opposition to such interpretations, one could make a compelling argument that the ancient Hindu and Buddhist civilizations of Asia imprinted the notions of equality of all human beings39 and the inherent human dignity of all human beings on most Asian cultures long before John Locke, Jean-Jacques Rousseau and Thomas Jefferson addressed these issues. Finally, the motivating force of the alleged clash between Asian Values and Western concepts of human rights may be the desire to place societal goals such as economic development clearly ahead of respect for fundamental rights. There is no practical reason to insist on such a rigid hierarchy. A recent Canadian initiative in China illustrates how Canada could play a special role in engaging in the Asian Values dialogue to promote a less rigid approach to individual rights and collective goals. On June 24-25, 1996, a rare event took place in China: one of the first unofficial international conferences on human rights was held in Beijing. The conference, jointly organized by Beijing University and the Human Rights Centre at the University of Ottawa, was the climax of a two-year dialogue on human rights between Chinese intellectuals and policy makers, including two of the authors of the 1991 White Paper on Human Rights, and their Canadian counterparts. Chinese and Canadians found common ground on important areas of human rights, including: first, the fact that despite the different origins of the human rights debate in the West and China, Chinese and Canadians could agree that the primordial source of human rights obligations is the concept of human dignity; second, the right to development, which is essentially a collective right, and the civil and political rights of the individual need not be placed in a hierarchical relationship to each other. Canadian constitutional jurisprudence and traditions have shown that collective and individual rights can be balanced in a fashion that promotes universal concepts of justice and proportionality. Two of these concepts involve the acceptance of "the rule of law" and that the principle that the end justifies the means cannot be the sole justification of rights-limiting governmental actions.40 Asian cultures should be receptive to such balancing. The notion of "balance" is deep- rooted in most Asian cultures.

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THE CLASH BETWEEN ASIAN VALUES AND HUMAN RIGHTS; REGIME LEGITIMATION OR STEPPING STONE TO MODERNITY? If the clash between Asian Values and human rights is more apparent than real, it might be suggested that Asian leaders nurture the conflict primarily for regime legitimation. This goal includes legitimation of the present economic system of what is termed authoritarian capitalism. Many countries with authoritarian political systems, hot only those in Asia, have shown dramatic economic growth.41 The regime in countries such as Brazil, Chile, South Korea and Taiwan was either a military or a party authority which was internally unified. These authoritarian regimes acted in partnership with domestic and foreign capital, including the World Bank, foreign commercial banks, U.S. aid and other sources.42 Many of these countries focused on low-cost, export-oriented industrialization strategies that depend on labour and other input cost containment and suppression of independent labour unions.43 The World Bank offers a different assessment of Asian authoritarian capitalism. The Bank has attempted to counter the allegation by economists and political scientists that the East Asian miracle is due to the authoritarian nature of the region's institutions. These analysts, the World Bank alleges, describe East Asian political regimes as "developmental states" in which powerful technocratic bureaucracies, shielded from political pressure, devise and implement well-planned interventions.44 The World Bank offers a kinder, gentler version of Asian authoritarian capitalism when it concludes that the economists who assert the Asian developmental state model overlook the central role of government-private sector cooperation. While conceding that some high-performing Asian economies have tended to be either authoritarian or paternalistic, the Bank asserts they have been willing to grant a voice and genuine authority to a technocratic elite and key leaders of the private sector.45 The Bank further asserts that to establish their legitimacy, and with the support of society at large, East Asian leaders established the principle of shared growth, promising that as the economy expanded all groups would benefit.46 The assumption by the World Bank, and others who attempt a soft sell of authoritarian capitalism, is that the authoritarian rulers can continue to guarantee shared and equitable growth for all in society. Some argue that it is not factually correct to link Asian Values to regimes that exploit low-cost labour and suppress trade unionism. Countries such as Malaysia, Singapore, Indonesia and even China

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have ensured rising real wages to their citizens over the past several decades and are shifting to higher-skilled employment and more capital-intensive industrialization. The development policies of these countries have been effectively redistributive, so that economic growth has resulted in substantive improvements in mass living standards, coupled with dramatic reductions in the incidence of poverty. Finally, these analysts conclude, the thrust of the Asian Values campaign is aimed as much at mobilizing public support for this development strategy as at regime legitimation.47 What makes such a perspective interesting is that, even if it is correct, there is increasing evidence that people in the "Asian tigers," such as Indonesia, China and, to a lesser extent, Malaysia and Singapore, are increasingly dissatisfied with the technocratic, top-down development strategies that have glaring democratic deficits and have led to wealth disparities even as real incomes have risen. The absence of hunger and material needs has never quenched the human thirst for liberty and justice. Sen recognizes authoritarian Southeast Asian countries' labour policies, in particular their ability to ensure much greater managerial autonomy and discretion, as one important factor in these countries' developmental success. This labour policy may even be compatible with the human resource development success for which these same countries are often noted, but this kind of achievement may not be sufficient to maintain support for the present political systems.48 Kuruvilla suggests that over time, as some Asian countries have moved from a strategy of low-cost export-oriented industrialization focused on exports with higher added value, their industrial relations strategy has tended to shift from cost containment and union suppression to work force flexibility and skills development.49 Goldstone has noted that, historically, the crisis point in autocratic regimes came precisely when large numbers of new professional elites emerged to assist with the modernization of society but were still not fully incorporated into political life through democratic reform.50 He concludes that autocratic regimes that seek to preserve absolute power while encouraging the growth of modern business and professional elites are creating their own "gravediggers."51 It should be noted, however, that the creation of a business class will not automatically lead to a push for democratic reforms and human rights. Many business interests may welcome authoritarian rulers because they suppress demands by labour and other groups that oppose corruption and lack of equity in incomes and wealth.

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Some powerful groups may prefer an authoritarian state that would maintain undemocratic privileges and gatekeeping.52 Indeed the fear of human rights in some Asian states may be the fear of individualism and what it may do to the status quo. As Christopher Lingle notes, Individualist cultures encourage and reward innovation by free-spirited entrepreneurs who are as likely to challenge the political status quo as to upset market arrangements. Most Asian economies, however, have either attempted autarky or have relied upon imitation, requiring access to open markets of more advanced economies. But the considerable success of many so-called miracle economies may not last. Unless they produce homegrown entrepreneurs and technological change, the technological gap will widen as innovators seek greater political and economic freedom outside the region.53

Lingle concludes that East Asian authoritarian capitalist regimes cannot last forever. The autocrats and their dynastic heirs are mortal and modernization stemming from economic prosperity will undermine their authority.54 Japan, Thailand, Taiwan and especially South Korea provide some proof of the ultimate demise of Asian authoritarian rulers who seek to utilize Asian Values as regime legitimation. In the case of South Korea, on August 26, 1996, the Seoul district court "administered a political catharsis that symbolizes the end of South Korea's authoritarian past"55 by sentencing former President Chun Doo Hwan to death and his successor Roh Tae Woo to twenty-two and a half years in prison. These sentences were later reduced in severity, the death penalty being commuted to a lengthy term of imprisonment. Chun and Roh were the most high profile of 16 former army generals and a bevy of members of South Korea's corporate elites who were on trial for crimes ranging from murder of the Kwangju massacre victims, to treason, bribery and corruption.56 Perhaps the manufactured clash between Asian Values and universal human rights is also a stepping stone for the evolution of a "global cultural modernity" in Asia. Masakazu Yamazaki defines modernity as "the spirit of living in constant contrast to the past."57 The manufactured clash may be an attempt to seek an Asian modernity where one has never existed. Given the immense territory of the region and the multiplicity of cultures, traditions, histories and even civilizations, the fact that there is such an attempt is highly significant. The irony, as Yamazaki has stated, is that the force behind the

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convergence observable in the region today is modernity, which was born in the West but radically transformed by both East and West in this century.58 Yamazaki describes what this author would assert is the emergence of a "global cultural modernity" in Asia in the following terms: ... the peoples of East Asia ... can be said to partake of modern Western civilization at the topmost stratum of their world, to retain their national civilizations and nation-states in the middle stratum, and to preserve their traditional cultures in their day-to-day lives. In political affairs, human rights and democratic principles belong to the first stratum, distinct bodies of law and political institutions to the second, and the political wheeling and dealing to the third.59

In fact Yamazaki, without acknowledging it, is describing perfectly the global cultural modernity that characterizes modern Japan. There are, indeed some who argue that Japan should take a stronger role in promoting democratic reforms and human rights across Asia, given its economic power and prestige.60 The newer democracies in Thailand, South Korea, Taiwan and the Philippines can also be similarly characterized. President Fidel Ramos of the Philippines has consistently rejected the position of other Asian leaders that Asian priorities for economic development or Asian Values should ride roughshod over human rights and constitutional guarantees. Key intellectual and civil society leaders in Singapore and Malaysia are urging full membership in the community of democratic states.61 The Deputy Prime Minister of Malaysia, Mr. Anwar Ibrahim, although intensely critical of what he calls the sermonizing and hectoring tone of the West on human rights,62 acknowledges the possibility of a global cultural modernity: If we in Asia want to speak credibly of Asian Values, we too must be prepared to champion those ideals which are universal and which belong to humanity as a whole. It is altogether shameful, if ingenious, to cite Asian Values as an excuse for autocratic practices and denial of basic rights and civil liberties. To say that freedom is western or unAsian is to offend our traditions as well as our fore fathers who gave their lives in the struggle against tyranny and injustices. It is true that Asians lay great emphasis on order and social stability. But it is certainly wrong to regard society as a kind of false god upon altar [sic] the individual must constantly be sacrificed. No Asian tradition can be cited to support the proposition that in Asia the individual must melt into the faceless community.63

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The Deputy Prime Minister and heir apparent to Dr. Mahathir has also emphasized that development cannot be used as an apology for authoritarianism. He has asserted that authoritarian rule has more often than not been used "as a masquerade for kleptocracies, bureaucratic incompetence and worst of all, for unbridled nepotism and corruption."64 Yamazaki concludes that the most positive outcome for the East Asian region would not be mere diversity but a civilizational framework that encompasses a well-regulated market, human rights and democratic principles.65 CONCLUSION AND CANADA'S ROLE IN THE DEBATE OVER ASIAN VALUES AND HUMAN RIGHTS.

If Yamazaki's thesis about the emergence of a civilizational threestratum framework in Asia is correct, then Canada may be one of the Western countries most capable of conducting a global cultural modernity conversation with that continent. One of the most important forms of such a conversation is strategic partnership with the appropriate human rights or democratic champions from the area. The Foreign Affairs Minister, Lloyd Axworthy, is a strong proponent of such champion partnerships in the area of human rights. Addressing the UN Commission on Human Rights, the Minister urged the international community to "harness the energy" of, inter alia, governments, civil society and the business community, especially those who control the new information technologies, to promote a common global destiny of opportunity and freedom.66 The Minister has also on several occasions stressed that he does not see a choice between trade or human rights in the Asia Pacific. Rather, because he understands that sustainable trade and investment are dependent on transparency and respect for the rule of law in a global rules-based trading regime, the proper policy orientation for Canada must be a focus on trade and human rights in Asia. This approach is obviously supportive of the analysis outlined above which that Asian authoritarian systems that have entrenched non-transparent and unaccountable gatekeeping in their economic and political systems may not be sustainable either politically or economically. It would, however, be easy for many to perceive a disconnection between these official human rights positions on the one hand and on the other hand the high-profile visits by the Prime Minister and Team Canada to Asia and Canadian representation at official Asia Pacific Economic Cooperation (APEC) and Association of Southeast Asian

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Nations (ASEAN) meetings. Critics have alleged that there is a lack of high-profile attention paid to human rights concerns in these settings. This criticism will no doubt surface again when Canada hosts the 1997 APEC summit. The government of Canada may rightly reply that "champion partnering" must be done away from the glare of the media if it is to be successful and avoid a backlash from the more repressive elements of the ruling elites. Much of such partnering takes the form of low-profile professional and scholarly technical assistance, overwhelmingly funded by the Canadian International Development Agency (CIDA). In China, for example, CIDA has assisted and continues to assist partnerships between Canadian institutions and NGOs and Chinese institutions and NGOs in the area of criminal law reform, training of prosecutors, lawyers and judges, village governance and implementation of the 1992 Law on the Protection of Rights and Interests of Women.67 In Indonesia, CIDA is again funding Canadian institutions to quietly support the important work of the Indonesian Human Rights Commission, Komnas Ham, which has shown signs of independence from ruling elites. The Canadian government has an opportunity to meet its critics halfway as host of the APEC summit in 1997. In addition to the low-profile champion partnering, it could commence higher-profile discussions with some of the leading proponents of Asian Values. Canada could argue that the clash between these values and universal human rights is artificial and unnecessary the position advanced in this chapter. The cost of not undertaking a higher-profile discussion on Asian Values and human rights is the probability that a growing number of Canadians may come to the conclusion, due to lack of public debate, that this country is being defined by the number of jobs it can create at any cost, or at least by turning a blind eye to its fundamental values abroad. This stance may also signal to potential liberal reformers in some of the more despotic systems that Canada and Canadian trade and investment interests are satisfied with being unquestioning collaborators with what might well turn out to be transitional authoritarian regimes. The more progressive groups which might succeed these regimes could have long memories. The reasons why the proponents of Asian Values may accept a Canadian initiation of a global cultural modernity conversation on human rights are the following: because Canada believes that democracy, pluralism and respect for human rights can promote stability, it has a duty to be a bridge to Asia on the question of collective values

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and human rights. Moreover, because this country has, through its constitution and its courts, developed universal conceptions of justice and proportionality in order to balance collective interests with fundamental rights and freedoms, it has a duty to engage in the dialogue on Asian Values and human rights. Finally, because Canadians are not averse to admitting their own country is a "work-inprogress," attempting to carve its own niche in the world of global cultural modernity, it should be confident that, over time, Asia and Asian leaders will listen to what it has to say. Canada can only benefit if, in its conversation with Asia, it seeks to be defined at the dawn of a new millennium by its desire to balance its strategic interests with its duties to a global humanity and the world it wishes its children to inherit. NOTES: The author wishes to thank Anne-Marie Traeholt and Robert Sinding for their invaluable research assistance for this article. 1

Cited in Hoong-Phun Lee, "Constitutional Values in Turbulent Asia," Papers of the 14th Lawasia Biennial Conference, August 16-20, 1995, Beijing, China 1-19. 2 Lee, "Constitutional Values ..." 3 The Far Eastern Economic Review, October 3, 1996, 22. 4 Government of Canada, Canada in the World: Government Statment, (Ottawa: Canada Communications Group 1995), ii-iii. 5 In Foreign Affairs, 72, no. 3 (Summer 1993), 22-49, Professor Samuel P. Huntington articulated a post-Cold War vision of the world which focused on a global emphasis and persistence of cultural and civilizational divisions. In this vision Confucian civilization and Islamic civilization would pose the most conflictual problems with the West and hence be a major source of global instability. The present author would moderate the Huntington thesis with the explanation that the nurtured clash of civilizations marks a stage in an ineluctable progression towards a global cultural modernity. 6 For an excellent analysis of the human rights situation in Indonesia see Todung Mulya Lubis, In Search of Human Rights: Legal-Political Dilemmas of Indonesia's New Order, 1966-1990 (Jakarta: PT Gramedia Pustaka Utama, 1993). 7 For an analysis of the street riots in Jakarta, see The Far Eastern Economic Review, August 6, 1996, 14. 8 Lee, "Constitutional Values ... ," 2. 9 S. Kuruvilla, "Linkages Between Industrialization Strategies and Industrial Relations/Human Resource Policies: Singapore, Malaysia, The Philippines, and India," Industrial and Labour Relations Review 49, no. 4 (July 1996), 635. 10 See Chapter 9 of this volume; see also Ozay Mehmet, "Rent-Seeking and Gate-Keeping in Indonesia: A Cultural and Economic Analysis," Labour, Capital and Society 27, no. 1 (April, 1994), 56.

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11 For a detailed analysis of how, in particular, national emergency and preventive detention laws have been misused in Malaysia and Singapore, see Lee, "Constitutional Values ... ," 6-12. 12 Cited in Lee, "Constitutional Values in Turbulent Asia," 3-4. 13 Alan Dupont, "Is There an 'Asian Way?", Survival 38, no. 2 (Summer 1996), 25. 14 Dupont, 14. 15 See, for example, Kishore Mahbubani, "The Pacific Way," Foreign Affairs 74, no. 1 (Jan./Feb. 1995); Lee Kuan Yew, "Culture is Destiny," Foreign Affairs 75, no. 2 (Mar./Apr. 1994), 114; Koh, "Does East Asia stand for any positive values?" International Herald Tribune, December 11-12, 199316 Goh Chok Tong, "Social Values, Singapore Style," Current History (December 1994), 417. 17 Dupont, 14. 18 The Far Eastern Economic Review, August 1, 1996, 38. 19 Bilahari Kausikan, "Asia's Different Standard," Foreign Policy 32, no. 92 (Autumn 1993), 26. 20 Dupont, 14-15. 21 The Far Eastern Economic Review, October 24, 1996, 18-27, in particular 19-21. 22 Ibid., 23-27. 23 Speech by Dr. Mahathir at the Senate House, Cambridge University, March 15, 1995, cited in Dupont, "Is There An 'Asian Way?", 15-16. 24 Information Office of the State Council of the People's Republic of China, Human Rights in China White Paper, Beijing, 1991. 25 Report of the Regional Meeting for Asia of the World Conference on Human Rights (Bangkok, March 29—April 2, 1993), UN Doc. A/Conf.l57/ASRM/ paragraph 8. 26 Sophia Woodman, "Asian Views: Defining Human Rights for a Region?," Human Rights in China (Winter 1994), 14. 27 For Asian NGOs' reaction to the governmental Bangkok Declaration, see Our Voice: Bangkok NGO Declaration on Human Rights. Reports of the Asia Pacific NGO Conference on Human Rights and NGOs' Statements to the Asia Regional Meeting (Bangkok: Asian Cultural Forum on Development, 1993). 28 UN Doc. A/Conf. 157/23 (July 12, 1993). 29 The Far Eastern Economic Review, October 24, 1996, 28. 30 Ibid., 28. 31 Dupont, 22-23. 32 The Far Eastern Economic Review, October 3, 1996, 24. 33 Ibid., 24. 34 These components of Asian Values have been described, catalogued and analyzed extensively elsewhere; see, for example, R. Little and W. Reed, The Confucian Renaissance (Sydney: The Federation Press, 1989); Lawson, "Culture, Democracy and Political Conflict Management in Asia and the Pacific: An Agenda for Research," Pacific Review 6, no. 2 DUI. 34 (5F) (October-November 1994); Desmond Ball, "Strategic Culture in the Asia Pacific Region," Security Studies 3, no. 1 (Autumn 1993), 23.

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35 The workshop report, prepared by Maria Serena Diokno of the Philippines, entitled "Cultural Sources of Human Rights in East Asia: Consensus Building Toward a Rights Regime," is published in the Carnegie Council's bulletin Human Rights, Dialogue 5 (June 1996). Hereafter cited as "Cultural Sources of Human Rights in East Asia." 36 "Cultural Sources ... " 5. 37 "Cultural Sources ..." 38 "Cultural Sources ..." 39 "Cultural Sources ..." 40 For further discussion of Canada as a role model for the balancing of collective and individual rights, see Errol P. Mendes, "The Legal and Constitutional Basis of Human Rights, the Right to Development and the Law of Proportionality: A Canadian Attempt to Bridge the Turbulent Waters between Chinese and Western Conceptions of Human Rights." This paper forms part of the joint research project being conducted by the International Law Institute at Peking University and the Human Rights Research and Education Centre, University of Ottawa. It is available on request. 41 See, for example, J.A. Goldstone, "The Coming Chinese Collapse," Foreign Policy No. 99 (Summer 1995), 48. 42 Goldstone, 48. 43 Mehmet, "Rent-Seeking, 56. 44 The World Bank, The East Asian Miracle (Washington, DC: 1993), 13. 45 Ibid. 46 Ibid. 47 Comments on this paper by Professor Martin Rudner. 48 Gautam Sen, Comparing Contemporary Indian Economic Reform with the Developmental Experience of China and the Asian NICs, Ottawa: University of Ottawa, Department of Economics Working Papers No. 9603E,1996. 49 S. Kuruvilla, "Linkages," 635. 50 Goldstone, "The Coming Chinese Collapse," 44. 51 Goldstone, 44. 52 See Zehra F. Arat, Democracy and Human Rights in Developing Countries (Boulder, CO: Lynne Rienner Publishers, 199D, 40. 53 Christopher Lingle, "The Propaganda Way," Foreign Affairs 74, no. 3 (May/June 1995) 196. 54 Lingle, 196. 55 The Far Eastern Economic Review, September 5, 1996, 21. 56 Ibid., 21. Following the assassination of President Park Chung Hee on October 26, 1979 and a successful military coup led by Major General Chun Doo Hwan on December 12, 1979 student protesters took to the streets of Kwangju, South Korea in May 1980 to demand the end of martial law, greater democratization and the resignation of Major General Chun Doo Hwan. By May 18 the South Korean leadership had cracked down on the protesters with Black Beret paratroopers who crushed the revolt by the end of May. Estimates of deaths range from 191 to over 2,000. See Donald N. Clark, ed., The Kwangju Uprising—Shadows over the Regime in South Korea (Boulder, CO: Westview Press Inc., 1988).

E R R O L P. M E N D E S

57 Masakazu Yamazaki, "Asia, a Civilisation in the Making," Foreign Affairs 75, no. 4 (July/August 1996), 118. 58 Yamazaki, 107. 59 Yamazaki, 116. 60 See, for example, David Arase, "Japanese Policy Toward Democracy and Human Rights in Asia," Asian Survey XXXIII, no. 10 (October 1993). 61 See, for example, Melanie Chew, "Human Rights in Singapore: Perceptions and Problems," Asian Survey XXXTV, no. 11 (November 1994). 62 The Far Eastern Economic Review, June 2, 1994, 20. 63 Address entitled "Media and Society in Asia," keynote speech at the Asian Press Forum, Hong Kong (Dec. 2, 1994), 3-4. Cited in Lee, "Constitutional Values ... ," 17. 64 Lee, 17-18. 65 Yamazaki, 118. 66 Address to 52nd Session of UNCHR, April 3, 1996. 67 See China Development Policy Framework, CIDA, November 1994.

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IX Tigers, Asian Values and Labour Standards: Promoting a Fairer Global Trade

OZAY MEHMET

Vv hen Canada assumes the chairmanship of the Asia Pacific Economic Cooperation (APEC) in 1997, it will do so from a markedly diminished economic standing relative to the Asia Pacific, a region comprising Japan and China as well as the high-performing economies, the so-called Tigers or Dragons. These countries have gained in economic terms, while Canada has lost ground since 1970 as a result of capital and technology movements and shifting comparative advantages in international trade. This paper focuses on the underlying factors behind these shifts, and is organized in seven Parts. Following this Introduction, Part II examines trends of income convergence between Canada and some dynamic Asia-Pacific economies since 1970. Part III focuses attention on the changing shifts in international trade favouring the Asia Pacific. Part IV discusses future sustainability of Asia Pacific dynamism. In Part V, there is a discussion of "Asian Values" with special reference

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to overseas Chinese capitalism. This is followed in Part VI with an examination of policy-induced unfair labour practices in export processing zones and in other sectors which violate "core" labour standards as well as Article XVI of the General Agreement on Tariffs and Trade (GATT) on export subsidies. Finally, Part VII of the paper concludes with a policy recommendation for Canada, suggesting that this country assume a more active role in the promotion of international labour standards centred on Human Resource Development (HRD) interventions, both bilaterally and also multilaterally via international financial institutions and other bodies. CONVERGENCE OF INCOME LEVELS

The remarkable growth of Asia-Pacific economies since 1970 has resulted in a dramatic convergence of income levels between the countries of the region and other trading nations, including Canada. Some statistics on this convergence are summarized in Table 9-1- In 1970, Japanese income per capita was just under 60 percent of the Canadian average. By 1993, the positions had been reversed: Canadian income level now represented a mere 63 percent of the Japanese average. The Japanese and other Asian income trends in this period reveal a remarkable convergence across the Pacific. Singapore, which enjoyed less than a third of the Canadian income level in 1970 had, by 1993, achieved virtual parity with Canada. Convergence is observed in other East Asian economies as well (Table 9.1). TABLE 9-1

CANADIAN GNP PER CAPITA COMPARED WITH ASIA PACIFIC, 1970-93 in US $ GNP per cap. GNP per cap. Ratio in!973 Ratio in 1993 in 1970 in 1993 (Canada=100) (Canada=100) CANADA

5850

19970

100

Japan

3470 6910 1710

31490

59.3 118.1 29.2

430 600

7660

USA

Singapore Rep. of Korea Malaysia

SOURCE; World Bank, World Tables 1995

24740 19850

3140

7.4 10.3

100 157.7 123.9 99.4 38.4 15.7

OZAY M E H M E T

The convergence trends in Table 9.1 represent only a beginning of a more fundamental shift. Just as Korea, Singapore, Taiwan and Hong Kong have graduated to industrialized country status along with Japan, so there are other candidates such as Malaysia and Thailand which have already emerged as Newly Industrialized Countries (NICs), and others such as Indonesia and Philippines are on the way to graduation. Looming larger is the emergence of China, which is expected to become the largest economy (in absolute terms) early in the 21st century.1 Trade prosperity is creating a new sense of confidence in the Asia Pacific which some regard as the beginning of a new "Asian identity" or regional "consciousness."2 The relevant trends since 1970 are illustrated in Table 9.2, which also provides a projection to the year 2000. According to the data in Table 9.2, Asia-Pacific economies (the first four rows) collectively accounted for only 10.5 percent of total world trade in 1970. By 1987, this share rose to 19.6 percent, and it is expected to rise to 22.0 percent by the year 2000. Moreover, dramatic trade expansion in Asia Pacific has been matched by losses in trade shares for North America and Europe. Thus, the U.S. share has declined from 14 percent to 10 percent and is set to represent only 9 percent of world trade in 2000. TABLE 9.2 Asia Pacific in World Trade, 1970 - 2000 (percentage shares) Region/ Country Japan ANIEs ASEAN 4 China

USA WORLD

1970

6 1.5 2 1

14 100

1987

2000 (projected)

9 6 3 1.6 10 100

9 7 3 3 9 100

SOURCE: Ippei Yamazawa and Fu-Chen Lo, eds., Evolution of Asia-Pacific Economies, International Trade and Direct Investment (Asia-Pacific Development Centre: Kuala Lumpur, 1993), Tables 2.1 & 2.6. NOTES: ANIEs = Asian new industrializing economies: refers to Korea, Taiwan and Hong Kong. ASEAN 4 refers to Indonesia, Malaysia, Thailand and Singapore.

As a result of trade shifts huge reserves, trade surpluses and savings are now concentrated in such Asia Pacific centres as Taiwan, Hong Kong and Singapore. These resources are financing an unprecedented economic dynamism in the region. In the 1980s these

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surpluses were channelled into Southeast Asian economies. Today they are flowing into the Chinese mainland, which has now become by far the largest recipient of direct foreign investment (DPI) in the developing world, attracting a remarkable $38 billion out of the $90 billion total DPI destined to developing countries.3 EXPLAINING THE ECONOMIC GROWTH OF THE TIGERS What is the explanation for this convergence? It is rapid and sustained economic growth. Behind this growth lay the emphasis which the governments of East Asia put on HRD in the initial stages of their economic expansion, in order to generate dynamic benefits by new, policy-induced comparative advantage. As the role of HRD is still largely misunderstood, it may be useful to start with explaining what it is. Following the pioneering work of Theodore Schultz4 and others,5 HRD is investment in human capital formation through education and skill training. This also includes research and development (R&D) expenditures to develop new entrepreneurial and technical know-how. Some key HRD indicators are summarized in Table 9-3. As Japan is considered the prototype for the East Asian Economic Miracle, Table 9-3 compares that country with Canada and the U.S. on the basis of key HRD indicators. While Canada and the U.S. compare favourably with Japan in terms of mean years of schooling, they have lagged significantly in scientific and technical education, especially at the middle education level. Canada is also well behind in terms of R&D expenditures as a percentage of Gross National Product (GNP). What is notable in Table 9.3 is that while Canada and the U.S. placed top priority on the development of tertiary level education (e.g. to expand accessibility to university), Japan, by comparison, underinvested in tertiary education while giving top priority to expanding its technical education at the middle level. Thus, over 90 percent of the relevant age group of Japanese graduate from secondary schooling, compared to about 72-73 percent in North America. A much higher proportion of Japanese students study science and technical subjects in a rigid and highly regulated manner, whereas in North America a higher percentage go to university, mostly to study liberal arts, humanities or non-science fields.

OZAY M E H M E T

TABLE 9.3 KEY HRD INDICATORS OF EAST ASIAN ECONOMIC MIRACLE

USA CANADA Key HRD Indicators 12.4 12.2 Mean years of schooling, total 1992 (25+) 1.4 R&D expenditures as 2.9 percentage of GNP, 1989-91 Science graduates, as 16 15 percentage of total, 1990-91 73.4 Upper Secondary graduates 72.5 as percentage of population of normal graduates age, 1991 Tertiary graduates as 29.6 33.3 percentage of population of normal graduates age, 1990-91 SOURCE: UNDP Human Development Report 1994, Table 32,p. 188

JAPAN 10.8 2.8 26

91.1 23.7

These priorities in HRD are now being replicated in other Asia Pacific economies. There is a general underinvestment in university education—which, incidentally, is one reason for the traditional high demand by Asian students for Canadian university places, though the numbers are now falling6—coinciding with a high rate of investment in technical and science education, especially at the middle level. The conclusion emerging is that HRD policies have enabled East Asian countries to generate new comparative advantages in their export-oriented growth strategy. This strategy was initially labourintensive as well, and HRD policies enabled these economies to achieve Growth with Equity. They grew at rates of over 8 percent per annum while also promoting equitable wealth redistribution through an expanding share of labour income. SUSTAINABILITY AND FUTURE PROSPECTS Looking to the future, how sustainable is the East Asian Miracle? There are two major schools of thought on this question: the nationalist/ protectionist school, and the internationalist school. The nationalist school sees East Asian dynamism as a threat to Western economic hegemony in a zero sum game worldview of trade. A political or strategic version of this school of thought is represented by Samuel Huntington of Harvard University. In his influential Foreign Affairs article on the clash of civilizations, Huntington postulated a confrontational world order divided along cultural "faultlines," in particular a Muslim-Confucian world mobilized against the

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Christian West.7 Another pessimistic scenario of this school is presented by observers like Kaplan and Homer-Dixon, who project a world of conflict and competition for diminishing global resources, resulting in disintegration, chaos, and floods of refugees from an impoverished Third World crushing at the gates of an affluent West.8 Further variants of the nationalist/protectionist school can be identified among various lobbies and interest groups, including American trade unions, with their pressure for environmental standards, human rights or other forms of "new conditionalities" aimed at arresting job losses in the North arising from capital mobility and investment flows to low-wage economies in the South.9 Consequently, social clauses formulated unilaterally in the West for application universally are perceived as Eurocentric, as a product of "the West versus the Rest" mindset. As such they are being strongly resisted in the South, where these attempts are dismissed as hypocritical forms of Western Crusade to undermine the comparative advantage of newly industrialized countries. Thus, Southeast commentators10 and, in particular advisors close to the Malaysian Prime Minister Mahathir11 have accused the West of manipulating human rights and the environment to create new forms of self-serving trade protectionism. While these accusations may be overstated, especially if and when they ignore systemic exploitation of labour as a basis for creating new comparative advantages (see below), it is evident that "contestability of markets"12 has entered the agenda of international trade and investment policy. Turning to the internationalist school, it is important to identify two important divisions within it: the Old Trade School based on the static Ricardian Free Trade Theory, and the new International Social Policy Agenda now slowly emerging.13 These two schools of thought are further elaborated upon below. The proponents of the Old Trade School cling to a Ricardian type of static internationalism. This school of thought, perhaps most notably represented at the present time by Paul Krugman, explains the rise of the Asia-Pacific economy in terms of factor endowments. It attributes rapid growth since 1970 to unprecedented expansion of capital accumulation and labour force. Paul Krugman dismisses as "myth" any thought of "economic miracle" in the rise of East Asia14 due to total factor productivity. His analysis, derived from a standard production function approach, finds no evidence of residual growth. Consequently, Krugman and others of this school believe that East Asian dynamism is unsustainable, as it is bound to encounter

OZAY M E H M E T

diminishing returns. Krugman's approach, however, is a deterministic, ex post facto analysis. It amounts, for example, to denying the educational and other qualitative enhancement of the Malays in Malaysia since 1970. Likewise, Krugman's attempt at drawing parallels between the economic history of the Soviet Union and the Asian Tigers reveals an astonishing lack of understanding of the region. Statistical and historical biases aside, the Old Trade school suffers from serious analytical deficiencies. It is built on static analysis and, as such, it is limited by the Prisoner's Dilemma: in the real world of dynamic change and interaction potential gains of trade are not enough; trading partners must actually benefit from specialization and exchange. Otherwise, international cooperation will break down. The Ricardian theory fails to reward cooperation in real terms. Historically, international trade has benefited the industrialized North at the expense of the primary producer countries of the South. In AsiaPacific, since 1970, this pattern has been broken. As a result of economic dynamism, Asia Pacific countries have successfully diversified their economies and have acquired new comparative advantages, and they are attempting to turn the tables on the North. It seems they will succeed unless a cooperative solution is found for better and more equitable rules of management for international trade. The way out of the Prisoner's Dilemma of the Old Trade regime lies in the cooperative management of the new international trade system that is now being created by the dynamic benefits of trade and development. What are these dynamic benefits which produce new comparative advantages for trading nations? How are they generated? In brief, they are generated by enabling policies in a "developmental state," guided by a modernizing leadership actively "governing the market"15 to promote rapid economic development. Dynamic benefits of trade are induced and nurtured by government policy. Normatively speaking, these policies are of two kinds: (1) developmental policies that are ethical, notably HRD policies; and (2) policies which promote coercion or exploitation. We shall come to the second type later, after a discussion of the first, i.e. developmental policies which are ethical as well as well as growth-stimulating. The East Asian "miracle" demonstrates how HRD policies can create dynamic benefits leading to new comparative advantages for trading nations.16 For example, investment in technical education and on-the-job skill training can make workers versatile and flexible in coping with modern techniques and know-how. Their productivity is

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enhanced. Similarly, technical innovation through R&D investments can lead to new products, just-in-time production systems, up-to-date sourcing and inventory management methods, creating pioneering comparative advantages. HRD and R&D investments are costly in the short term, but highly profitable in the longer run. A notable example is the Japanese semiconductor technology introduced in the late 1960s with huge initial expenditures, and leading to the micro chip revolution that rewarded Japan with returns on its earlier pioneering investment. Dynamic benefits (or increasing returns) are alien to Ricardian theory, which fails to acknowledge the role of education, training and R&D, not only because it is a static theory, but also because as a theory of activity driven by the private sector it denies any role for the "developmental state." Japan, of course, was the prototype of the "developmental state" by means of nurturing the economy, and was subsequently imitated elsewhere in East Asia. The dynamic benefits of HRD are now recognized as the main sources of growth by the New Growth Theory,17 recalling the Human Capital Revolution initiated by T.W. Schultz in the early 1960s. In contrast, Krugman rejects the residual growth theorem and argues that East Asian growth can be explained by conventional growth accounting. Somewhat paradoxically, Krugman in his latest book18 endorses the significance of technology-induced dynamic benefits for the U.S. economy. He acknowledges the serious decline of American education, and calls for investment in high-level skill development to match East Asian competitiveness. This latest Krugman position narrows the gap between the Old Trade internationalism and the more dynamic version of the internationalist position as represented by the World Bank. The Bank study on the East Asian Miracle19 acknowledged the importance of total factor productivity in the creation of a trade-based prosperity that has become the envy of the world.20 These high-performing Asia Pacific economies have not only realized rapid growth in excess of 8 percent per annum, they have also achieved poverty reduction through a more equitable redistribution of income. They did this as a result of heavy investments in growth-and-equity strategies, such as land redistribution, education, training and innovation. In economic terms, Asia Pacific dynamism represents unprecedented flows of capital, investment and technology into a region which as recently as two or three decades ago was underdeveloped, suffering from severe unemployment and poverty. In recent years

OZAY M E H M E T

export earnings from trade have created large pools of savings and trade surpluses in Taiwan, Hong Kong and Singapore. These surpluses and savings, in addition to those from Japan, are now financing growth triangles, industrial parks and special economic zones elsewhere in East and Southeast Asia.21 China and Indonesia are emerging as economic giants. The next century is well set to be an Asia Pacific century. There are more than economics and finance at work in Asia Pacific growth. There are cultural, historical and institutional determinants of Asia Pacific competitiveness. This justifies a multidisciplinary investigation of the East Asian economic miracle. Indeed, such a broad approach is essential, because increasingly the Tigers' comparative advantage lies in coercive and exploitative labour practices involving children, women and migrant workers with no legal protection or collective bargaining rights.22 What is worse, coercive and exploitative practices are often policy-induced; they are to be found not just in "sweatshops" or in sex and prostitution industries involving children and women as commodities, but also in new Export Processing Zones (EPZs), industrial parks and special economic zones, built by host governments for foreign investors. These policies promote competitiveness; they also run the risk of violating international standards and trade law. The comparative advantage theory now faces a dilemma involved in legitimizing coercive trade. To resolve the free trade-social policy dilemma in the East Asian context, it is necessary to reject revolving solely around "getting prices right" and "setting a level playing field." It is necessary to probe deeper for more fundamental sources of East Asian dynamism. The driving force behind the Tigers is policy pragmatism in a developmental state led by modernizing leaders. In turn, this state rests upon "Asian Values" of leadership, governance and ethics which are often at variance with their Western equivalents. ASIAN VALUES AND RENT-SEEKING IN THE DEVELOPMENTAL STATE In the East Asian developmental state policy governs the market and directs endogenous growth, specifically by promoting domestic business. For historical reasons, in several East Asian countries domestic business happens to be dominated by the overseas Chinese.23 These societies are multi-ethnic. Therefore, for pragmatic reasons of domestic policy, growth in the past had to be interlinked to distribution to

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ensure regime stability and social/ethnic harmony. In particular, ethnic politics in multiracial countries such as Indonesia and Malaysia24 produce policy pragmatism which ensures wealthsharing, or Growth with Equity. The system is financially fuelled by overseas Chinese capitalism. Generally, the ethnic Chinese capitalists are willing to be taxed in order to finance redistributive, affirmativeaction programs administered by the state, providing there is growth to ensure that all ethnic groups gain. Of course, there are always tensions over ethnic and redistributive politics25 and occasionally interethnic rivalries and money politics explode into violence and threaten stability. But, on the whole, the East Asian "developmental state" works reasonably well to produce regime stability. There is, however, a less transparent, more hidden dimension to the East Asian developmental state. In addition to official wealthsharing through fiscal transfers, there is also an unofficial form of redistribution through rent-seeking and gatekeeping activities. These include arbitrary fees, middlemen's commissions, kickbacks and payoffs, typically for arranging deals, and contracts and for securing licences and permits. They are typically paid by Chinese capitalists and foreign investors, and normally accrue to officials and political elites in charge of the decision-making institutions. Economic rents are an inseparable part of East Asian capitalism driven by the overseas Chinese. While this practice shares some similarities with Western capitalism, the East Asian variety also has some culture-specific characteristics. These will be surveyed below on the basis of a growing body of literature on the subject of "Asian Values," in particular, (1) Familism, (2) The Asian Concept of Power and Governance, (3) Accountability and Transparency, (4) Gift-giving and Gatekeeping, and (5) Corruption and Rent-seeking. FAMILISM East Asian capitalism rests on a bedrock of familism and personalism. Redding26 identifies the forces of familism and paternalism as the spirit of Chinese capitalism. Led by a key dominant figure the Chinese family is a business system of closely-knit trade/investment networks and extended family relations, operating on a regional and even a global basis. Familism represents vertical and horizontal integration, channelled through subcontracting and linking up familial networks spread across the Asia-Pacific region and beyond. Intra-group secrecy and trust are highly prized ethical norms bonding these networks.

OZAY M E H M E T

Chinese business networks closely match the Asian concepts of power and governance. These business networks enjoy privileged connections to ruling political and bureaucratic elites. Indeed, much of the Asia Pacific economic dynamism is the result of a mutually advantageous partnership between overseas Chinese capital and a system of "money politics."27 This partnership creates tremendous wealth at the top of the social pyramid with exploitation of labour at the bottom. Labour's exploitation at the bottom, and rent-seeking at the top, are policy-induced, specifically on account of lack of labour standards, which, in turn, is justified as the necessary condition for global competitiveness. Thus, cheap labour is part and parcel of a worldview which links poverty and rents to the Asian idea of power and governance.28 THE ASIAN IDEA OF POWER AND GOVERNANCE Asian political power is concentrated in an all-powerful state. Individual rights and civil society are inherently incompatible with this idea of state. Thus, in Japan the state has long encouraged gender inequality so that "good wives, wise mothers" voluntarily support "corporate warriors" working long hours for "Japan Inc."29 The Asian concept of political power and governance is fundamentally different from the Western concept. In the West political power is acquired and legitimized through a political process of popular voting; consequently state authority is indirect and instrumentalist, with government as an agency for translating popular will into policy so long as it enjoys the confidence of the people. No such instrumentalist concept of governance exists in Asian political culture. The Asian idea of power is amoral and personified around leadership. This reflects the notion of the Patrimonial Ruler,30 a benign father-figure whose authority does not derive from the people. The Patrimonial Ruler, like the father of a family, is authoritarian and patriarchal. Legitimacy stems from transcendental values or is the result of demonstrated physical might, as in military coups d'etat. In short, the Asian concept of power is independent of ethics. Outward order and harmony are placed above and ahead of justice or human rights. In this environment the evolution of civil society can only occur slowly. In the meantime, progressive attempts from the West to support democratic institutions, human rights and norms will be viewed by elites with suspicion, as a Western ploy to undermine Asian dynamism.31 Dialogue, especially through like-minded academic and

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non-governmental channels, may gradually overcome these suspicions, build mutual trust and open the way to cooperation. But much work remains to be done in the West in the study of Asian ways and values for the purpose of promoting inter-cultural dialogue. ACCOUNTABILITY AND TRANSPARENCY

The Asian concept of the authoritarian or patrimonial state conflicts most visibly in the domain of accountability and transparency in politics or public administration. There is no Asian tradition that makes political leaders directly answerable to the people, nor are bureaucrats in Asia expected to be public servants serving the general population. The predominant Asian value governing relations between rulers and ruled is the necessity of public order and harmony. It is considered shameful or coarse to indulge in open, public criticism of leaders. Criticism must be done privately, within established procedures such as intraparty factions and family networks or through sponsors who act as go-betweens. Western reporters and observers, accustomed to press freedom and adversarial relations between news media and public officials, often find themselves in violation of these Asian values. To be sure, Asian values as related to accountability and transparency do not mean that there is no room for criticism or dissent as part of a democratic process. Dissent and criticism occur on Asian terms. To take an example from what may be regarded as an Asian democratic system, reference may be made to the Malaysian United Malay National Organization (UMNO), the dominant party which has retained power by democratic processes since independence.32 UMNO is characterized by intense intraparty politicking while maintaining outward party solidarity and unity. The ethnic Chinese and Indian coalition partners of UMNO, which form the governing coalition, operate in the same manner. The net effect of these Asian values is to limit the familiar (Western) rules of accountability and transparency. Access to information rules do not exist, freedom of the press is not regarded as a democratic imperative, there are no conflict of interest regulations or ethical codes of conduct for public officials.

OZAY M E H M E T

GIFT-GIVING AND GATEKEEPING

East Asian environments exhibit a widespread custom of gift-giving tantamount to what in the West would be treated as corruption and bribery. In Asian terms, however, gift-giving and gift-taking are intricately related to the concept of power. It is quite normal in Indonesia33 or elsewhere in East Asia for holders of power to acquire wealth by influence-peddling. Typically, this means selling licenses and permits to investors and businessmen. Thus, officials act as "gatekeepers," rationing licenses to the highest bidder to supplement meagre salaries. In turn, investors and businessmen willingly pay these "transaction costs" which are added on to the cost of doing business. The exchange of licenses by "gate-keepers" for gifts of money and goods (sometimes cars and houses) is an acceptable form of demonstrating reciprocity, a highly valued Asian custom. Such reciprocity may convert official functions into private property, subordinating public interest to private gain, but does not necessarily lead to conflict of interest for two reasons. Firstly, in the authoritarian, patrimonial state, it is expected that the office holder should be rewarded for loyalty to the ruler or the immediate boss who is the ultimate judge of such things. Secondly, there are undefined limits on the correct form of gift-giving and gift-taking which reduce acts to ritualistic ceremonies, as in Japanese tea ceremony or the Wayang Kulit (a shadow play) in Southeast Asia. Taking and giving gifts must be done with style and delicacy, typically during festivals and ceremonies, and in secrecy or privacy to avoid public disquiet or disharmony. Giving and taking a gift cements and sustains relationships at all levels of society: within the family, in business, and at official, administrative levels. CORRUPTION AND RENT-SEEKING ACTIVITY

The effect of gift giving in the developmental state is that it increases transaction costs and institutionalizes a system of rent-seeking. In Western neo-institutional literature, rent-seeking activity is regarded as unproductive, causing cost-push inflation,34 and is a major source of "government failure."35 There is, however, a significant variance in the Asian context. Some observers have justified rent-seeking as a form of incentive, a value-enhancing stimulus that can lead to brand new sets of rights, which would be an Asian variant of Schumpeterian pioneering comparative advantage.36 Khan, for example, has combined this

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framework with an input-output analysis applied to South Korea, India and Malaysia. The argument here is that rent deployment may be good for wealth redistribution to the extent that rents received by the powerful and influential elites are, at least in part, channelled into wealth-sharing transfers to the lower income groups. Other studies of rent-seeking have extended the concept to analyze new forms of clientelism in Thailand37 and elsewhere in Asia Pacific. What emerges from the above can be summarized in the following four conclusions: Firstly, in macroeconomic terms, Asia Pacific dynamism reflects an impressive trade-oriented growth performance with high savings and investment, driven significantly by overseas Chinese. Secondly, in these economies, significant wealth sharing and redistribution have taken place within the framework of a developmental state, in part owing to domestic ethnic politics, but primarily in conformity with "Asian Values." Thirdly, while in several East Asian developmental states a high value has been placed on HRD to increase the supply of highly qualified manpower for rapid growth, these HRD investments have been strategic and selective. Many states are still characterized by serious underinvestment in primary schooling and elitist tertiary education. Fourthly, and most disturbingly, Asia Pacific dynamism is now in danger of institutionalizing an economic system of rent-seeking and exploitation of labour as part of an overall strategy of generating new comparative advantages. To the extent that these advantages are policy-induced, they constitute export subsidies and violate international trade rules. FREE TRADE OR UNFAIR TRADE PRACTICE?

Coercive and exploitative labour practices underlying Asia Pacific dynamism may be consistent with the Old Free Trade system which ignores ethical norms and legal standards. But are these practices acceptable if and when they are policy-induced? We now examine three specific cases of policy-induced unfair trade practice in Asia Pacific. The three cases are: (i) Export Processing Zones, (ii) the informal sector and (iii) migrant workers. EXPORT PROCESSING ZONES Export Processing Zones (EPZs) in newly industrializing economies are industrial parks and estates, especially built by host countries to attract foreign investment. They provide low rent, fully serviced land

OZAY M E H M E T

and real estate, cheap electricity and, above all, cheap migrant labour. Since they are the result of government-induced policies, these measures amount to a significant form of export subsidy. As such, they appear to be illegal under the World Trade Organization (WTO) rules—based on Article XVI of the GATT trade regime—which prohibit export subsidies on non-primary products.38 EPZs are popular with investors, especially foreign investors from high-wage economies in the North. While job losses have occurred in the North in the wake of capital mobility, employment on EPZs has increased rapidly in the last 15 years. It grew by 9 percent per annum in 1975-86, and by more than 14 percent in 1986-90.39 Generally, working conditions on EPZs are relatively unfavourable to workers, either due to lack of social security or because of low unionization which results in poor collective bargaining rights.40 These conditions have particular impact on women who make up more than 70 percent of the workforce on EPZs. In some cquntries, female workers are required to undergo virginity tests, and are fired for absenteeism due to menstruation, pregnancy or childbirth.41 A particularly exploitative practice found on EPZs is labour contracting which exempts employers from responsibility toward the workers simply because there is no employment contract in place. It would be incorrect to argue that all EPZs involve exploitative working conditions. This is simply not true. In Malaysia, for example, working conditions on the larger EPZs tend to be superior when compared to sweat shops and local backyard industries.42 It is also relevant to point out that the gender issue is more complex; sometimes female employment may simply reflect the general social and cultural precepts of the country, including its traditional sex-related division of labour. Subordination of women on EPZs, despite its shortcoming, may indeed compare favourably to traditional cottage industry or unpaid family farm work. Nevertheless, more HRD investments on EPZs are warranted to protect and enhance working conditions. INFORMAL SECTOR The informal sector represents a major source of employment in many developing countries. In Indonesia it accounts for two out of every three jobs in the country.43 The growth of the informal sector is a complex process, but it reflects unprecedented urbanization, capitalintensive industrialization and limited job opportunities in the formal

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sector. Some of the unplaced job-seekers become international migrants (see below). Most, however, end up in the informal sector, overcrowding it all the more, multiplying the numbers of the working poor and recreating poverty. The bulk of the informal sector consists of legal, small enterprise activities. But as the name implies, the informal sector is outside the realm of labour codes, in particular the International Labour Organization (ILO) Conventions 29 and 105 on slavery and forced labour (Table 9.4). This is often the case with street kids, casual and itinerant traders, market women and underage child workers. Typically, these vulnerable groups of workers sell goods and services manufactured in the formal sector enterprises, such as cigarettes and processed food. Working long hours for minimal earnings, they provide cost-saving marketing and distribution services to formal sector enterprises. TABLE 9.4 RATIFICATIONS OF CORE ILO CONVENTIONS IN (as at October 31,1994) Country

Indonesia Malaysia Korea Philippines Singapore Thailand CANADA

Freedom of association (conv. 87)

Right to Forced collective labour bargaining (conv. 29) (con. 98) x x X

x

X

X X

X X

x

U.S.A.

Abolition of forced labour (conv. 105)

NonMinimum discrimi- age nation (cov. 138) (conv. Ill)

x

x x x x

x

x

X

SOURCE: WDR 1995: 150-2.

Coercive and exploitative practices in these informal sector activities breed poverty, generation after generation. Cheap labour, long hours, dangerous and unhealthy work are not only contrary to human dignity; on economic grounds they represent objectionable ways for trading countries to acquire comparative advantages. They should be replaced by incentive programs through HRD policy interventions, for

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the purpose of transferring children, women and vulnerable groups into education and skill development programs. MIGRANT WORKERS

Economic migration has become a major international issue. Migration flows are rapidly increasing. According to the International Organization for Migration up to "70 million persons, mostly from developing countries, are either working legally or illegally in other countries, over one million persons emigrate permanently to other countries each year, close to an equal number seek asylum and over 12 million refugees live outside their homelands compared with about 2 million in the 1950s."44 Labour mobility is, of course, a desirable thing, benefitting both sending and receiving countries. While globalization has virtually universalized free capital mobility, this is not the case with labour mobility. With uneven economic development we can expect increasing labour migration. In the dynamic Asia Pacific much of the contemporary labour migration flow takes place through illegal underground channels, controlled by labour contractors and agents' networks, and operate without rules or standards.45 Migrant workers include contract workers, illegal immigrants, asylum seekers and refugees. Malaysian agricultural plantations are now almost entirely worked by migrant workers.46 In Asia Pacific, there is a substantial trade in exporting and importing human beings, both intraregionally as well as over long distances, typically individuals who are ever willing to take "3D jobs"— dirty, dangerous and difficult.47 In this human trade, women are particularly subject to exploitation by unscrupulous labour contractors, as recent cases of Filipino maids sent to the Gulf States and Singapore have demonstrated. Increasingly, foreign workers are being linked to crime and violence.48 The international community needs to apply rules and standards to prevent a modern return to the "slave trade." There are international labour codes designed to protect migrant workers, for example ILO Convention No. 118 which provides for equality of treatment with national workers, and Convention No. 157 which qualifies migrants for social security benefits. Typically, these standards are avoided. There would be full justification for international action, with Canadian support and initiative, to eliminate exploitation as a basis of

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trade. As Steve Chernovitz49 has argued, free trade should not be allowed to become unfair trade. PROMOTING LABOUR STANDARDS: WHAT CAN CANADA DO? Canada can play a significant role in the promotion of international labour standards. This should be done by focusing on HRD, multilaterally and cooperatively, through APEC, the Association of Southeast Asian Nations (ASEAN), the WTO, the ILO and other international fora. It should not be done by confrontation, or by imposition of Western conceptions of environmental or human rights standards, but by cooperative action with Asian partners, who, after all, appreciate and understand the value of HRD. Much useful work on social clauses is currently underway in international organizations.50 Canada, which is a player in these discussions, should see to it that the social clauses debate does not become a purely intra-Western debate,51 but a truly intercultural dialogue to allay Asian fears of Eurocentricity in these efforts. It is desirable that Canada opt for a negotiated resolution of differences between Asian and Western countries rather than a confrontational application of trade rules. For example, Article XVI of GATT prohibits export subsidies on non-primary products and, accordingly, some may wish to bring a charge of social dumping against Asian countries for unfair labour practice on EPZs and industrial estates. A wiser and more constructive course of action would be to promote labour standards multilaterally through the Trade Policy Review Mechanism (TPRM) in the existing WTO regime. Canada could take the initiative to strengthen and operationalize the TPRM as a non-confrontational instrument of conflict management.52 Unfair labour practices, such as child employment in sweatshops, prostitution or forced labour cases, cannot be eliminated overnight, however repugnant they may be, nor are the reform measures themselves cost-free. Trade bans and boycotts should be avoided, as they would almost certainly hurt the poor families most; instead HRD investments in the informal sector should be encouraged. These investments benefit child workers, but they also have short-term direct and presumably opportunity costs for the affected families. Therefore, some kind of family allowance must be part of the reform package, to include meaningful compensation for poor households now dependent on unfair labour practices as a source of family income. This equitable approach, however slow and costly, would be more effective for enhancing worker rights and better working

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conditions than confrontational trade strategies. Investment in the schooling of child workers in the informal sector-coupled with other policy interventions aimed at formalizing the informal sector, should represent the first line of action for governments who are willing to promote international labour standards. Collective bargaining rights and freedom of association for workers in the formal sector are essential for improving wages and working conditions. These rights are enshrined in the ILO Conventions 87 and 98, which few East Asian countries have ratified (Table 9.4). The extreme case is South Korea, where none of the core standards listed in Table 9-4 are ratified; not suprisingly, worker unrest there is on the increase. In several Asia Pacific Tigers workers are now demanding these rights, and more demands in this direction can be expected in future.53 It is important that international action, supported by academic and non-governmental initiatives, be forthcoming in order to promote labour policy reforms as part of better governance. However, these supportive initiatives should not seek to impose Western ideas on the countries of Asia Pacific; rather they should be directed towards promoting constructive dialogue intended to overcome Eurocentricity in existing conventions and procedures. There are limits to what a middle-power country like Canada can do. The subject is complex, and there is no consensus yet on what constitutes "core labour standards," nor is there adequate clarity of meaning and scope in the existing ILO standards.54 However, those listed in Table 9-4 provide a good starting point. Work is currently underway on this agenda in various international bodies, especially at the ILO, the WTO, the OECD and the World Bank. Canada should be actively involved in all four, to broaden the discourse across both sides of the Pacific in support of a fairer global trade. Most specifically, Canada can contribute to multilateral cooperation (1) by endorsing and promoting greater multilateral interagency coordination between the four organizations tested above, and (2) by taking advantage of its position in APEC and ASEAN to play an "honest broker" role in support of a non-confrontational strategy of linking trade with better labour standards through HRD interventions. Currently there is a taskforce in the ILO working to redefine the outmoded Convention 138, in order to better determine what constitutes exploitation of working children. Canada should support the inclusion of HRD incentives in this new initiative, in particular by ensuring that the new Convention is consistent with the more progressive 1989

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UN Convention on the Rights of the Child, already ratified by 187 countries.55 Ratification, of course, is only a necessary, and not a sufficient, condition for the implementation of labour standards. A major difficulty is that labour standards are deficient in the North as well. For example, the U.S. has ratified only one of the six "Core Standards," as is shown in Table 9.4. Canada's own record is somewhat better, but clearly much work remains to be done domestically on the social policy dimensions of international trade. International dialogue on the subject is not a one-way flow of reform ideas. Notwithstanding objections from certain vested interests, Social Policy is now entering the agenda of international trade negotiations as "the most potential conflict on the trade agenda."56 It may well be one of the central themes of the next round of Multilateral Trade Negotiations. Accordingly, the time has come for Canada to take some leadership in promoting a fairer global labour market.57 NOTES Comments on earlier drafts of this paper by Martin Rudner, Errol Mendes, Jean Deaudelin, Hatsue Kasuya and participants in a workshop at NPSIA on December 5/6, 1996 are gratefully acknowledged. The author takes full responsibility for all opinions and interpretations. 1 2

3 4

5 6 7

For an optimistic assessment of China's prospects, see Nicholas D. Kristoff, "The Rise of China," Foreign Affairs, 72, 5 (November/December) 1993, 59-74. See, for example, Funabashi Yoichi, "The Asianization of Asia," Foreign Affairs, November/December 1993; N. Sopiee, The Rise of East Asian Consciousness: The Psychological, Cultural and Political Dimensions (Conference on East Asia, Kuala Lumpur, January 8,1993); Gerald Segal, "China's Changing Face," Foreign Affairs, vol. 73, no. 3 (May/June 1994), 54-58. These data are from World Bank, World Debt Tables, External Finance for Developing Countries, vol. 2, Washington, DC 1996. The original and influential contribution was by Theodore W. Schultz, "Investment in Human Capital," American Economic Review, vol. 51, no. 1, March 1961, 1-17, restated and updated in numerous subsequent publications of Schultz and his students. This pioneering work won Schultz a Nobel Prize in economics. For a survey of the vast literature on the subject, see Ozay Mehmet, Human Resource Development in the Third World, Cases of Success and Failure (R.F. Fryre: Kingston, Ont., 1988, Chapter 1.) Martin Rudner, "Canada and International Education in the Asia-Pacific Region," Chapter 10 in this volume. Samuel Huntington, "The Clash of Civilizations," Foreign Affairs, vol. 72, no. 3 (Summer 1993), 22-49.

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8 9 10

11 12

13

14 15 16 17

18 19 20

21

Robert Kaplan, "The Coming Anarchy," The Atlantic Monthly, vol. 273, no.2, (February 1994), 44-76; Mark Kingwell, "Meet Tad, the Doom-meister," Saturday Night, September 1995, 42-49. Here the American labour movement is especially protectionist. See for example, AFL-CIO, Southeast Asia Labor Notes, Washington, DC., Winter 1995, and Press for Change, Nike in Indonesia, Bayonne, NJ, February 1995. See for example, K. Mahbubani, "The West versus the Rest" National Interest, summer 1992 and B. Kuasikan, "Asia's Different Standard," Foreign Policy, no. 92, (Fall 1993) 24-41. For a counter-argument, see Matthew Connelly and Paul Kennedy, "Must it be The Rest Against the West?" Atlantic Monthly, October 1994. Sopiee, "The Rise ..." M. Hart, "The Global Trade Regime, Labour Standards and the Contestability of Markets," (mimeo.), Monterey Institute of International Studies, October 1996. However, it is important to emphasize the intercultural dimension of market contestability in these trade disputes. For an extended discussion of this topic, see Ozay Mehmet, Errol Mendes and Robert Sinding, Promoting a Fair Global Market Place, (Mimeo.), Ottawa, March 1995. Also see C. Elwell, Human Rights, Labour Standards and the New WTO: Opportunities for a Linkage—A Canadian Perspective, International Centre for Human Rights and Democratic Development, Montreal 1995. Paul Krugman, "The Myth of Asia's Miracle," Foreign Affairs, vol. 73, no. 6 (November/December 1994), 62-78. Robert Wade, Governing the Market; Economic Theory and the Role of Governments in East Asian Industrialisation, (Princeton, NJ: Princeton University Press, 1990). For an extended discussion of this topic, see Ozay Mehmet, Human Resource Development, Chapter 2. Robert E. Lucas, "On the Mechanics of Economic Development," Journal of Monetary Economics, vol. 22, (July 1988), 3-42; Paul Romer, "Endogenous Technological Change, "Journal of Political Economy, vol. 98, no. 5, Part 2,571-5102 October 1990; M.F.G. Scott, A New View of Economic Growth: Four Lectures, World Bank Discussion Papers 131, Washington, DC, 1991. Pop Internationalism (Cambridge, Mass.: MIT Press, 1996), esp. Chapters 12, "Technology's Revenge," and 13, "The Localization of the World Economy." This influential study is The World Bank, The East Asian Economic Miracle, (Washington, DC: Oxford University Press, 1993). Recent examples of this view are to be found in C. Fred Bergsten and Marcus Nolan, eds., Pacific Dynamism and the International Economic System (Institute for International Economics: Washington DC., 1993) and Jose E. Campos and Hilton L. Root, The Key to the Asian Miracle, Making Shared Growth Credible (Washington, DC: Brookings Institution, 1996). A survey of the topic is in the chapter by Chia and Lee in Bergsten and Nolan, eds., Pacific Dynamism ...

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22

23 24

25

26 27

28

29

30 31 32 33 34

For evidence relating to child labour, unhealthy and unsafe working conditions, discrimination and lack of worker rights, see World Bank, Involving Workers in East Asia's Growth, Washington DC., 1995, esp. Chapter 4: "Labor Policies, Labor Institutions and Worker's Welfare." An excellent and comprehensive study of the subject is in Commonwealth of Australia, Department of Foreign Affairs and Trade, Overseas Chinese Business Networks in Asia, Parkes, ACT, 1995. On Indonesia, see L. Suryadinata, Primbumi Indonesians, the Chinese Minority and China (Heineman Asia: Singapore, 1992). On Malaysia, see James V. Jesudason, Ethnicity and the Economy; The State, Chinese Business, and Multinationals in Malaysia (Oxford University Press: Singapore 1990). For a more detailed discussion, see Ozay Mehmet, Development in Malaysia: Poverty, Wealth and Trusteeship (London: Groom Helm, 1986) and, by the same author, "Rent-seeking and Gate-keeping in Indonesia: A Cultural and Economic Analysis," Labour, Capital and Society, vol. 27, April 1995, 56-89. See in particular Chapter 7 of Gordon S. Redding, The Spirit of Chinese Capitalism (de Gruyter: Berlin and NY, 1993). Also highly relevant is Commonwealth of Australia, Overseas Chinese ... There is a growing literature on the subject. See for example, Shamsul A.B., From British to Bumiputera Rule (Institute of Southeast Asian Studies: Singapore, 1986); R. Robison, Indonesia: the Rise of Modern Capital (Allen & Unwin: Sydney 1986); Jomo K.S., A Question of Class, Capital, the State and Uneven Development in Malaya (Oxford University Press: Singapore 1986); E.T. Gomez, Political Business: Corporate Involvement of Malaysian Political Parties (James Cook University: Cairns, Queensland, 1994). This is quite consistent with the growth-with-equity strategy previously described above, in that workers may be paid higher wages (compared to the agricultural sector for example), but these wages are still a fraction of value added, or well below the workers' marginal product. Of course, workers also face labour market discrimination, e.g. migrant workers. A gender-focused recent study is Hatsue Kasuya, Japanese Economic Development Model, Growth with Gender Inequity, unpublished master's research essay, Carleton University, The Norman Paterson School of International Affiars, 1996. The classic study of the subject is B. Anderson, "The Idea of Power in Javanese Culture," in C. Holt, ed., Culture and Politics in Indonesia, (Ithaca, NY: Cornell University Press, 1972). As has been most articulately argued in the writings of Mahbubani, Kausikan and Sopiee cited above (see Notes 2 and 10). See for example, B. Gale, ed., Readings in Malaysian Politics (Petaling Jaya, Malaysia: Penduluk Publications, 1987). A case study is Mehmet, "Rent-Seeking and Gate-Keeping ... ," 1995. As argued by M. Olson, The Rise and Decline of Nations (Yale University Press: New Haven, 1982) in the context of the U.S. trade policy.

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35 The original contribution on rent-seeking was by A. Krueger, "The Political Economy of Rent-Seeking Society," American Economic Review, vol. 64, no. 3, (June 1974), 291-303- Her more recent paper on the subject is "Government Failures in Development, "Journal of Economic Perspectives, vol. 4, no. 3, (Summer 1990), 9-23. 36 Recent examples of this viewpoint are offered by J. Ravenhill, "Rents and Development: A Schumpeterian Approach," (Paper presented at the Workshop on Rents and Development, University of Malaya, Kuala Lumpur, August 27, 1996); and M.H. Khan, "A Typology of Corrupt Transactions in Developing Countries," IDS Bulletin, vol. 27, no. 2, 1996. 37 See R.F. Doner and A. Ramsay, "Postimperialism and Development in Thailand," World Development, vol. 21, no. 5, May 1993, 691-704. 38 J. Trachtman, "International Regulatory Competition, Externalization and Jurisdiction," Harvard Journal of International Law, vol. 34, no. 1, 1993, 47; J.R. Holberin et al., "Comparative Analysis of Specific Elements in United States and Canadian Unfair Trade Law," International Lawyer, vol. 26, 1992, 873-898. The subject is also briefly discussed in Mehmet, Mendes and Sinding, "Promoting ..." 39 P. Bailey et al, Multinationals and Employment: The Global Economy of the 1990's, ILO, Geneva 1993. 40 Source: International Confederation of Free Trade Unions (ICFTU), Annual Survey of the Violations of Trade Union Rights, ICFTU, Brussels, 1991. See also Bailey et al, Multinationals ... , 1993, esp. Chapters 9 and 10. 41 See for example World Bank, Involving Workers, 20. 42 See L. Sivalingam, The Economic and Social Impact ofEPZs: The Case of Malaysia, Working Paper 66, ILO, Geneva 1994. 43 A survey of the concept and its application in Indonesia is in Evers and Mehmet, op.cit. 1994. See also H. Lubbel, The Informal Sector in the 1980s and 1990s Paris: OECD, 1991). 44 These figures, which date from about 1990, are from R.T. Appleyard, International Migration: Challenge for the Nineties (International Organization for Migration: Geneva 1991), 1. More recent data indicate that "at least 125 million people now outside their country of origin." Source: World Bank, World Development Report 1995: Workers in an Integrating World, Washington DC, 1995, 65. 45 See M. Boyd, "Family and Personal Networks in International Migration: Recent Developments and New Agendas," International Migration Review, vol. 23, no. 3, 1989; Ozay Mehmet, "Labour Migration in Asia-Pacific," in Labour Migration in APEG A Canadian Perspective, (North-South Institute: Ottawa 1996) (forthcoming). 46 P. Pillai, "Malaysia," ASEAN Economic Bulletin, November 1995. 47 "Toilers of the East," Far Eastern Economic Review, April 2, 1992; ASEAN Economic Bulletin, Special Issue on Labour Migration in Asia, November 1995. 48 "Crackdown, government gets tough on migrant workers," Far Eastern Economic Review, October 31, 1996.

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49 See Steve Chernovitz, "Promoting Higher Labor Standards," Washington Quarterly, vol. 18, no. 3, 1995 and "The World Trade Organization and the Social Clauses," Journal of World Trade, vol. 28. no. 5, October 1994, 17-33. 50 ILO, Defending Values, Promoting Change: Social Justice in a Global Economy: An ILO Agenda, Report of the Director-General to the ILO Conference, 81st Session, Geneva 1994; OECD, Trade and Labour Standards, Paris 1996 and OECD, Core Labour Standards and Direct Foreign Investment, Paris 1996. 51 For a discussion centred purely on the European Union, see P. Waer, "Social Clauses in International Trade: The Debate in the European Union," Journal of World Trade, vol. 30, no. 4, August 1996, 25-42. 52 As proposed in Mehmet, Mendes and Sinding, Promoting ..., 71-73. 53 See for example "Worker Woes, Pro-Union Group Slams Asian Governments," Far Eastern Economic Review, July 6, 1995. Also see World Bank, World Development Report, 1995. 54 This point is well argued in R.T. Strank, Look Before You Leap: Core Labour Rights Policy, Staff Commentary 14, Department of Foreign Affairs and International Trade, Ottawa 1996. 55 See ILO, Child Labour: Targeting the Intolerable, International Labour Conference, 86th Session (1998), Report VI (1), Sixth Item on the Agenda, Geneva 1996, 29. 56 Waer, "Social Clauses ... " 1996, 25. 57 For a supportive position on this see the presentation by Maureen O'Neil, Chairperson, International Centre for Human Rights and Democratic Development, before the Senate Committee on Foreign Affairs, Ottawa, November 26, 1996.

X Canada and International Education in the Asia-Pacific Region

MARTIN RUDNER

1 he global expansion of merchandise trade and investment since the 1980s has been accompanied by a parallel growth in international educational mobility, especially at the tertiary (university and college) level. This has been reflected in the growing numbers of university and college students going abroad for study, in greatly increased international exchanges and linkages among scholars and researchers, and in the creation of new international mechanisms for the promotion of educational cooperation between academic institutions in different countries. This rapid internationalization of higher education is having a profound impact on the evolution of these university systems, on the economics of education and its expanding role in the growing trade in services, and on the shift in international competitiveness in favour of more globalized, knowledge-based capabilities. By the mid-1990s, available data indicated that over 1.5 million tertiary-level students were studying in academic institutions outside their home countries.1

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In contrast to other industrialized countries like the United States and Australia, Canada has been slow to engage in this burgeoning international trade in higher education services. During the past decade, the number of university students from Asia Pacific coming to Canada for higher education has actually dropped. Canada's declining attractiveness to international students, absolutely and also relative to that of other countries, is indicative of the diminished profile of Canadian higher education in the Asia-Pacific region. As this study will argue, the weakening competitiveness of Canadian higher education can have far-reaching ramifications for the longer-run competitive disadvantage of Canada's knowledge-based industries in the emergent Asia Pacific Economic Cooperation (APEC) trading community. TRENDS IN INTERNATIONAL EDUCATIONAL MOBILITY

The 1980s witnessed the emergence of international education as a highly valued "trade" in knowledge services. By 1995, the global market for international higher education was estimated at US$27 billion.2 In countries with well-developed higher education systems governments and academic institutions responded to perceived opportunities to market their "educational services" internationally. Much of this educational marketing effort was directed at high-growth developing countries in the Asia-Pacific region, whose own higher education systems were as yet incapable of meeting rapidly growing demand. The shift towards a more proactive approach to the "export" of higher educational services on the part of advanced industrialized countries was motivated by a combination of domestic as well as foreign and trade policy considerations. In many of these countries university administrators and governments were impelled by budgetary constraints and decelerating enrolment rates to seek out new catchment areas for educational recruitment. Between 1975 and 1990 the number of international students enrolled in colleges and universities in the United States, the top destination, increased by 127 percent. The substantial presence of students and researchers from abroad in countries of Europe and in the United States became significant components of the respective knowledge industries of these countries, and generated significant economic returns locally. Moreover, there was a growing awareness of the prospective spinoffs

MARTIN RUDNER

from international education in the form of the export of technology and equipment to world markets.3 As the trade potential became more widely recognized, governments and academic institutions in the U.S., Australia and Great Britain were among the leaders in embarking on focused efforts to promote the export of their higher educational services. A wide array of marketing mechanisms was deployed to publicize educational opportunities, to initiate formal arrangements between countries, to foster institutional collaboration and partnerships, and to facilitate student mobility, often using aid support. TABLE 10-1 International Mobility of Asia Pacific Students by Country and Destination, 1991a Source Country East Asia: Korea Japan Hong Kong China Taiwan ASEAN:

Indonesia Malaysia Philippines Singapore Thailand Vietnam

Total Number

Destination (percent) Australia Canada

USA

UK

38,000b 120,363C 36,110 85,000d n.a

80 30 35 48 33.5e

3 1 20 2 n.a.

8 4 12 27 2.5e

I6,500d 58,254 6,000d 15,371 10,000d n.a.

53 25 68 25 63 n.a.

4 14 1 21 4 n.a.

10

2

16 3 13 6

4

n.a.

Other

2

7

4 25 5 3.5e

61

2

14

3 n.a.

8 18 n.a.

30 41 30 10 24 n.a.

a: Includes primary, secondary and tertiary levels of schooling b: Students in English-speaking countries only c: Students and business people studying internationally d: Students studying at university level internationally e: Thousands n.a.: Not available. SOURCE: International Education: The Asia Pacific Region and Canada (Ottawa: DFAIT, 1993), Table A

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For the dynamic economies of the Asia-Pacific region trade in educational services has emerged as an important strategic element in their efforts to acquire the human capital resources deemed vital to sustain their long-term growth performance. At present, for most of the countries which are members of the Association of Southeast Asian Nations (ASEAN)—Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam— educational attainment at the post-secondary levels, and in science and technology, lags behind that of other countries at similar levels of economic development, and compares poorly with the situation in other developing areas like Latin America.4 As a result, the Asia-Pacific region has emerged as one of the major "markets" for this educational trade promotion effort. The United States had some 264,000 students from Asia in its higher education institutions in the early 1990s, but only 4,000 American students were studying in Asia. Students coming from Asia Pacific countries comprised nearly 60 percent of international higher education enrolments in the United States, over 52 percent in Canada, 45 percent in the United Kingdom and almost 75 percent in Australia.5 This impulse towards international educational mobility was particularly pronounced among the high-growth developing countries of ASEAN, as well as among the Newly Industrialized Economies of East Asia (Hong Kong, South Korea and Taiwan) and Japan. EDUCATION AND THE DEVELOPMENT PERFORMANCE OF ASIA PACIFIC COUNTRIES

The growth and modernization of their respective education systems contributed significantly to the rapid economic development experienced by the countries of East and Southeast Asia during the past three decades.6 Education also played a vital role in creating the knowledge base that enabled the East Asian economies both to generate and to absorb new ideas and technologies, and thus accelerate their movement up the technological ladder.7 Tertiary-level education grew along with the expansion of education systems in East and Southeast Asia. All governments have continued to invest heavily in higher education,8 and the ensuing expansion of higher education across East and Southeast Asia is evident in the sharply increased enrolment rates. Higher educational enrolment rates improved dramatically during the period 1980-1992, with student numbers growing sharply, especially in Korea, Indonesia, Malaysia, and Thailand. Despite this expanded access to

MARTIN RUDNER

higher education, tertiary-level participation rates in East and Southeast Asia continue to lag well behind those of industrialized economies and even other developing regions.9 Even Japan and South Korea, with tertiary participation rates of 39 percent and 28 percent, respectively, were well below the 66 percent attained by Canada and the United States.10 A major constraint on higher educational capacity in most Asia Pacific countries—and one that is least amenable to a speedy remedy—is the widespread and acute shortage of qualified academic staff.11 As a result of unmet social demand, an inordinately large number of students from East and Southeast Asia have had to go abroad to other parts of the world, mainly to Europe and North America, to complete their tertiary-level training. For most Asia Pacific countries, the flow of tertiary students going abroad actually represented a high proportion of total domestic university enrolments. In the early 1990s, Malaysia was actually sending abroad more students than could be enrolled in its home universities.12 The ratios of tertiary study abroad for the AsiaPacific region should be compared to an average propensity for studying abroad of about 1 percent for industrialized countries as a whole.13 These relatively high ratios of students studying abroad indicate that most East and Southeast Asian countries have become highly dependent on international higher educational resources for a significant component of their high-level human capital requirements. The effort to enhance human capital capabilities not only involved the broadening of access to tertiary training but also aimed at achieving qualitative improvements in the standard of excellence of domestic higher educational institutions, in particular their research capacity. Until now, most universities in East and Southeast Asia have functioned primarily as teaching institutions rather than as centres of research and innovation. To a considerable extent, this relative weakness in university research capacity is symptomatic of the paucity of the science and technology research effort across the Asia-Pacific region generally.14 Many Asia Pacific governments and universities are keen to strengthen their domestic research capacity by accessing the resources of leading international research centres through institutional linkages and specialized study abroad. International trade in higher educational services has played an important part in facilitating the accelerated acquisition of new areas of knowledge and expertise relevant to their ambitious national development goals.

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The growing dependence of Asia Pacific countries on international resources to offset domestic deficiencies in higher education capacity has imposed increasingly severe strains on the balance of payments of some of them. Some estimates have placed this cost at around US$2 billion a year for Malaysia alone. In order to better control costs, and to try to obtain greater educational value for public money spent on international education services, Asia Pacific governments have begun to seek alternative, more cost-efficient means of accessing international higher educational resources. To be sure, the main effort is being directed at expanding local opportunities for higher education through the enlargement and restructuring of their public university systems and by encouraging the development of private institutions. As well, a wide array of new initiatives are being explored, among them the negotiation of more favourable mobility arrangements within the APEC framework, diplomatic efforts to obtain concessional terms for international students, arranging twinning and other forms of collaboration with foreign institutions, and welcoming the establishment of foreign university branch campuses in-country. Yet until some of these other policies take effect, Asia Pacific countries are likely to continue the current dependency on students studying abroad for an increasingly significant portion of their human capital formation. APEC AND THE EMERGENT ARCHITECTURE FOR INTERNATIONAL EDUCATIONAL MOBILITY

The formation of the APEC forum in 1988 was driven primarily by economic goals, as its name implies.15 Early on, however, APEC accepted that human resource development could not be detached from the objectives of trade and investment liberalization and economic and technical cooperation. This attitude was reflected explicitly in the creation of an APEC Human Resource Development (HRD) Working Group as one of the originally mandated ten working groups. Subsequently, the APEC Leaders' Vision Statement, issued at the culmination of the first APEC leaders' summit in Seattle in 1993, endorsed the importance of higher education as investment in the future of economic development and cooperation across the AsiaPacific region. A year later, an APEC Leaders' Education Initiative Conference convened in Seattle. At this meeting considerable emphasis was placed the relevance of interuniversity exchanges for deepening and broadening economic cooperation in the region. The

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First APEC HRD Ministerial Meeting took place in Manila in January, 1996, and called upon the APEC HRD Working Group to give particular attention to developing policies and programs for, inter alia, facilitating educational mobility and expediting the liberalization of trade in human resource development services.16 International education thus emerged on to the APEC agenda. Perhaps because of their ambiguous goals education and HRD have been approached in a somewhat unfocused and diffuse way within the APEC framework. Three distinct organizational mechanisms are concerned with educational matters. The principal domain for addressing education and HRD issues is the APEC HRD Working Group. The main thrust of its discussions and activities addresses workforce-related skills and training. As well, an APEC Educational Forum was established as a result of a U.S.-sponsored meeting of APEC education ministers in 1992, and now functions as a virtually autonomous intergovernmental consultative mechanism on educational cooperation. A third mechanism, the University Mobility in Asia and the Pacific (UMAP) Program, was originally a separate Australian initiative, and was subsequently embraced as a flagship scheme for regional higher education cooperation under the APEC Leaders' Education Initiative. The UMAP program represents a reciprocal arrangement for largescale, bilateral exchanges of students across the Asia-Pacific region. Some 23 countries—including non-APEC countries like Cambodia, Laos, Mongolia and Russia—participate in UMAP exchanges of undergraduate students in all disciplines. Canada, for its part, has been markedly diffident in regard to UMAP, and has limited itself to observer status. Some provinces, most notably British Columbia, have indicated an interest in exploring modalities for their own UMAP participation. Whether this limited provincial participation will be acceptable to other UMAP participants remains to be revealed; be that as it may, it is clear that Canada's role in the principal APEC framework for international education is likely to be eclipsed by more energetic participants like Australia, Korea, Japan, Taiwan, the United States, and the ASEAN countries.17

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CANADIAN INVOLVEMENT IN INTERNATIONAL EDUCATIONAL MOBILITY IN THE ASIA-PACIFIC REGION

Canada's involvement in APEC educational and human resource development initiatives has been greatly complicated by this country's federal system of government, which places education wholly under provincial jurisdiction, as well as by the ambivalence surrounding Canadian attitudes towards international educational mobility. In the distinctive style of Canadian federalism, jurisdiction over issues involving higher education and international educational mobility was divided and dispersed among various federal, provincial and institutional bodies. It is noteworthy in this regard that other federal countries, notably Australia and the United States, have not been so hampered in their international educational initiatives. Canada's federalist structure has created a uniquely complicated, not to say disjointed, policy structure pertaining to international education. Canada is probably singular among countries of the world in not having a national department of education. As a result, at the federal level, responsibility for international educational issues is divided between Human Resources Development Canada, the Department of Foreign Affairs and International Trade (DFAIT) and the Canadian International Development Agency (CIDA), so far as it concerns international assistance for education and HRD. Canadian provinces and territories exercise jurisdiction through their respective ministries of education, and became collectively involved in APEC educational activities through their coordinating body, the Council of Ministers of Education, Canada (CMEC). Institutional participation in international education has involved individual universities and colleges as well as their respective national representative organizations, the Association of Universities and Colleges of Canada (AUCC) and the Association of Community Colleges of Canada (ACCC). So as not to offend provincial sensibilities, the government of Canada decided to designate certain non-governmental organizations as "lead institutions" or executing agencies for Canadian participation in APEC HRD activities. Accordingly, Canadian participation in the HRD Working Group was managed by the Conference Board of Canada, which also served as lead institution for the Business Management Network. The North-South Institute was made lead institution for the Economic Development Management Network, and the ACCC for the Human Resource Development for Industrial Technology Network. Similarly, the Asia Pacific Foundation was

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appointed Canada's "virtual" APEC Study Centre, as well as executing agency for the Canadian Education Centres (CECs) in Asia. To achieve a semblance of consensus and policy direction for Canadian involvement in the APEC HRD Working Group, a Canadian Policy Co-ordination Committee was set up with representation from DFAIT, CIDA, Human Resources Development Canada, Industry Canada, CMEC, along with the three "lead institutions" appointed to manage Canadian participation in the HRD networks. CMEC is the official Canadian contact for UMAP, but delegates most of its involvement to the AUCC. The ambivalence in Canada's approach to international education generally, and as regards the Asia-Pacific region in particular, reflects the underlying ambiguities and turmoil affecting Canadian education policy. On the one hand, Canada's education system benefited historically from one of the highest rates of public expenditure in the world. Moreover, government policies and political rhetoric emphasized accessibility to education, at all levels, treating this almost as an icon of Canada's human resource development. On the other hand, the universities of Canada have had to endure decades of increasingly severe underfunding. Federal transfer payments to the provinces in support of post-secondary education are being wound down and will soon cease entirely. Provincial governments, which have exclusive constitutional jurisdiction over their respective education systems, have tended to be distinctly ungenerous in their support for higher education, irrespective of party or province. Universities in Ontario, Canada's largest provincial system, have been especially hard hit in recent years. As a reflection of the relative deprivation experienced by Canadian higher education, despite a fifty percent increase in population and a more than doubling of real national income per capita, only two new universities have been opened in Canada over the past quarter century, the University of Northern British Columbia in 1994 and Royal Roads University in the fall of 1996. Today, the Canadian higher education system, for the most part, lacks the resources, the institutional energy and the policy incentives to be forcefully proactive in the burgeoning international trade in education services. Worse still, it may be losing its historic competitive advantages in the area of high quality international education.

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INTERNATIONAL EDUCATION IN CANADA'S NEW FOREIGN POLICY FRAMEWORK The foreign policy review of 1994 resulted in international education being accorded a significantly enhanced profile for international education on the agenda of Canada's recently elected Liberal government. In a potentially far-reaching departure the Report of the Special Joint Committee Reviewing Canada's Foreign Policy put forward a new cultural dimension for future Canadian foreign policy.18 This policy departure was subsequently adopted in the Liberal government's policy statement, Canada in the World, issued in February, 1995. The projection abroad of Canadian values and culture emerged as one of the government's three primary foreign policy objectives, along with the promotion of prosperity and employment and the protection of security.19 International education was deemed to be of "key importance" to achieving this aim. Indeed, the Liberal government pledged to work closely with the provinces, the private sector and universities and colleges to promote enrolment in Canadian institutions of higher education among foreign students and to encourage mobility of Canadian students through exchange programs and otherwise.20 The stated objectives were twofold: to help Canadian students acquire a global educational perspective, and "to build networks of the decision makers of tomorrow." This new pluralization of Canada's foreign policy objectives to encompass culture and education was reflected in Canadian orientations and involvement in APEC. Initially, DFAIT's management of Canada's role in APEC was concentrated overwhelmingly on trade and investment issues. In practice, the prevailing emphasis on the APEC economic agenda implied a certain disdain for the HRD Working Group, which some seemed to dismiss as a mere sop to the developing economies. Any suggestion that APEC be given an aid role was firmly resisted by DFAIT, and this limited the scope for CIDA involvement. Meanwhile, no other federal department was seen to be interested. The situation was unique, for Canada and for APEC, for the management of this country's participation in an APEC Working Group, the HRD Working Group and its sub-networks, was relegated to non-governmental organizations (the three "lead institutions") with modest financial support from CIDA. This modality for Canadian involvement effectively marginalized the APEC HRD domain, thereby undermining DFAIT's core priorities and commitments.

MARTIN RUDNER

Once Canada's new foreign policy framework was adopted, however, departmental attitudes and positions shifted accordingly. Responding to the new foreign policy priority for international education, the federal government became increasingly and more directly engaged in the activities of the APEC HRD Working Group. The interdepartmental allocation of responsibilities gave expression to the new priority: a new departmental player in relation to APEC affairs, Human Resources Development Canada, took on the mandate for policy and programming matters, although its attention has focused specifically on labour market issues, while Industry Canada kept science and technology training in its purview. Both these departments joined with DFAIT and CIDA in representing federal objectives on the Canadian Policy Co-ordination Committee, set up to coordinate Canada's positions with those of the provinces (through CMEC) and the lead institutions for the APEC HRD Working Group. Yet it is indicative of an underlying ambivalence that the government of Canada has remained laggard in the gathering and analysis of data on international education, so that resulting deficiencies in the availability of information continue to impede policy responses and program development.21 CONFLICTS, ANOMALIES AND IMPEDIMENTS IN INTERNATIONAL EDUCATION POLICY Ambivalences remain and are manifest in the conflicts of objectives which arise in the course of implementing Canada's new foreign policy framework, both between the different levels of government and between the higher education institutions and the different levels of government. There have remained ambivalences and ambiguities in Canada's role in the APEC HRD Working Group. Thus, on the one hand, the tempo of Canadian participation has intensified, and in 1996 Canada became "lead Shepherd" and Chair of the HRD Working Group. On the other, the actual scope of Canada's involvement has remained narrowly limited, mainly to interorganizational consultations through network projects dealing with exchanges of information, comparisons of experience and compilations of data, as distinct from substantive educational programming. Characteristically, the ambivalence has been most pronounced in Canada's approach to UMAP, the emerging framework for higher educational mobility in the Asia-Pacific region. As noted above, Canada has not yet decided to participate fully in UMAP, and retains only observer status. CMEC is the officially

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designated Canadian contact for UMAP; however the interprovincial body delegates most of its (limited) involvement to the AUCC. CANADIAN EDUCATION CENTRES

These ambivalences have also permeated Canadian bilateral foreign policy initiatives promoting international education in the Asia-Pacific region. In a new initiative aimed at "marketing" Canadian higher education in Asia the federal government has promoted the establishment of Canadian Education Centres in key student-sending countries, beginning with South Korea, Taiwan, Indonesia and Malaysia. The aim was to triple the number of Asian students coming to Canada from the targeted countries to 150,000 over five years. This growing chain of CECs is managed by the Asia Pacific Foundation as an executing agency for CIDA, which provided the original impetus and funding, and it was expected to operate on a cost-recovery basis. Some 100 Canadian universities, colleges and other training organizations subscribed funds to have their recruitment information displayed and prospective students referred by the CECs. Early indications are that the CECs have helped facilitate an increased flow of students to Canadian higher educational institutions. Following the establishment of the CEC in Seoul, the number of Korean students coming to Canada grew from about 400 in 1991 to a reported 5000 in 1995. Notwithstanding their "trade"-like attributes, the CECs succeeded in provoking the sort of perverse obstructionism that characterizes the ambivalence of Canadian efforts in international education. In an astonishing display of contrariness, the Premier of Ontario, Mike Harris, chose to speak out strongly against the universities in his province turning to foreign student recruitment for financial succour, even as he accompanied the Team Canada visit to Malaysia that opened the CEC in Kuala Lumpur in early 1996.22 Despite the fact that his conservative administration had slashed the budget of its already underfunded universities by some $400,000,000, the Premier did not scruple to send an explicit warning that he would "put a stop" to any attempt to offset these revenue losses and maintain costly academic programs by expanding international enrolments. So far as Canada's largest university system was concerned, any initiative to increase international educational mobility could risk bringing down the wrath of an unsympathetic and blinkered administration which is provincial in both senses of the term.

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BILATERAL EDUCATIONAL AGREEMENTS

In another effort to integrate education into foreign policy, Canada also embarked on formal agreements with Asia Pacific countries to promote bilateral educational linkages. These agreements and the countries targeted were seen as having significant educational trade potential for Canada. The first of these was signed in December, 1995, between Taiwan and Canada, with the National Sun Yat-sen University and the University of Victoria as the two participating institutions. The momentum for this agreement was generated by the universities themselves, with the encouragement of the two governments, and followed upon a series of Canada-Taiwan Higher Education Conferences that helped foster greater familiarity and interinstitutional ties between universities in Taiwan and Canada. The second bilateral agreement, with Malaysia, was signed during the Team Canada visit to that country in January, 1996, and represented a Canadian governmental response to Malaysian requests for cooperation in higher education development. In expressing its own international economic needs, the Malaysian government placed high priority on gaining access to higher education facilities in Canada as well as Canadian assistance for the accelerated development of its own university system. The resulting agreement was literally an "announceable" for the Team Canada visit, with the detailed modalities to be worked out in further intergovernmental consultations. When the terms of the agreement are finally concluded, it is expected that there will be some provision for international educational mobility included. What is perhaps especially significant, however, is the high political profile that this agreement gives to international education within the foreign policy framework. By virtue of the Prime Ministerial imprimatur, bilateral educational relations were now perceived as constituting one of the leading edge policy instruments for shaping the future relationship between Canada and the countries of the Asia-Pacific region. The significance of this agreement was not lost on other Asia Pacific countries. Thailand put forward a proposal for a bilateral educational agreement and, in the meantime, approaches were made directly to various provincial governments to explore possible arrangements for Thailand to access their respective higher educational facilities. Limited arrangements for academic cooperation were concluded between Thailand and New Brunswick and Nova Scotia, respectively, during the 1997 Team Canada mission to that country.

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Foreign policy initiatives and international agreements, in particular those cutting across areas of domestic jurisdiction, can become vulnerable to internal policy conflicts and other such impediments to implementation, some of them appearing even from within the federal government itself. International educational initiatives seem to be especially vulnerable to discordant jurisdictional policies. As an example of one such anomaly, laudable DFAIT efforts to promote Canadian education abroad, in keeping with the priorities of the new "integrated" foreign policy framework, were negated to some extent by exclusionary visa regulations. According to a report on International Education prepared for DFAIT, prospective students in almost every Asia Pacific country (with the exception of Singapore) regarded Canada's visa regulations as a major deterrent to their coming to this country for higher education.23 While other impediments were also cited, such as the difficulty in meeting the English-language proficiency standards of Canadian universities, or the notoriety of Canadian winters, the student visa process is one that falls under the jurisdiction of the government of Canada and clearly must be dealt with if educational mobility is to be encouraged under the proposed bilateral agreements or otherwise. INSTITUTIONAL LINKAGE-BUILDING

The strategies for higher education development currently being adopted in Asia Pacific countries are likely to shift the thrust of future APEC programming for international education more towards the promotion of institutional linkages between Asian universities and their counterparts in Australia and North America. Several Asia Pacific countries are now aiming to expand and improve their domestic capacity to provide higher education by way of inviting foreign universities to establish an institutional presence in-country. Malaysia has been at the forefront of this initiative, and indeed that country and Taiwan see themselves developing into regional centres for higher education. Responding to the opportunities that have arisen, universities from Australia, Britain and the United States have taken the lead in establishing a range of linkages with their counterparts in Malaysia and elsewhere, from twinning arrangements with local universities and colleges to the setting up of branch campuses. The expanding trade in educational services has thus engendered a growing international investment in higher education capacity building in the Asia-Pacific region.

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It is interesting to note how the Canadian exporter community has today become highly cognizant of the instrumental role of international education linkages in opening and consolidating access to important Asia Pacific markets. This was clearly expressed at a Roundtable Conference organized at the Canada-Thailand Bilateral Economic Commission meeting in Ottawa in May, 1996, where representatives of Canadian business pleaded for a more ambitious effort to extend higher educational linkages between universities in both countries, in the interest of trade development. This plea resonated favourably with Thai government representatives, who consistently stressed their country's need for greater access to Canadian higher educational resources. Despite the opportunities that are presenting themselves, however, there remains a lacuna in policy leadership in support of Canadian involvement in international education. There still does not exist a national policy framework encompassing the federal and provincial levels of government, and involving the universities and colleges for the purpose of mobilizing Canada's higher educational capabilities as part of a strategy for international education geared to foreign and trade policy objectives. As a result, Canadian universities and colleges have not been at all active in this linkage enterprise. For one thing, the policy framework for Canadian higher education does not encourage universities and colleges to act entrepreneurially in establishing an institutional presence abroad. Canada's higher educational institutions have no mandate, no resources, few incentives, and little entrepreneurial capacity to avail themselves of the opportunities emerging in Asia Pacific university capacity building. Even when, in the mid-1980s, CIDA launched a number of "institutional linkage" projects involving universities and other academic institutions in Indonesia and Thailand in actuality these were technical assistance or training schemes for institution-strengthening. There was no provision for establishing a Canadian educational institutional presence in-country. Moreover, neither the federal government nor the provincial governments indicated any awareness of the strategic significance of engaging in higher educational enterprises abroad for the development of knowledge-based trade relations. There is not currently in place, any positive incentive framework in the Canadian system of higher education for these international linkage arrangements. While some Canadian universities have been

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apt at fundraising among Asian alumni for campus developments at home, none has been able or willing to invest from its own resources to create an institutional presence in overseas "markets." The relative weakness of Asian area studies (or indeed area specialization in the academic and professional disciplines) in Canadian higher education has also diminished the ability of universities and colleges to embark on institutional linkages with hitherto unfamiliar APEC countries. There are in Canada a very few dedicated area studies programs concentrated on China and Japan,24 but none on Southeast Asia. Neither has the study of Asia benefited from special sponsorship by any level of government (except for some limited federal seed money for language training), as have certain other "strategic" fields, like international business or defence and security studies. CIDA's vaunted "centres of excellence" program did not include an Asian Studies centre, while the Agency's geographic programs remained unresponsive to a proposal for the creation of a national centre for Southeast Asian teaching and research. Again, when the Government of Canada proceeded to establish an APEC Study Centre, this was not vested in the university system, as was done in Australia, Japan, the United States and elsewhere, where it might contribute to building institutional capacity. Instead a so-called "virtual" Centre was situated in the Asia Pacific Foundation. All this contrasts poorly with U.S., Australian, and British experiences, where governments and universities have supported the development of a comparatively long and strong academic association with Asia Pacific countries, nurtured by area specialists. This element of academic familiarity has helped inform their institutional approaches to linkages with Asia, and also helped promote the educational reputation of the institutions concerned in these markets.25 CHALLENGES ON THE ROAD AHEAD During a period when the flow of students from Asia-Pacific countries going abroad for higher education grew rapidly the actual numbers choosing to come to Canada declined. According to available indicators the total number of students from Asia-Pacific countries in Canadian higher educational institutions fell during the decade 1985-1995 from around 100,000 to about 90,000. This downward trend was even sharper in the numbers coming to Canada from some of the high-growth developing economies, which were otherwise

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major student-sending countries. Thus, the student flow from Malaysia decreased from over 10,000 to around 2,200.26 This declining trend was symptomatic of a deterioration in Canada's competitive position in international education, at least in the Asia-Pacific region, analogous to a loss in competitive advantage in trade. Over the past decade Canada has steadily lost "market share" in the trade in international higher education, despite having lower university fee levels and despite the increasingly active promotional efforts now being undertaken.27 With the exception of students from Hong Kong and Singapore, for whom Canada remains a favoured student destination, the proportion of Asia Pacific students coming to this country has slipped to the 2-4 percent level. Even if the target of 150,000 students from Asia Pacific countries is fulfilled at the end of five years, Canada's overall share of the international student flow will probably remain around the same low level, given the rapidly increasing rate of higher educational mobility across the region. Canada must move ahead swiftly just to stand still. Canada's weakened competitive position in international education in the Asia-Pacific region suggests a disconcerting worsening of our capability for developing a knowledge-based economy.28 Large and growing numbers of international students from Asia Pacific countries are choosing to attend higher educational institutions in other countries, most notably the U.S. and Australia, while Canada's attractiveness is declining, absolutely and also relatively. Canadian higher educational institutions have seen their international educational competitiveness steadily erode as a consequence of chronic and debilitating financial deprivation, a dispirited professorial, aging campus facilities, impoverished libraries, inadequate laboratories, obsolescent equipment and diminished research capabilities. This country's reduced profile in Asia Pacific educational mobility seems likely to be further diminished in future as a result of the growing presence in-country of American, Australian, and British higher educational institutions offering learning opportunities locally. The educational impact of these international institutional linkages seems likely to eclipse the benefits of studying abroad. Here as well the low profile of Canadian higher educational institutions is indicative of how Canada's knowledge resources are being overshadowed by competitors in the Asia Pacific marketplace for international education. This can have far-reaching ramifications for the longer-run

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competitive advantage of Canadian knowledge-based industries in the emergent APEC trading community. Renewal of Canada's competitive advantage in international education in the Asia-Pacific region requires more than mere marketing ploys. If this country expects to share in the expanding trade in higher education, it will have to display the political will, resource commitments and management determination for a three-pronged effort aimed at revitalizing its higher educational capabilities and facilitating educational mobility and institutional linkage building. Speed is crucial, since international education markets, like other markets for exportables, have no obligation to wait for late entrants. However, it is unlikely that progress can be made unless and until there is a strategic reversal of the attitude of some provinces which treat higher education as merely a debit in their accounts. Ontario is particularly problematic in this regard, since it is the jurisdiction in which Canada's largest higher education system is situated. Synergy is called for, along with a positive, constructive approach in all levels of government and in the higher education institutions themselves, aimed at fostering a more energetic and enterprising Canadian presence in international higher education generally, and in the Asia-Pacific region in particular. Canadian policy leadership in this direction could and should endeavour to build advantageously on the APEC vision of the future Asia Pacific community. APEC is becoming more than just a consultative forum on economic and trade liberalization, as it takes on board other important action agendas. Human resource development is emerging as an increasingly prominent component of the APEC process. It behooves Canada to reassess its earlier reserved attitude to the APEC HRD proposals relating to educational mobility and cooperation—such as UMAP—in the light of its own need to enhance its international competitive position in higher education. The former ambivalence will have to give way to a deliberate effort to harmonize Canadian capabilities in higher education with the broader thrust of the APEC HRD agenda. 1997 could well become a turning point, a time of opportunity, occasioned by "Canada's Year of Asia Pacific" and the APEC meetings in Canada, for galvanizing Canada's resolve to engage itself more extensively in international higher education in the Asia-Pacific region.

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NOTES 1

2 3 4

5 6

7

8

9 10

11

12

Department of Foreign Affairs and International Trade, International Education: The Asia Pacific Region and Canada (Ottawa: INFOEX Division, Department of Foreign Affairs and International Trade, 1993), 1; Canadian Bureau for International Education, Where the Students Are: An Analysis of the Major Competing Countries for the International Student Market, 1985 to 1995 (Ottawa: CBIE, October, 1996), 4. CBIE, Where the Students Are, 4. Industry, Science and Technology Canada, Industry Profile on Commercial Education and Training (Ottawa: Industry, Science and Technology Canada, 1991). For a comparison of ASEAN and Latin American attainments in human resource development and economic growth, see Martin Rudner, "ASEAN, Asia Pacific Economic Co-operation, and Hemispheric Free Trade for the Americas," World Competition 16, No. 2 (December, 1992), 138-9. UNESCO, UNESCO Statistical Yearbook 1992 (Paris: UNESCO, 1992). World Bank, The East Asian Miracle: Economic Growth and Public Policy (New York: Oxford University Press for the World Bank, 1993), 43-46. The strong link between education and human development progress, on the one hand, and economic performance, on the other, in the East and Southeast Asian experience was also indicated by the UNDP Human Development Report 1996 (published for the United Nations Development Programme by Oxford University Press, 1996), 66 and Figure 3.1Paul Romer, "Two Strategies for Economic Development: Using Ideas and Producing Ideas," in Proceedings of the World Bank Annual Bank Conference on Development Economics (Washington, DC: World Bank, 1993); World Bank, The East Asian Miracle, 49-50. UNDP, Human Development Report 1996, Table 14. The share of public expenditure on education devoted to higher education was, for 1992, 7 percent for Korea, 15-20 percent for China, Malaysia, Thailand, and 30 percent for Hong Kong, as compared to an average of 22 percent for the industrial world. UNESCO, World Education Report 1995, (Paris: UNESCO, 1995) Table 8. UNDP, Human Development Report 1996, Table 26. The figure for Korea refers to enrolments in degree level programs only, whereas the others are gross ratios covering enrolments in all tertiary level programs, degree and non-degree. David Anderson, The Role of Degree-Level Private Colleges in Malaysia's Development Strategy (Kingston: Queen's University, John Deutsch Institute for the Study of Economic Policy, International and Development Studies Working Paper, n.d.), 11. In the early 1990s some Malaysian universities reportedly experienced a 25-30 percent academic vacancy rate. Khoo Kay Kim, "The Universities in Malaysia," Commonwealth Universities Yearbook 1994, Vol. 2 (London: Association of Commonwealth Universities, 1994), 1302. During the period 1990-93 some 61,000 Malaysian students were studying abroad, at an annual cost estimated at M$2.5-3 billion, compared to a total enrolment of 60,000 in domestic Malaysian universities.

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13 UNDP, Human Development Report 1996, Table 14. 14 A useful indicator of research effort is the rate of R&D scientists and technicians per 100/population. Whereas industrialized countries as a whole exhibit a ratio of 4.6, the countries of East and Southeast Asia show 2.3 for South Korea, 1.8 for Singapore, 1.6 for China, 0.4 for Malaysia, 0.2 for Thailand, and 0.1 for the Philippines: UNDP, Human Development Report 1996, Table 14. 15 On the origins and organization of APEC see Martin Rudner, "APEC: The Challenges of Asia Pacific Economic Cooperation," Modern Asian Studies 29, Pt. 2(1995). 16 APEC, Asia Pacific Economic Cooperation 1996 (Singapore: APEC Secretariat, 1996), 8. 17 It should be noted parenthetically that the Commonwealth Fellowship and Scholarship Program represents one other international educational mobility mechanism for those APEC countries that are also members of the Commonwealth, including Australia, Brunei, Canada, Hong Kong, Malaysia, New Zealand, Papua New Guinea and Singapore. However, this Program has played a very limited role, at least as regards Canadian academic exchanges with Asia Pacific Commonwealth counterparts. 18 Special Joint Committee of the Senate and the House of Commons Reviewing Canada's Foreign Policy, Canada's Foreign Policy: Principles and Priorities (Ottawa: Parliamentary Publications Directorate, 1994). See also John Hay, "Projecting Canadian Values and Culture: An Episode in the Making of Canadian Foreign Policy," Canadian Foreign Policy 3, No. 2 (Fall, 1995), 21-32. 19 Canada, Canada in the World: Government Statement (Ottawa: Department of Foreign Affairs and International Trade, Information Systems, 1995), 10. 20 Canada in the World, 38. 21 CBIE, Where the Students Are, 11. 22 "Universities seeking foreign students," The Globe and Mail, January 19, 1996, A9. 23 Ibid., Only in Singapore did prospective students mention a "relative ease of getting visa"; can the visa procedures implemented there be emulated elsewhere as well? 24 The relative weakness of area studies, even in a prominent field like Japanese studies, is addressed in a recent report of the Japan Foundation, Japanese Studies in Canada: The 1990s. Japanese Studies Series XXV (Tokyo: The Japan Foundation, 1995). This Report indicates that only six Canadian universities possess graduate-level specialization on Japan: British Columbia, Carleton, McGill, Montreal, Toronto and York. Yet Japan is Canada's second most important trading partner. 25 International Education: The Asia Pacific Region and Canada reports that the availability of home country programs and name recognition of educational institutions rank among the leading factors influencing Asia Pacific students' desires to study abroad (see DFAIT, International Education ..., 16). 26 DFAIT, International Education, 63, Table 5.55.

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27 CBIE, Where the Students Are, 11. 28 In the words of Robert Giroux, President of the AUCC, "We fare badly in terms of (international) innovativeness and competitiveness"; see "Universities Seek Public-Work Funds," Jennifer Lewington, "The leaning beat,' The Globe and Mail 30 September 1996, A3.

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XI A New Frontier in Multilateralism: Canada and the ASEAN Regional Forum

AMITAV ACHARYA

1 he establishment of the Association of Southeast Asian Nations (ASEAN) Regional Forum (ARF) in 1994 marks a major turning point in Canada's diplomatic and security policy toward the Asia Pacific region. As a founding member, Canada's engagement in the ARF provides it with a new opportunity to strengthen its multilateralist credentials. But this forum is a complex and somewhat unique institution. The manner of its evolution, dictated to a large extent by the perspectives and preferences of its Asian members, may not fit in easily with Canada's previous experience and expertise in multilateralism, which has been primarily concerned with global and EuroAtlantic institutions. This paper examines some of the challenges that Canada faces as it develops a meaningful role in the "Asia Pacific Way" of multilateralism.

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Canada's policy towards Asia Pacific security cooperation in the late 1980s and early 1990s has been influenced by a number of factors. The first is a recognition of the opportunities presented by the region's immense economic dynamism. By the early 1990s, Canada's trade across the Pacific had already outstripped its trade across the Atlantic; its trade with the eight Asian members of Asia Pacific Economic Cooperation (APEC), before China, Hong Kong and Taiwan joined the grouping, was already greater than its trade with all the members of the European Union.1 By the mid-1990s, Canada's trans-Pacific trade was 45 percent greater than its trans-Atlantic trade. Asia was the destination of 40 percent of Canada's non-U.S. exports. Ten of Canada's top 25 trading partners are Asia Pacific countries.2 The Asia Pacific had also become important to Canada as a source of tourist revenue, and as a recipient of a large proportion of Canada's development assistance budget. Despite the salience of economic concerns, Canada's interest in Asia Pacific has its basis in several other aspects, historical, cultural and diplomatic. Addressing a meeting of the North Pacific Cooperative Security Dialogue (NPCSD), launched by Canada as part of a major early effort to promote security multilateralism in the Asia Pacific region, Joe Clark, who was then External Affairs Minister, alluded to Canada's record of participation in the defence of South Korea in the Korean War and its key role in both the international control commissions in Indochina. He also noted the region's emergence as a major source of immigrants to Canada, which has created "strong cultural and ethnic ties" between Canada and Asia.3 Closely linked by economic interests and historical and cultural ties, the Asia Pacific region has become an increasingly important area of concern in the reorientation of Canada's foreign and defence policies in the post-Cold War era, although it still takes second place to Europe. Canadian security interests in the region have been defined broadly to include both conventional and non-conventional issues. Canadian policy makers and scholars have identified a host of postCold War developments with implications for Canada's regional security interests. These include the decline of U.S. military presence in the region, the growth of Chinese military power, the rise in defence spending and the spread of sophisticated conventional weapons throughout the region, the proliferation of weapons of mass destruction in the Korean Peninsula and South Asia, and the aggravation of territorial disputes in the East and South China Seas. Unconventional

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security threats in the region include the problem of unequal development, trade disputes, overpopulation, migration and refugees, environmental degradation, internal repression, terrorism, and drug trafficking. The increasing salience of these issues in Canada's international security agenda is reflected in the government's most recent White Paper on defence, which states its commitment to "play a more active role in Asia Pacific security affairs."4 Analyzing recent Defence Department documents, Brian Job notes that a "commitment to the building of multilateral security regimes, dialogues, and CBMs [confidence building measures]" is an important priority of Canada's Asia Pacific security policy, the other areas being control of weapons of mass destruction in the region, and expanding bilateral political and security cooperation with key Asian states, particularly Japan, Korea, and the ASEAN countries.5 Canada's role in Asia Pacific regional security includes involvement in a variety of Track One and Track Two activities at bilateral and multilateral levels. Apart from the NPCSD, which sought to create a framework of multilateral dialogues and consultations at both Track One and Track Two levels (it was discontinued in 1993), Canada's regional security engagement has included providing strong support as one of the dialogue partners of ASEAN, for that organization's efforts at regional economic and political cooperation. At the Track Two level, Canada has provided funding for the series of workshops organized by Indonesia for the purpose of seeking a peaceful settlement to conflicts in the South China Sea. More recently, this country has sponsored the annual Asia Pacific Roundtable organized by the ASEAN Institutes for Strategic and International Studies (ASEAN-ISIS), a coordinating body of think-tanks from ASEAN countries which organizes regular discussions on international affairs and regional security issues in Kuala Lumpur. Canadian officials and academic experts have played a key role in the development of the Council for Security Cooperation in the Asia Pacific (CSCAP), a non-governmental grouping which seeks to promote exchange of views on regional security issues and provide policy inputs to the ARE THE ORIGINS OF THE ARF Against this backdrop, the launching of the ARF in July 1994 marked a new phase in Canada's involvement in Asia Pacific security cooperation. The ARF is the first region-wide intergovernmental forum on security issues in the Asia Pacific region. The establishment of the ARF

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is the culmination of a number of developments associated largely, but not exclusively, with the end of the Cold War. In the era of bipolarity, the security order of the Asia Pacific region was shaped by a series of bilateral alliances led by the two superpowers, the U.S. and the Soviet Union. Multilateralism, whether led by the superpowers to ensure deterrence and balance of power, or promoted by the regional countries as a mechanism for conflict resolution, had little place in the Cold War regional order.6 As the dominant Pacific military power the U.S. preferred bilateralism to multilateral alliances, since the former ensured greater U.S. control over the behaviour of its Asian allies. Moreover, neither the U.S. nor the Soviet Union found it easy to duplicate their European multilateral alliances in the Asia Pacific region, as became evident from the fate of the short-lived Southeast Asia Treaty Organization (SEATO) and the stillborn Brezhnev Proposal for an Asian Collective Security System. The region also proved resistant to multipurpose regional organizations of the kind that had emerged in Latin America, Africa and the Middle East (e.g., the Organization of American States, the Organization of African Unity, and the Arab League), because of the lack of a common regional identity and the prevalence of divergent political systems and security interests among the countries of the Asia Pacific region. Interest in multilateralism in the region has increased considerably since the end of the Cold War. Several factors have contributed to this process. Among them are concerns associated with the changing regional balance of power, engendered by the declining credibility of the U.S. regional military presence and alliance system, the economic and military resurgence of China, and a dramatic rise in post-Cold War military spending and arms acquisitions by regional countries. Multilateral security dialogues and institution building have found increasing acceptance in the region as a way of managing strategic uncertainty and preventing the escalation of regional disputes. Normatively speaking, multilateralism is also viewed by its proponents as a more desirable alternative to deterrence-based security approaches based on existing military alliances. The very fact that the region's principal groupings of Cold War adversaries, such as the ASEAN states and Vietnam, Russia and Japan, and China and Russia, have been searching for a common ground to bury the Cold War hatchet, has further encouraged the search for multilateral approaches to security. Indeed, the contrast between the promise of "inclusive" multilateralism and the "exclusive" bilateralism of the Cold War

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security architecture was central to many of the initial proposals on multilateralism made by the former Soviet Union (under Gorbachev) and by Australia and Canada.7 Given the novelty of the enterprise and the complexity of the security issues requiring attention, there have been understandable differences over the conceptual basis, the geographic scope and the organizational structure of the evolving framework for multilateral security cooperation. Early Soviet and Australian proposals called for a new, broad-brush, macroregional security institution to facilitate confidence building and conflict resolution within the region. Canada's initiative, launched in 1990 as the North Pacific Cooperative Security Dialogue, envisaged a subregional membership. While Australian and Soviet proposals saw multilateralism as a substitute for balance of power mechanisms based on great power military alliances in the region, the Canadian proposal called for the retention of these bilateral security arrangements pending a gradual process of institutionalization addressing both military and non-military threats. The U.S. under the Bush administration exhibited considerable opposition to the creation of any new security institution that might undermine the rationale for its existing alliances. But the Clinton administration has been more favourable to multilateralism, viewing it as a way of supplementing, rather than supplanting, its bilateral alliances. While middle power initiatives and great power attitudes were important in shaping the early discourses on multilateralism, it was the efforts of a coalition of smaller powers, the Association of Southeast Asian Nations, which provided the decisive push toward the emergence of a practical framework for security dialogue and cooperation in the Asia Pacific region. This in itself represents a major shift from ASEAN's initial position on multilateralism. Proposals for an Asia Pacific multilateral security framework presented this organization with a dilemma. On the one hand, it was just beginning to take stock of the implications of the end of the Cold War for its own future. The political settlement of the Cambodia conflict (the Paris Peace Agreement on Cambodia was signed in 1991) had raised doubts about ASEAN's viability, given the fact that the conflict had served as a glue, binding its members together despite their divergent security perceptions and approaches. ASEAN was still working out a modus vivendi with the Indo-Chinese states in order to put an end to the long and bitter ideological and strategic polarization of Southeast Asia.

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During the Cold War ASEAN had sought to present itself as a grouping devoted to economic and political goals, while security issues (with the exception of the Cambodia conflict and the idea of a Zone of Peace, Freedom, and Neutrality in Southeast Asia) were not discussed in ASEAN meetings. Against this backdrop, the idea of participating in a larger regional security grouping involving all the major players of the Asia Pacific region would have seemed like a major step forward. ASEAN's doubts were compounded by the fact that almost all the proposals for regional security cooperation came from "outside" powers and that some of these were based on European models of security cooperation (especially the Conference on Security and Cooperation in Europe—CSCE). This was especially hard to digest for a grouping that had hitherto believed that regional order must be based on indigenous conceptions of security without any kind of influence or interference from countries outside of the region. On the other hand, in view of the changes in the regional and global security environment after the end of the Cold War, ASEAN could not have ignored the growing demand for multilateralism. Lest the outside powers seize the initiative, it had to come up with an "indigenous" framework that would enable it to play a central role in developing any multilateral framework for regional security. In this sense, ASEAN was faced with an opportunity to project its subregional experience in security cooperation into a larger regional arena and thereby enhance its relevance and role as a regional institution in the post-Cold War era. Following a series of semiofficial consultations (including a key meeting at Jakarta in June 1991 hosted by the ASEAN Institutes of Strategic and International Studies), ASEAN8 agreed, with a decisive push from Japan, to initiate an official level dialogue on security issues among the Asia Pacific countries. A decision to this effect was taken at ASEAN's first post-Cold War summit held in Singapore in 1992. But instead of creating a brand new forum, ASEAN decided to hold the proposed security dialogue, to be called the ASEAN Regional Forum, as an adjunct to its two premier annual multilateral events: the Foreign Ministers Meeting and the political and economic consultations between ASEAN Foreign Ministers and a number of "dialogue partners" (then consisting of Australia, Canada, the U.S., South Korea, Japan, New Zealand), and called the ASEAN Post-Ministerial Conferences (ASEAN-PMC). The ARF was inaugurated in 1994 with 18 initial members: Brunei, Malaysia, Indonesia, Thailand, Singapore, the

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Philippines, Vietnam, Laos, the U.S., Canada, South Korea, Australia, Japan, New Zealand, the European Union, Russia, China, and Papua New Guinea. Cambodia joined a year later, while India and Myanmar were accepted as members in 1996. OBJECTIVES AND APPROACH

The ARF is the first truly "multilateral" security forum covering the wider Asia Pacific region. It is the only "regional" security framework in the world today in which all the great powers (including the U.S., Russia, Japan, China, as well as Britain, France and Germany as part of the European Union delegation) are represented. The ARF's professed goal is the creation of a "more predictable and constructive pattern of relations for the Asia Pacific region."9 The key principle underlying the ARF is the notion of "cooperative security." The main element of cooperative security is inclusiveness. Inclusiveness requires that "to the extent possible, dialogue must involve as many relevant principal actors ... if there is to be membership, then in principle the club must not impose criteria for participation or for the agenda other than the acknowledged relevance to the defined region."10 Malaysia's Foreign Minister, Abdullah Badawi, has articulated the principle of inclusiveness in the following terms: the ARF "requires the development of friendship rather than the identification of enemies. The nature of security problems in the Asia-Pacific are such that they do not lend themselves amenable for management through the old method of deterrence by countervailing force, "(.sic)11 From the very outset, the ARF has not been a grouping of the likeminded. It includes states whose interests and perspectives regarding regional security may differ significantly.12 Thus, as Gareth Evans, the former Foreign Minister of Australia, once put it, the purpose of ARF is to build "security with others rather than against them."13 Multilateralism in the Asia Pacific context is defined in direct opposition to the "exclusive bilateralism" of America's post-World War II security strategy in the region, which focused primarily on a balance of power approach maintained by a regional network of bilateral military alliances. In the words of a senior U.S. official, the ARF is "not a bloc forming against the common threat" but rather a case of "potential antagonists talking to each other, trying to clear up any misperceptions, give greater transparency ... [and] some sense of predictability."14 There are five ways in which the ARF could promote ASEAN's interests in, and approaches to, regional stability in the Asia Pacific

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region. The first is to offset the strategic uncertainties of the transition to multipolarity, which have rendered the interests and objectives of regional actors unknown and unpredictable. A multilateral security forum, however weakly institutionalized, helps to avoid misperceptions and generate new ideas about, and approaches to, regional order. The second is to "engage" China, widely seen as a possible threat to regional stability by virtue of its unprecedented economic growth and military build-up, in a system of regional order. This strategy is seen as being preferable to the alternative of "containment," which ASEAN members regard as an impractical and dangerous strategic option. Thirdly, the ARF is a useful device to ensure the continued engagement of the U.S. in the region's security affairs. This in turn will preclude the emergence of an independent Japanese security role, a development which will surely be viewed by most of Japan's neighbours as highly destabilizing. The fourth goal that ASEAN seeks to pursue through the ARF is to ensure that intraregional conflicts, such as the territorial dispute in the South China Sea,15 are managed peacefully in accordance with multilateral norms and principles. To this end, the ARF seeks to develop a system of preventive diplomacy to restrain the use of force in interstate relations. Finally, the ARF provides ASEAN, a coalition of small powers, with a measure of influence over great power geopolitics in the region. Though lacking in structural power, ASEAN may be able to pursue a strategy of "soft balancing" by guiding and manipulating the discourses and practices of multilateralism. Acting collectively through a multilateral forum, ASEAN can shape the development of a set of ideas and principles which might persuade the region's major powers to view diplomacy and "rules of acceptable conduct," rather than arms races and alliances, as the principal means of deterring aggressive behaviour and preserving regional equilibrium. The ARF's early evolution is broadly characterized by two major features: incrementalism and soft institutionalism. Incrementalism, implying a step-by-step approach to security collaboration, is evident from a document entitled "The ASEAN Regional Forum: A Concept Paper," developed by ASEAN in 1995. The paper envisages three stages of security cooperation: confidence building, preventive diplomacy, and conflict resolution (later changed to "elaboration of approaches to conflicts" as a concession to China, which had warned against rapid institutionalization of the ARF).16 The initial measures of confidence building selected by the ARF include exchange of annual

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defence postures on a voluntary basis, increased dialogues on security issues at the bilateral, subregional and regional levels, forging of senior-level contacts and exchanges among military institutions and participation of the ARF members in the UN Conventional Arms Register. The preference for soft institutionalism implies that, for the time being at least, the ARF will remain essentially a "dialogue forum," rather than an instrument of collective action in regional conflicts. It also means avoiding the construction of any elaborate collective bureaucratic apparatus. Instead, the ARF has chosen to rely on a number of ad hoc mechanisms to facilitate decision-making on security cooperation. For example, the second ARF meeting set up three inter sessional working groups, one dealing with confidence building measures (to be chaired by Indonesia and Japan), a second dealing with peacekeeping operations (co-chaired by Malaysia and Canada), and a third on search and rescue cooperation (led by Singapore and the U.S.). These groups, along with more regular ARF gatherings such as the Senior Officials' Meeting (ARF-SOM), are expected to play an important role in developing concrete steps towards greater security collaboration. To sum up, under ASEAN's guidance, the development of security cooperation within the ARF has been, and is likely to remain, slowmotion, non-legalistic and consensual. Such an approach avoids formal and direct measures, and seeks to develop a "non-threatening" atmosphere in which regional actors may explore ways of problemsolving. It also emphasizes the importance of "the process" over "the product," and promotes a security approach in which the principles of consultations and consensus assume priority over confrontation and competitive bargaining. CHALLENGES AND CONSTRAINTS The ARF is a rare example of multilateral security cooperation in which the great power members have willingly conceded leadership and agenda-setting functions to the less powerful developing member states (ASEAN). Being an institution with ostensibly "indigenous" roots, rather than an implantation of supposedly "foreign" models of multilateralism, the ARF has proved politically more acceptable to the Asian actors, particularly the ASEAN members, who retain a longstanding and deeply ingrained suspicion of regional security proposals sponsored by outside powers. Moreover, by having ASEAN,

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an existing and time-tested multilateral institution, as its primary building block, the ARF has minimized conflicts and controversies which would have inevitably marked attempts to form a brand new regional security institution. But ASEAN's leadership role within the ARF may not be an entirely unmixed blessing. Apart from providing the institutional platform and location for the ARF, ASEAN members have left no doubt as to who will "dominate and set the pace" of this forum. In the words of Surin Pitsuwan, at that time Thai Deputy Foreign Minister, "ASEAN will always have the driver's seat." Although ASEAN promises to "recognize the concerns and interests of outside powers, including the four major powers (U.S., Japan, China and Russia), it clearly expects the latter to accept its leadership of the forum and the norms and principles that it specifies.17 But the ARF's other members, including the U.S. and Canada, are sometimes uncomfortable with ASEAN's leadership role. The cautious and slow-motion "ASEAN way" of cooperation does not sit well with the approach preferred by some Western members, notably Australia and the U.S., which would like the ARF to develop quickly and adopt concrete measures.18 A related issue is the relevance of ASEAN norms and practices, conceived within a subregion in a larger and, in many respects, a more complex security arena. The "ASEAN way" of consultations and consensus building19 was developed when the threat of communist expansion served as a cementing factor for its otherwise divided membership. It is doubtful whether these norms and practices (which rely heavily on inter-personal and informal ties within the ASEAN grouping) can be successfully duplicated within a wider regional setting. Questions have also been raised as to whether the ARF is the appropriate framework for handling security issues in the Northeast Asia region. Many doubt that it is. Thus, there have been suggestions for the creation of a subregional forum in Northeast Asia which would be more sensitive to security issues specific to that particular area.20 The management of the North Korean proliferation crisis consisted of a series of bilateral exchanges between the U.S. and North Korea, North Korea and South Korea, China and North Korea, Japan and South Korea and, at least initially, Japan and North Korea. The U.S. initiative on subregional talks on security issues in the Korean Peninsula, involving China, North and South Korea, Japan and the U.S., attests to Washington's apparent belief that the ARF may not be the appropriate forum for managing security in Northeast Asia.21

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The advent of the ARF represents a significant broadening of ASEAN's hitherto inwardly focused and subregional political and security agenda. An expanded ASEAN makes it more difficult for the group to achieve consensus on key issues, which in turn may constrain its ability to provide leadership and direction to the grouping. It is noteworthy that Malaysia's Foreign Minister speaks of growing disunity within ASEAN over developments in the wider Asia Pacific region. His reference to a lack of "resolve" on the part of ASEAN to "stay united in the face of certain pushes and pulls exerted upon it by the dynamics of international politics and diplomacy" was an implicit criticism of fellow ASEAN members which had failed to back Malaysia's own regional and international initiatives, particularly over the East Asian Economic Caucus.22 The entry of Vietnam may further dilute ASEAN's unity and consensual decision-making style. ASEAN facilitated the creation of the ARF by providing it with a suitable institutional setting and anchoring it on its own long-standing code of interstate behaviour. While as a collectivity ASEAN carries significant diplomatic and political clout within the ARF, its ability to prevail over the major powers such as China and the U.S. with regard to hard strategic issues may be limited. The fate of the ARF may be decided by the shifting balance of structural strength among the major powers in the region, rather than by ASEAN's painstaking and sincere efforts to provide normative and enterpreneural leadership. Another challenge facing the ARF concerns the very principle of inclusiveness upon which it is supposed to be founded. The membership of the ARF does not include parties to major regional conflict situations, especially Taiwan (a claimant to the Spratly Islands) and North Korea. Although Taiwan has been allowed into a multilateral intergovernmental economic regime such as APEC, China has drawn a distinction between security multilateralism and economic regionalism by opposing Taiwanese membership in the ARF. Beijing has also scuttled Taiwan's full-scale participation in the Council for Security Cooperation in the Asia Pacific a grouping of several think-tanks in the region concerned with security issues, arguing that the CSCAP is not as "non-governmental" as it claims to be, since it allows participation by government officials in a non-official capacity. The Chinese hardline position undercuts the aim of CSCAP to be more "inclusive" than the ARF. The U.S. seems opposed to the early inclusion of North Korea in the ARF framework. Assistant Secretary of State Winston Lord

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responding to North Korea's reported request (Pyongyang had apparently indicated a desire to join the ARF through the Australian embassy in Bangkok),23 called it "interesting" but "a little premature," and insisted that North Korean membership was conditional upon a satisfactory resolution to the nuclear proliferation issue.24 Last but not the least, the two major players in the ARF, China and the U.S., continue to harbour misgivings about multilateral security cooperation. As noted earlier, ASEAN's interest in developing the ARF can be seen principally as a way of peacefully engaging China and integrating it into a regional security community. But China has seen multilateralism as a way for lesser regional actors to "gang up" against Chinese interests and objectives in the region. It has also been suspicious that the ARF may develop into a tool in the hands of the Western powers for interfering in the domestic affairs of the Asian member states. Indicative of this is a warning by the Chinese Foreign Minister, Qian Qichen, that "no attempts should be made to use confidence building measures and preventive diplomacy to resolve internal conflict or problems of a country."25 China's attitude toward the ARF is best described as one of passive support for multilateralism but active pursuit of bilateralism. For example, although China has offered joint development of South China Sea marine resources as a possible solution to the territorial conflict, it insists that this must be done bilaterally, rather than through a multilateral mechanism of the kind that Indonesia has been promoting through its annually held South China Sea talks. China is unlikely to embrace multilateralism when it conflicts with its interests and role as a rising power. From the Chinese perspective, the stability of the Asia Pacific region may not depend so much on a multilateral framework sponsored by the region's weaker states (such as ASEAN), as on a balance of power interaction between the major powers in the region. Although China opposes a great power concert system, Chinese commentators seem to believe that it is the relationship between the U.S., China and Japan (Russia is excluded for the moment because of its domestic and international weaknesses), and more specifically between the U.S. and China, which is critical to regional stability. Nonetheless, Chinese opposition to multilateralism will be tempered by a fear of regional isolation. The growing acceptance of multilateralism in the region does increase the political and diplomatic costs of Chinese unilateralism in territorial and strategic matters. China faces considerable pressure

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from ARF members to be more compromising on sensitive issues such as the Spratlys. In this context, the political costs of rejecting multilateralism may outweigh the strategic benefits accruing from an uncompromising unilateral territorial posture. Despite its misgivings about the ARF, China shares a common interest with the ASEAN members in keeping the ARF informal and weakly institutionalized. By working proactively within the ARF China might gain a greater ability to control its development and agenda than it would by playing an obstructionist role. Another major power whose attitude is of critical importance to the success of the ARF is the U.S. The Bush administration greeted multilateralism with open hostility (by calling it "a solution in search of a problem") out of fear that it would undermine the relevance of the existing bilateral U.S. security arrangements in the region. The Clinton administration, realizing that the Asian proponents of multilateralism, especially ASEAN, are also strongly supportive of the U.S. military presence and regional alliance system, has revised the U.S. policy. It supports multilateralism as one of the ten major goals of the new U.S. policy in Asia.26 But this support remains a qualified one. Current U.S. policy on multilateralism envisages a concentric circle of security institutions, which includes (1) its existing bilateral alliances, (2) the newly developed security consultations within the ASEAN-PMC and the ASEAN Regional Forum, and, where appropriate, (3) multilateral action by the most concerned and relevant actors to resolve specific security problems such as those of the Korean Peninsula. But U.S. policy continues to pay "primary attention to reinforcing ... [its] traditional security alliances;"27 multilateral security dialogues "in no way supplant America's ... forward military presence in Asia."28 Even for the ASEAN states, the enthusiasm for multilateralism has not grown at the expense of their existing bilateral security and defence relationships. Bilateral border committees between Indonesia and Malaysia and Malaysia and Thailand continue to play a critical role in dealing with contentious territorial issues. In the area of dispute settlement, ASEAN continues to "think multilaterally while acting bilaterally." Bilateralism also remains the principal mode of defence cooperation among the ASEAN states, including Vietnam's initial efforts to develop defence ties with its ASEAN neighbours. Moreover, the post-Cold War era has seen a reaffirmation of some of the key bilateral defence relationships among the ARF members. These include agreements to update the U.S.-Japan and U.S.-Australia

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defence relationships, and a landmark defence agreement between Australia and Indonesia. CANADIAN POLICY DILEMMAS

While Canada's interests in Asia Pacific region are regarded by most though by no means all, segments of the Canadian foreign policymaking community as substantial enough to justify close engagement, its ability to assume a leadership position or role in the development of security cooperation in the region is constrained by geography, resources and competing commitments to security and stability in other parts of the world. The experience of the NPCSD is instructive in this regard. It is possible to view this forum as an act of Canadian "leadership"— a leadership based not on any projection of structural power that Canada lacks, but established in the realm of ideas and institutional innovation. The NPCSD was not an exercise in futility. It probably helped to create a greater sense of urgency among the ASEAN states, leading them to respond with the ideas which form the basis of their current initiative. But it was an attempt to exploit a window of opportunity created by the end of the Cold War, rather than a logical outcome of a long-standing, independent and proactive Canadian involvement in Asian security issues. Moreover, its subsequent demise deprived the Canadian government of valuable momentum and undermined its credibility as a key player in the regional security dialogue. The NPCSD experience reveals both the opportunities and the constraints Canada faces in developing a "leadership" role in the promotion of Asia Pacific security cooperation. If resource constraints and domestic indifference prevent Canada from aspiring to a leadership role in Asia Pacific security cooperation what might be a more realistic goal? A Department of Foreign Affairs official interviewed by the author described Canada's objective in the ARF as being "ultimately to increase its credentials in the region as a useful and interesting participant in the regional security cooperation" (emphasis added). But defining what is useful and interesting may not be an easy task. The foregoing appraisal of past experience and current challenges suggest that, an "interesting and useful" Canadian contribution to the ARF may require attention to a range of areas. The following is a brief outline of ten of the most important concerns and policy choices facing Canada.

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Norms and Values Canada has been a major provider of ideas and norms for international cooperation and institution building. In the Asia Pacific context the notion of cooperative security was initially developed by Canadian officials and academics. This concept has now found widespread usage in the region. Promoted through the NPCSD, "cooperative security" helped to define the pragmatic middle ground between the ambitious but unrealistic Soviet and Australian proposals for a brand new all-encompassing multilateral forum (doing everything at once), and the vehement resistance to any form of multilateralism put forth by the early Bush administration (doing nothing). Canada could make a similar contribution to the future development of the ARE One obvious area for Canadian concern is the development of a "code of conduct" to govern interstate relations in the region. Developing a code that will prove acceptable to the regional countries is a major challenge. ASEAN seeks to make its own subregional code, contained in the Treaty of Amity and Cooperation,29 as the basis of regional order. But the Treaty's main principles, such as those of non-interference and non-intervention, reflect a strong prosovereignty stance on the part of ASEAN. They make it difficult to consider issues relating to human rights and governance within a regional forum. Yet such issues are a core element of Canada's foreign policy values and objectives. From a Canadian perspective, any regional code of conduct developed under the auspices of the ARE will be grossly inadequate if it excludes respect for principles concerning the protection of human rights and good governance. Adjusting the ASEAN principles to accommodate Canada's emphasis on human rights and environmental issues could prove especially challenging as an area of Canadian policy concern within the ARE. Specialization A second issue facing Canada's involvement in the ARE is whether it should focus on things it does best, such as peacekeeping, or develop a more broad-based approach to the development of security cooperation in the ARE? To be sure, peacekeeping remains important as Canada's "comparative advantage"—an area in which Canada can claim genuine expertise and leadership. Canada has already sponsored seminars on peacekeeping for the ARE, but this is not enough. While important to the ARF's Asian members, such as Malaysia and Indonesia, which have stepped up their participation in UN

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peacekeeping operations, peacekeeping is of lesser significance in the intra-ARF context than some other issues, such as confidence building measures. Thus, it is necessary for Canada to identify and develop other issues of specific concern to ARF members, such as land mines and small arms proliferation. Despite having failed to attract a consensus, the idea of a regional arms register, strongly supported by Canada, needs to be pursued on a long-term basis. Institutionalization Another important issue facing Canadian policy concerns the structure and direction of the ARF. Should it remain a loosely structured, consultative forum, or should it develop a more concrete focus and role and become an organization, able to undertake hard bargaining and negotiations on sensitive political and security issues. The concept of cooperative security underlying Canada's approach to the ARF emphasizes an evolutionary approach to institution building. As Joe Clark noted in 1991: "Cooperative security is by definition evolutionary... The development of a cooperative security dialogue depends on what is realistic and possible... We prefer to work slowly and to take the time to develop consensus."30 It is, however, difficult to ascertain what a desirable pace for the ARF should be. Some Canadian policy makers and analysts are uncomfortable with the relatively slow and cautious approach favoured by ASEAN and China. Is it now time for Canada to push for a speedier development of the ARF in the direction of a more hands-on and direct role in regional security? Should Canada continue to acquiesce in the reluctance of some ARF members to use the forum to deal with contentious issues, such as the Spratlys and the Korean Peninsula question (and, now that India is a participant, the South Asian security stalemate as well)? Or should these issues be tackled upfront and made central to the ARF's deliberations on regional security? This remains a difficult area of policy innovation and choice for Canada. Agenda Setting and Leadership In a related vein, should Canada continue to endorse ASEAN's central role within the ARF? Some aspects of ASEAN's steering of the ARF, such as its almost "unilateral" acceptance of India and Myanmar as members, have already proven controversial. But even if Canadian policy makers have reservations about ASEAN's role as driver in the ARF, will it be wise to seek a lessening of that role? Without ASEAN,

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the ARF might not have been created. Certainly, Chinese participation would have been less likely if the ARF had been launched by any other actor, particularly the U.S. Moving the ARF away from the ASEAN process has costs and benefits, which Canada must weigh carefully. Support for such a move will identify Canada closely with the U.S. camp, and might alienate ASEAN members without necessarily enhancing Canada's own weight within the grouping and its ability to set the ARF agenda. On the other hand, loosening ASEAN's hold over the ARF might open new and interesting avenues for the grouping which might be in Canada's interest. For example, a decision to hold ARF meetings in Northeast Asia might make the forum more relevant to the Korean Peninsula problem. Bilateralism-multilateralism Nexus Another policy question facing Canada is the close nexus between multilateralism and bilateralism. Canada's strong support for multilateralism needs to be matched by an equally strong commitment to the development of bilateral contacts and cooperation. As noted, neither the Asian members of the ARF nor Australia nor the U.S. see multilateralism as a substitute for bilateral linkages. Bilateral relationships provide a solid foundation for multilateral engagement and lend greater credibility to the latter. But compared to the U.S. and Australia, Canada lags in developing bilateral linkages, particularly in the defence arena. Its bilateral defence relationships within the Asia Pacific region are insignificant compared to its ties in Europe. Defence relationships encompass a whole range of areas such as ship visits, military sales, technology transfer, military education and training. Of particular importance will be a decision as to whether Canada should consider the development of special relationships with one or more Asian members of the ARF. Subregional/regional Interface Similarly, Canadian policy needs to pay more attention to the interface between subregional and macroregional frameworks established for security cooperation. The ARF is clearly geared to the latter. But Canada's regional security policy recognizes that a "regional framework must allow for differentiation in sub-regions, recognizing distinct security approaches."31 Arguably, the Northeast Asia subregion is of greater strategic and economic importance to Canada than Southeast Asia. It is also an area noted for its lack of any subregional

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security cooperation. The need to fill this gap has been recognized by several analysts and policy-makers in the region. Despite having launched the first North Pacific subregional security consultations, Canada has faced considerably greater difficulty finding a seat at the table in subregional consultative mechanisms concerning Northeast Asian than it has in Asia Pacific-wide institutions. Apart from defining a subregional focus for the NPCSD, Canada has in the past supported the idea, proposed by South Korea, of a subregional consultative security mechanism in Northeast Asia. Yet this proposal has encountered stiff resistance from North Korea. While co-chairing a CSCAP working group on North Pacific, Canada has been excluded from a subregional dialogue forum sponsored by the University of California, San Diego as well as the recent U.S. proposal for subregional talks on the Korean situation. Despite these obstacles, however, there is a strong case for continuing Canada's effort to develop a Northeast Asian mechanism, within which Canada would help to open channels of communication with North Korea, with a view to securing its participation in a Northeast Asian Forum. Regional/global Interface Canada's involvement in the ARF should be used to strengthen the linkage and interface between its regional and global security concerns. As a member country with a global security agenda in the areas of peacekeeping, arms control, and non-proliferation, this country can and should seek to explore the potential of the ARF to advance its global security interests. The ARF meeting in Brunei signalled a significant widening of ASEAN's (and the ARF's) security horizons. Malaysia's strong expression of concern over the Bosnian situation and the intense criticism directed by most ARF members against French nuclear testing in the South Pacific are indicative of the development of the ARF as a debating forum for security issues that are global in scope. With the signing of the Southeast Asia Nuclear Weapon-Free Zone Treaty in December 1995, ASEAN has manifested an increasing interest in global non-proliferation issues such as the Comprehensive Test Ban Treaty (CTBT). India's membership within the ARF will increase the salience of nuclear non-proliferation within the ARF security agenda and offer additional scope for the ARF's efforts to influence global security concerns. Canada's policy options in developing this aspect of the ARF deserve further attention.

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Domestic Constituency Sustaining a long-term Canadian commitment to Asia Pacific security cooperation is a particularly demanding task, given the rapid changes in the international system which stretch Canada's limited resources and attention span. But the question of commitment relates not just to Canada's participation and involvement in ARF and related initiatives, but also to the development of a policy community within Canada which is sensitive to Asia Pacific security issues. Apart from being an active participant and contributor at the official gatherings of the ARF, Canada includes within its regional security policy in the Asia Pacific region the extension of support to Track Two channels for regional security cooperation, such as CSCAP and the Canadian Consortium on Asia Pacific Security (CANCAPS).33 But with limited funding, CANCAPS has a long way to go before it can play a major role in informing policy makers and the public on regional issues, influencing policy debates through proactive ideas and proposals for new initiatives, and developing greater levels of expertise on Eastern Asia within the country. In the meantime, it is far from clear that there now exists in Canada a strong and stable constituency for sustaining a long-term commitment to engage in institution building in the Asia Pacific region. Comprehensive Security The ARF's current agenda on security cooperation consists of measures to promote confidence building, preventive diplomacy and conflict reduction. It is basically geared to addressing conventional security questions. Missing from the picture is any sense of how the ARF might be used to deal with unconventional threats. The latter are an important component of any cooperative security concept which assumes that "[clhallenges to security and stability increasingly come in more diverse forms including, inter alia, economic underdevelopment, trade disputes, overpopulation, irregular migration and refugee movements, environmental degradation, political oppression, human rights abuses, terrorism and the illicit trade in drugs."33 While conventional security questions, such as the regional arms build-up, tensions in the Korean Peninsula or the South China Sea dispute may require immediate attention, developing a long-term action agenda for the ARF requires greater attention to unconventional threats. This should be an important policy concern for Canada.

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Alternatives Finally, any serious consideration of Canadian policy towards the ARF should explore possible alternatives to the nascent and untested forum. Clearly, if the ARF remains a "talk shop," some of its members may look for alternative avenues for promoting security cooperation. A possible example of this could be the idea of creating a forum for the region's defence ministers, mooted by former U.S. Defence Secretary William Perry. For Canada, the potential of APEC to deal with security issues is an important consideration. Although currently opposed by ASEAN, such a development is not entirely unlikely. With an annual Leaders' Meeting, APEC clearly has the potential to discuss a wider range of issues, including political and security matters, in the manner of the G7. CONCLUSION Canada has already made an important contribution to the development of the ARF. But its ability to sustain a long-term commitment to institution building in the region is yet to be fully demonstrated and appreciated by the Asian actors. The ARF is evolving in an Asian milieu with which Canadian policy makers are still not completely familiar or comfortable. Moreover, despite a promising start, the viability of the institution remains unclear. Canada's own ability to address the problems surrounding the ARF is constrained by geography, lack of resources, cultural barriers, and a somewhat hesitant appreciation of the region's strategic and economic importance to Canada. As a result, this country faces a number of difficult policy choices in influencing the direction, scope and substance of the security approach being developed by the ARF. Successful transformation of the ARF into a significant and durable regional security structure may be one of the most significant tests of Canada's long-standing commitment to multilateralism in international relations. It is important to meet this test. There may be no better way for this country to pursue and advance its political and strategic stakes in the region. While Canada's ability to promote a cooperative security institution in the Asia Pacific region may be limited, it is still greater than its ability to influence the alternative to multilateralism, a system of balance of power geopolitics dominated by the most significant regional powers. The spiral of anarchy and disorder that may result from the failure of multilateralism will be more

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costly for Canada than the resources needed for a more substantive and meaningful engagement within the ARE NOTES This paper was originally written for the Regional Integration in Eastern Asia Project at the University of Toronto-York University Joint Centre for Asia Pacific Studies, funded by the Canadian International Development Agency. Comments by Paul Evans on an initial draft of this paper are gratefully appreciated. 1

2

3 4 5

6 7

8 9 10 11

Notes for a Speech by the Right Honourable Joe Clark, Secretary of State for External Affairs, to the Colloquium on North Pacific Cooperative Security Dialogue in Victoria, British Columbia, April 6, 1991. Reproduced in Canada on Asia Pacific Security in the 1990s, CANCAPS Papiers No.l (Toronto and Vancouver: The Canadian Consortium on Asia Pacific Security, March 1994), 25. In addition, Japan was the third largest foreign investor in Canada after the U.S. and UK. Japanese direct investment in Canada has doubled since 1985 to Can.$ 5.7 billion, and Japanese portfolio investment, mainly in federal and provincial government bonds, was estimated to be Can.$ 49 billion. See Gary J. Smith, "New Dimensions in Asia Pacific," in Canada on Asia Pacific Security in the 1990s, 66. As Clark pointed out, in 1990 alone, 90,000 of the total of 212,000 immigrants into Canada came from Asia. Notes for a Speech ... April 6, 1991, 24. Canada, Department of National Defence, 1994 Defence White Paper, (Ottawa: Canada Communications Group, 1994), 37. Brian L. Job, "Asia Pacific Security Outlook: Canada," written for the AsiaPacific Security Outlook Project directed by Charles Morrison and sponsored by the East-West Center and the Research Institute on Peace and Security, Japan, 4. For a historical background, see Paul Evans, "Reinventing East Asia: Multilateral Cooperation and Regional Order," Harvard International Review, (Spring 1996), 16-19, 68-69. For a discussion of the evolution of ideas and initiatives concerning a multilateral security system in the Asia Pacific region see: Amitav Acharya, A New Regional Order in Southeast Asia: ASEAN in the Post-Cold War Era, Adelphi Paper no. 279 (London: International Institute for Strategic Studies, 1993). ASEAN then consisted of Brunei, Malaysia, Indonesia, Thailand, Singapore, and the Philippines; Vietnam became an ASEAN member in 1995. "The ASEAN Regional Forum: A Concept Paper," document circulated at the Second Annual Meeting of the ASEAN Regional Forum, Brunei, August 1, 1995. David B. Dewitt, "Common, Comprehensive and Cooperative Security," Pacific Review, Vol. 7, no.l (1994), 136-50. "ARF: S'pore proposes a gradual approach," The Straits Times, July 23, 1994, 1.

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12 Peter Ho Hak Ban, "The ASEAN Regional Forum: The Way Forward," Paper Presented to the Third Workshop on ASEAN-UN Cooperation in Peace and Preventive Diplomacy, Bangkok, February 17-18, 1994. 13 The Straits Times, August 4, 1994, 2. 14 Interview, The Straits Times, July 30, 1993, 34. 15 Ted McDorman discusses this in Chapter 13 in this volume. 16 "The ASEAN Regional Forum ... " Annex A and B, 8-11. 17 Yang Razali Kassim, "Minister: Asean will always have driver's seat in forum," Business rime's (Malaysia), July 25, 1994, 3. 18 "New framework for security," The Straits Times, July 26, 1994, 15. 19 Michele Cooper, "ASEAN seizes role in post-Cold War diplomacy," Agence France Presse, July 28, 1994. For a fuller discussion of "the ASEAN way" see: Arnafin Jorgensen-Dahl, Regional Organisation and Order in Southeast Asia (London: Macmillan, 1982); Noordin Sopiee, "ASEAN and Regional Security," in Mohammed Ayoob, (ed.), Regional Security in the Third World (London: Groom Helm, 1986), 221-31; Donald Weatherbee, "ASEAN Regionalism: The Salient Dimension," in Karl D. Jackson and M. Hadi Sosastro, (eds.), ASEAN Security and Economic Development (Berkeley, CA: Institute of East Asian Studies, University of California, 1984), 259-68. 20 At the first ARF meeting, Han Sung Joo, at the time South Korean Foreign Minister, argued that "Countries in the Northeast Asian sub-region are in need of a framework for security dialogue and cooperation," and that "The remaining vestige of the Cold War structure warrants a Northeast Asia security dialogue." Valerie Lee, "U.S. hails defence forum, warns Korea problem urgent," Reuters World Service, July 26, 1994. 21 There are now a number of Track Two dialogues on Northeast Asian security issues, including: the Hokkaido Conference on North Pacific Issues, the North Pacific Group of the Council for Security Cooperation in the Asia Pacific; the Northeast Asian Cooperation Dialogue; and the UN Centre for Peace and Disarmament in Asia and the Pacific's Symposium on Northeast Asia. See Evans, "Reinventing East Asia ..." 1922 The EAEC (originally termed the East Asian Economic Grouping) was first proposed by Malaysia in response to the breakdown of GATT Uruguay Round talks in December 1990. The Malaysian proposal envisaged a grouping consisting exclusively of East Asian countries (thereby excluding the U.S., Canada, Australia, and New Zealand, which were members of the Asia Pacific Economic Cooperation) that could develop a common approach to the crisis in GATT and respond to the advent of the European Single Market and the North American Free Trade Agreement. But the proposal received little support from other Asian countries, particularly Japan, which was seen by Malaysia as the de facto leader of EAEC, despite Malaysia's strong denial of the U.S. charges that the EAEC was meant to be a "trade bloc." The EAEC idea remains somewhat moribund today. The ASEAN countries have agreed that the EAEC should become a caucus within the APEC, but the role of this caucus is not clearly defined. It is noteworthy that the first meeting of EU and East Asian leaders (the so-called Asia-

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23 24 25

26 27 28 29

30 31

32

33

Europe meeting, or ASEM) in 1996 brought together all the East Asian countries that are to be included in the EAEC, prompting Malaysian officials to claim this event as the realization of the EAEC idea. Business Times (Malaysia), July 30, 1994. "N. Korea not yet ready for security forum, U.S. says," Kyodo News Service, Japan Economic Newswire, July 29, 1994. Michael Richardson, "A step ahead on Asian security," International Herald Tribune, July 26, 1994, 2; Ahirudin Attan and Lokman Mansor, "Thailand: ASEAN Forum hailed as force for regional peace," Business Times (Malaysia), July 26, 1994. Susumu Awanohara, "Group Therapy," Far Eastern Economic Review, April 15, 1993, 10-11. Transcript of Defense Department Special Briefing on East Asia Strategy Report by Joseph S. Nye, Jr., Assistant Secretary of Defense for International Security Affairs. Federal News Service, Washington, D.C., February 27,1995, 4. "Asian and Pacific Links: A Sort of Safety," The Economist, July 31, 1993, 26. The Treaty of Amity and Cooperation was signed by the five founding members of ASEAN—Indonesia, Malaysia, Singapore, Thailand and the Philippines—at their first summit meeting in Bali in 1975. The treaty acts as a de facto charter of ASEAN (which does not have a formal charter), outlining the basic aims and objectives of the grouping and the norms of interstate cooperation in Southeast Asia, including respect for the sovereignty and territorial integrity of members, non-interference in the internal affairs of members, non-use of force, and pacific settlement of disputes. Notes for a Speech ... , April 6, 1991, 26. An Address by the Honourable Barbara McDougall, Secretary of State for External Affairs, at the Vancouver North Pacific Co-operative Security Dialogue Conference," in Canada on Asia Pacific Security in the 1990s, 36. CANCAPS serves as a national forum for academics, government officials and others (such as journalists and members of the business community) in which to discuss Asia Pacific security issues. It is funded by the Department of Foreign Affairs and International Trade. It organizes an annual conference and publishes a newsletter (The CANCAPS Bulletin) and a occasional paper series (CANCAPS PAPIER). Its two national offices are located at the Institute of International Relations at the University of British Columbia and the Centre for International and Security Studies at York University. Stewart Henderson, "Canada and Asia Pacific Security: The North Pacific Cooperative Security Dialogue: Recent Trends," in Canada on Asia Pacific Security in the 1990s, 37.

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XII East Asian Arms Build-ups and Regional Security

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(Canadian foreign policy statements since 1990 have been laced with rhetoric about the need to move beyond a narrow conception of security. "Security has ceased to be something to be achieved unilaterally," Joe Clark, who was at the time Foreign Minister, told the United Nations General Assembly in September of that year. "Security has ceased to be something to be attained through military means alone. Security has become multi-dimensional and it has become cooperative."1 This phrase provided the label for Canada's most prominent security initiative to date in the Asia Pacific region, the North Pacific Cooperative Security Dialogue, the aim of which was to promote a "habit of dialogue" on security issues among countries that did not typically communicate with one another about such issues. Although both the phrase and the initiative had withered by the end of 1993, the idea—that security should be arrived at multilaterally and should encompass political, cultural, economic, environmental, humanitarian

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and demographic issues, as well as those that are purely military—is still very much in evidence in statements by Canadian politicians and bureaucrats. The idea is particularly suited to Asia, where countries have traditionally tended to think of security, and the related notion of stability, in very broad terms. It is also suited to Canada's interests and aptitudes in Asia Pacific. Canada is not a military player in the region, but it does have expertise and influence in other areas of security, broadly defined. Canada's security objectives in Asia Pacific are first and foremost to support its economic objectives in the region, that is, to promote a secure and stable environment for trade and investment; to ensure safe and open sea lanes and air routes; to ensure that any political and economic changes in the region occur peacefully; and to promote a rules-based environment for interstate relations. Other security interests include building up regional multilateral institutions capable of dealing with security issues; ensuring a Canadian voice in forums where regional security issues are discussed; forestalling developments that would draw Canada into military commitments in the region, either as a peacekeeper or as a combatant; keeping the United States engaged as an active player in regional security; and promoting Canadian global security goals—such as non-proliferation of nuclear, biological and chemical weapons—in the region. Other goals that have become more prominent within the new conception of security include the promotion of sustainable development, human rights and good governance (now called "public management" by Ottawa). An objective likely to become more salient in the next decade, as the size of Canada's Asianborn population grows, is to ensure that conflicts within Asia do not spill over into incidents of unrest or terror within Canada. This chapter may thus seem an anomaly, insofar as it deals almost exclusively with the oldest, least fashionable, but most basic aspect of security: national militaries and their weapons. Definitions of security notwithstanding, there has been a marked improvement in the military capabilities of almost all East Asian countries over the last 15 years.2 Asia is the only region in the world in which real defence spending is significantly higher now than it was in 1985.3 Defence expenditure in East Asia and Australasia grew 38 percent between 1985 and 1995, from U.S.$102 billion to U.S.$l4l billion in 1995 constant prices. This contrasts with a global drop in defence spending of 31 percent (from U.S.$1,173 billion to U.S.$814 billion). In 1995, for the first time, the value of the region's arms imports exceeded those

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of North America and Western Europe combined. East Asia now accounts for nearly one-quarter of the world's annual arms trade of U.S.$30 billion—double its average share in the 1980s.4 A variety of factors are motivating the regional military build-up, including uncertainty about the region's future security arrangements, the need to replace outdated equipment, the growth of maritime responsibilities, corruption in the procurement process, and economic prosperity. Even though most East Asian states are buying only small quantities of advanced weapons, the last decade and a half has seen an important change in the character of new military equipment throughout the region. The growing reach, technical sophistication and firepower of Asian weapons systems are bringing neighbours within closer range of one another. While it would be an exaggeration to call the situation an arms race, some recent acquisitions are potential sources of tension insofar as they heighten existing suspicions and enhance the likelihood that new, offensively oriented equipment will be deployed in times of crisis, especially by military-dominated regimes.5 For Ottawa, this situation presents a dilemma—how to deal with traditional security in a region where Canada has generally downplayed the issue in its foreign policy. In general, arms build-ups have been a subsidiary concern in Canada's cross-Pacific diplomacy, coming behind economic issues, human rights concerns (insofar as they emerge from the rhetoric), and general confidence building to promote the peaceful resolution of disputes. In part this is faute de mieux: Canada does not have the credentials to be influential on the issue. Yet Asian arms build-ups have implications for Canada's economic, human rights and preventive diplomacy goals in the region, as well as for traditional Canadian non-proliferation and peacekeeping concerns. Before discussing this issue, this chapter will first examine the characteristics of East Asian arms build-ups and consider what is problematic about them. CHARACTERISTICS OF EAST ASIAN ARMS BUILD-UPS

East Asia is a vast region characterized by such disparities in the physical size of countries, their military capability and their threat perceptions that it can be misleading to generalize about trends in arms acquisition. Some regional states, such as the Philippines, have not engaged in any arms build-up to speak of; others, like Indonesia, have done so only sporadically; still others, including Vietnam, have

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been disarming. Nevertheless, these tend to be the exceptions. In general, recent East Asian arms build-ups have been characterized by the following features. The growth of naval power, particularly capabilities that allow navies to roam farther and remain away from home longer.

The period between 1983 and 1995 saw a 44 percent jump in the number of principal surface combatants (aircraft carriers, destroyers and frigates) in East Asian navies.6 The growth has been qualitative as well as quantitative: the new vessels are typically the latest, most combat-capable types, with better surveillance systems and multidimensional weapons and sensors. For many regional navies recent acquisitions mark an important shift from river and coastal operations to ocean-going capabilities. At first blush, the emphasis on naval power is not surprising. Many East Asian countries are located on islands, archipelagos or peninsulas; others have long coastlines. The region's waters are among the world's busiest shipping corridors and most of the area's maritime boundaries are in dispute. Except on the Korean Peninsula and the land borders around China, the bulk of the force that could be brought to bear in war would have to come from the sea. Nonetheless, the recent trend is worth remarking because prior to the 1980s most East Asian force improvements occurred on land. The change reflects a greater attention to external security and a growth in economic interests at sea. The promulgation of exclusive economic zones within limits of 200 nautical miles and the extension of the allowable width of territorial seas to 12 nautical miles under the 1982 UN Convention on the Law of the Sea (UNCLOS) has created claims— many overlapping—over resource-rich areas that require surveillance and policing. The procurement of advanced air power, especially advanced multi-role fighter aircraft and maritime reconnaissance planes.

The fighters being acquired are extremely capable, suited to maritime attack roles as well as to air-superiority manoeuvres. In most cases the new planes are F-l6s (Taiwan, Singapore, Indonesia, Thailand, South Korea), although F/A-18s (Malaysia, Australia), F-15s (Japan), Mirage 2000s (Taiwan), Su-27s (China, Vietnam), MiG-29s (North Korea,

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Malaysia) and MiG-31s (China) have also been procured. For most countries this represents a move from short-range intercept capabilities to those suited to medium-range airspace control and interdiction. An emphasis on guided missiles.

Most states are equipping their new surface combatants with Harpoons, Exocets or indigenous anti-ship missiles like the Chinese C-801 and the Taiwanese Hsiung Feng II. A majority of the fighter aircraft and long-range maritime patrol aircraft being introduced to the region are being fitted with air-to-air and air-to-surface missile launchers. A further significant development since the early 1980s has been the growth of ballistic missile capabilities in Northeast Asia. China has continued its already extensive program with the development of new intercontinental, intermediate-range and short-range missiles. North Korea has produced homegrown versions of the Scud-B and Scud-C and successfully flight-tested the Rodong-1, with a range of 1,000 km. The Rodong-2, with a range of 1,500-2,000 km, is reportedly under development, as are the two-staged Taepo Dong 1 and 2, With a range of up to 3,500 km, the latter could reach Guam, where the United States has air force and naval facilities.7 Taiwan also began an indigenous ballistic missile program. An increase in local defence manufacturing and support capabilities

Although the growth in arsenals has generally been import-led, an increasing proportion of East Asian defence equipment is being built locally, typically under licensing agreements with traditional arms suppliers. The marked effort on the part of recipients, particularly in Northeast Asia, to obtain the transfer of technology and related skills has led to major improvements in the quality of indigenously produced weapons. Japan, Taiwan and South Korea are now capable of producing most types of sophisticated defence equipment—not only modern naval vessels, combat aircraft and ground vehicles, but also some command, control, communications, computer and intelligence (CM) systems. Much further down on the scale of complexity, North Korea is largely self-sufficient in arms production, making its own versions of armoured personnel carriers, artillery, missiles, light tanks, high-speed missile boats and landing craft, submarines, small arms and munitions. China is also virtually self-sufficient in unsophisticated

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defence equipment, producing a wide range of aircraft, warships, submarines, tanks, small arms and ammunition, as well as missiles. Indonesia and Malaysia are in the midst of programs of significant improvement to their domestic defence production capacity. No state in the region is free from dependence on outside suppliers, especially for high-end equipment and technology. However, the East Asian willingness to pay handsomely for key weapons-related technologies, coupled with outsiders' willingness to supply these technologies as the price of entering booming Asia Pacific markets, has resulted in a symbiotic relationship between major arms suppliers (the U.S., Russia and the West Europeans) and states like South Korea, Japan, Taiwan, Singapore and China.8 Stumbling Blocks The fact that East Asian armed forces have been introducing more advanced equipment into their inventories does not necessarily mean that they have been able to take full military advantage of it. The technological capabilities of regional actors vary greatly and the introduction of new systems has not been a uniformly smooth process. Several states are introducing particular weapons types into their inventories for the first time and it is far from evident that the purchasers—most of whom have rudimentary public education systems—possess the skilled manpower necessary to operate and maintain these complicated systems. Although states are finding means to buy the weapons, follow-up resources for training and spare parts are often lacking. The eclectic mix of weapons being chosen within individual services adds to maintenance difficulties. Problems of integration are likely to be compounded as regional states acquire even more advanced equipment. The systems and technologies typical of the "military technological revolution," such as stealthy platforms and advanced C^I, require the development of new military doctrines and the creation of new military organizations if they are to be fully exploited. For most countries, this task will be far more difficult than acquiring the capabilities in the first place. WHY DOES IT MATTER? Stumbling blocks notwithstanding, East Asian arms acquisitions over the last 15 years—and continuing since—have important implications for regional security. Some of these are beneficial: countries are better able to defend themselves, which may promote local deterrence, especially

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as the United States reduces its forces in the Pacific. In addition, many of the weapons are safer to operate than their predecessors, thus posing less risk to limbs and lives in normal peacetime operations. Still, the build-ups raise concerns, which will now be discussed. Changing Force Postures There is an increasingly outward focus to East Asian armed forces, something that could be described as a movement in the direction of power projection, that is, the capability to strike distant military targets or to put the assets or territory of another state at risk. Although it is generally fruitless to get into a discussion of whether a particular weapons system is offensive or defensive, since the answer depends on the military context and operational doctrine, some weapons are—in the abstract—more suited to offensive than to defensive operations. These tend to be systems that are able to carry significant amounts of firepower over relatively long distances and that are capable of surprise. Although all defence ministries in the region would argue that their new weapons are intended to be used in defensive, or counter-offensive, situations, many have a distinctly offensive potential. Examples include ballistic missiles, advanced strike aircraft, modern surface combatants, modern submarines, carrier vessels, and long-range anti-ship missiles. The combination of advanced fighter planes, fast attack craft and precision-guided missiles that offers regional states a relatively inexpensive means of defending maritime approaches also provides them with a strike capability well-suited to offensive operations. In most cases, East Asian arms build-ups are not coupled with offence-oriented doctrines or signs of preparation for offensive operations, examples of which would include forward troop deployments, combined arms training, amphibious assault training and aggressive blue-water operations. North Korea, with its forward positioning of infantry, armoured and artillery units, is a clear exception. There are also worrisome elements in China's defence program, about which more will be said later. In other cases, such as Myanmar and Vietnam, defence establishments are so opaque that doctrine can only be guessed at. Even in Southeast Asia, where doctrine is generally considered benign, the assertive potential of new acquisitions is supported by several emergent concepts in defence planning, including the establishment of rapid deployment forces (Singapore, Malaysia), a focus on combined air/naval operations (Thailand, Singapore), and an emphasis on forward defence (Singapore).

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Non-threatening military doctrines are not necessarily comforting in a region replete with overlapping territorial claims, where each claimant can make a cogent argument that it is acting defensively. In any case, doctrine can change. Recent Asian arms build-ups have been accompanied by a movement away from manpower-intensive postures, which means that conflict, especially of the limited kind likely in the region, would be less disruptive domestically than previously and hence perhaps more entertainable. Perpetuation of Suspicion Some acquisitions, such as North Korea's missiles, China's improved amphibious fleet, and Taiwan's fighter jets, are probably intended to send uncomfortable messages to potential adversaries. But even where this is not intended recent acquisitions are feeding suspicions. Several purchases—the Thai helicopter carrier, the number of Harpoons, the number of F-l6s—do not seem to be linked to identifiable policies or reasonable planning scenarios. They can often be explained by non-defence factors, such as corruption in the procurement process or the desire for national prestige. However, once in service, they can generate interstate tensions and counter-acquisitions, due to the tendency to base planning on worst-case assumptions. Though the pace of events does not justify the use of the term "arms race," there are manifestations of action-reaction acquisitions even among regional "friends": for example, Singapore's F-16 deal is thought to have in part spurred fighter acquisitions by Indonesia, Thailand and Malaysia. East Asia is rife with historical disputes and rivalries. Rapid economic growth and burgeoning populations have added new fodder for interstate conflict: fisheries, hydrocarbons, cross-border pollution, the treatment of migrant workers. Recent arms acquisitions add to mistrust and make it easier for states to exert pressure and up the ante in disputes. In a worst-case scenario, the problems posed by command and control of new equipment—little warning, rapid speed, short flight time—could create pressures for pre-emption in a crisis. The above would be of less concern if East Asia had a dominant regional power or institutions with the capacity to prevent and manage interstate conflict. Unfortunately, one impetus for regional arms build-ups is the Asian perception that the United States will not be able or willing to politically and militarily sustain its hegemonic role in the region. The U.S. military presence in the Pacific

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has declined steadily since the late 1960s, a trend that accelerated during the Bush administration, when the number of U.S. troops deployed in the region fell to 100,000 from 135,000. In 1996, Washington took steps to try to correct this perception and reaffirm its security commitment to the region. In March, the U.S. Navy deployed two carrier battle groups in the waters off Taiwan in response to the heightened tensions between Taiwan and China during the run-up to the Taiwanese presidential election. In April, President Clinton signed a U.S.-Japan security declaration that reinvigorated the 1951 U.S.-Japan Security Treaty and stated explicitly that America intends to keep the number of troops in the Pacific at 100,000 "in the prevailing security environment."9 In July, the United States, Australia and New Zealand revived their ANZUS Treaty. But it is not at all clear that this new found resolve could weather a drop in U.S. popular and Congressional support for the American presence in the Pacific and the U.S.-Japan alliance, especially if trade friction grows, Japanese (and South Korean) hosts grow more assertive, and Japan does not carry its fair share of the burden in regional crises (for example, Taiwan). Nor does it allow for a possible North Korean collapse, which would remove the external threat that, at least in official explanations, justifies much of the U.S. troop presence. At the same time, the region's nascent security institution—the ASEAN Regional Forum (ARF)—has adopted a go-slow approach to regional security problems. There are some salutary examples of regional defence cooperation and confidence building, particularly in Southeast Asia: attempts to share defence information, to exercise together, to exchange officers and to try, in other ways, to create an atmosphere of predictability, transparency and trust that would reduce the tensions aggravated by arms acquisitions. But this atmosphere is coming into being too slowly to put to rest concerns bred of the larger context. Key questions include not only the future U.S. role, but also the role of China (see below) and Japan,10 and also Russia, a footnote to most pieces about East Asia, but still with a sizeable military force and interests and disputed territories in the Pacific. Effects on Existing Conflicts The new acquisitions have implications for states' bargaining and fighting power in the context of existing conflicts in the region.

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The Spratlys The Spratlys are a chain of tiny islands in the South China Sea, claimed in whole or in part by Brunei, China, Malaysia, the Philippines, Taiwan and Vietnam. With the possible exception of China, the claimant states are not capable of sustained naval operations in the region. However, given the size of most of the islands and existing garrisons, assaults or "invasions" would not necessarily require complex operations (though occupation might). Small improvements to forces could offer important advantages. The short distances between the territories of most claimants and the Spratlys mean that land-based aircraft and missiles and smaller ships like fast attack craft are key players. Frigates and destroyers, with their range and firepower, have a tactical advantage, but patrol and missile-armed ships, supported by air operations, could also have a considerable impact. One result of Southeast Asian arms build-ups could be strengthened deterrence against Chinese intervention in the Spratlys. However, Beijing already shows signs of increased confidence in its power to conduct surprise encroachment operations. In February 1995, the Philippines discovered that Chinese forces had erected military structures on Mischief Reef and placed territorial markers on other features claimed by the Philippines—the first time China has directly challenged a Spratly claimant other than Vietnam. Competitive oil drilling in the region may increase tensions and lead to skirmishes between the Chinese and other navies. The Koreas South Korea's arms acquisitions over the last decade, supported by Seoul's widening lead in economic performance, have resulted in a gradual shift in the military balance between North and South. The North still enjoys a lead in armour and artillery, and in forces readily available for the initial phase of war. Nonetheless, Seoul has a growing advantage in logistic support (except in the area of ammunition), in the ability to sustain prolonged combat, and in command and control abilities. It has also been honing its edge in airpower, which could prove decisive in battle. This slow turning of the tide in South Korea's favour may have the positive effect of strengthening deterrence. Recent force improvements almost certainly increase Seoul's capacity to resist a North Korean advance, should deterrence fail. On the other hand, they could lead an increasingly desperate North to contemplate a strike on

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the South before the conventional balance turns even further, or to rely on weapons of mass destruction. Tension along the border has risen over the past year. North Korea has moved more troops and aircraft to forward positions near the demilitarized zone (DMZ),11 and has continued to build up its arsenal. At the beginning of April 1996 Pyongyang announced that it would no longer respect the demilitarized zone and began sending as many as 300 troops at a time into the joint security area for small-scale exercises.12 There is concern that Pyongyang may escalate antagonism in the DMZ to deflect its people's attention from domestic troubles, which include famine and a severe energy shortage. While there is no evidence that the North is planning immediately to attack the South, the taunting at the border, as well as a submarine intrusion in September 1996, signals a trying period in North-South/U.S. relations and increases the chance of an incident that could shatter the current tense peace. Continued peninsular arms build-ups also have an effect on other Northeast Asian arms developments. The birth of a South Korean blue water navy, while in part designed to counter the North Korean submarine force, is also thought to betray a concern about Japan's future activities in the region. Pyongyang's medium-range missile capability, capable of carrying weapons of mass destruction beyond the Peninsula, is also a concern for Japan and China. Korean unification would eliminate some regional tensions, but also introduce new ones. Many Japanese see a unified Korea as a potent economic rival and possible military threat. China is probably no more desirous than Japan of having a united Korea on its borders. If war between the Koreas begins to look probable, and doubts about the desirability of unification persist, continued arms build-ups on the Korean Peninsula will not prompt moderation on the part of others. Taiwan Military build-ups in China and Taiwan are of concern, given that the former engaged in a campaign of military intimidation against the latter in late 1995 and early 1996. This involved live-fire military exercises and missile tests by China in international waters just off Taiwan's shores. The immediate purpose of China's actions was to erode support for pro-independence candidates in the run-up to Taiwan's first democratic presidential election on March 23, 1996. More broadly, they were intended to dampen any support for independence in Taiwan. China has made clear that any attempt by Taipei

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to seek independence would be one of four grounds for Beijing to use force against the island. Chinese President Jiang is believed to be under strong pressure from his generals to maintain a hawkish stance on the issue. The failure of the intimidation tactics to influence the election outcome13 may have momentarily undermined the hard-line approach, but China's continued pressure over the summer probably indicates a high degree of military influence in Beijing on this issue. Few anticipate a direct Chinese attack on Taiwan. Should China decide to make a move against the island, it would be more likely to start with actions short of war, such as imposing a naval blockade (formal or informal) of the Taiwan Strait, which, although logistically difficult, would cripple the island's export-oriented economy, or— more likely—occupying one of several undefended islands claimed by Taiwan. Some analysts suggest that in the face of serious coercion Taiwan would collapse. Others believe that it would put up a fight. Overshadowed by reportage of China's acquisitions, Taiwan's arsenal has been undergoing a robust modernization that will provide it with a modern, relatively sophisticated naval force and one of the most powerful air forces in East Asia by the end of the decade. The potential for U.S. involvement—signalled by the pre-election battle group deployment mentioned earlier—is likely to prompt moderation in Beijing, but there remains the potential for military confrontation as a result of miscalculation or a military mistake. Taiwan's forces went on high alert last year and Taiwan has threatened military retaliation if there are any Chinese incursions into Taiwanese waters. Such a trip-wire environment leaves little margin for error by inexperienced regional commanders operating weapons with which they have only new-found familiarity. China's Emergence as a Regional Military Power The People's Liberation Army (PLA) has significant hurdles to overcome before it can become a world-class military force. But if present trends continue and if China stays together—both large "ifs"—China will emerge by about 2020 with a large, modern force capable of reaching far into the Pacific and, potentially, of dominating East Asia. In the short term, the effects of China's arms build-up on regional stability should be minimal. As long as the country is preoccupied with economic development and requires a peaceful environment and Western investment towards this end it is unlikely to use its new arms for aggressive ends. However, it could still pose a localized problem.

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However inadequate the Chinese navy is in modern great power terms its size gives it real capabilities in the regional context. Beijing's concept of active defence, while not aggressive, relies heavily on preemption and power projection to the limits of the "strategic boundary," that is, the air and sea space China feels it needs to control to be secure, which extends beyond the country's actual borders. Recent actions in the South China Sea and the Taiwan Strait are not encouraging. As Jose Almonte, security adviser to Philippines President Fidel Ramos notes, these have "shattered East Asia's comfortable assumption that its efforts to draw China into its network of economic interdependence would 'moderate' Beijing's behaviour."14 China is not an expansionist power, but it will protect what it believes to be its sovereign territory, including claimed areas. Its military modernization is intended to send a message to this effect, that is, to deter moves towards Taiwanese independence; to reinforce the supremacy of China's claims in the Spratlys and elsewhere; and to dissuade other great powers from acting in the region without first consulting Beijing. China is unlikely to pick a fight, though it will respond if provoked or if it perceives itself to be provoked (for example, by an unintended incident). Problems could be exacerbated if any of a number of potential scenarios develop. These include: economic failure in China, which could lead to more centralized leadership and the adoption of a more assertive foreign policy; a breakdown of central authority, leading to local conflicts and destabilized border areas; and skirmishing over Deng's succession, which could lead one faction or another to court military support by taking a strong stand on territorial issues, or prompt a change in the PLA's role in the political structure. Even continued political stability and economic growth, coupled with regional ambition (or global power aspirations), could create significant tensions. Any power of China's size that builds up its military forces must cause concern among neighbours, especially when no neighbour on its own is a match for China. No one has to think China has any aggressive intentions today. The question centres on what Chinese intentions will be ten or twenty years from now, particularly as China moves through a period of leadership change and political uncertainty. Already there are signs of a rise in nationalist rhetoric and external posturing for the purpose of solidifying a domestically uncertain leadership. China's arms build-up is gradually giving it the strength to be a regional bully should its intentions turn nasty.

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Meanwhile, uncertainty about future Chinese developments encourages others in both Northeast and Southeast Asia to maintain relatively strong force levels and to continue force improvement programs, which in turn confirms Chinese apprehensions. The recent flare-up of the dispute over the Senkakus/Diaoyus—eight uninhabited islands under Japanese possession but also claimed by China—is both symptom and harbinger. China regards the erection by the Japan Youth Federation of a lighthouse on one of the islands as part of a broader revival of Japanese expansionism and militarism.15 China already views the U.S.-Japan security alliance with suspicion, seeing its reaffirmation in April 1996 as evidence of a U.S. policy to contain China and as a cover under which Japan will start to play a larger regional military role. China also fears that a theatre missiledefence system, under development by the Pentagon, will be deployed by the U.S. and Japan in Asia, thus neutralizing the Chinese nuclear deterrent. Though Japan remains constitutionally prohibited from developing an offensive military capability—and opposed to such action politically and psychologically—an increasing number of Japanese legislators and analysts are calling for a more assertive, less deferential policy towards China. The Clinton administration is also pressing for a more active Japanese role in regional military security. Potential Threats to Navigation Recent acquisitions have made states, particularly in Southeast Asia, much more capable of interfering with freedom of navigation in regional waters—a matter of importance to outsiders, given that the South China Sea and connecting straits form an artery for an estimated 40 percent of the world's seaborne trade by volume and are essential for countries wanting to move naval forces expeditiously between the Pacific and Indian Oceans (and thence to the Persian Gulf). The fast attack craft that figure so prominently in regional procurement programs are ideally configured for choke-point control and are capable of causing damage far out of proportion to their size with their ship-to-ship missiles. The emphasis on mine countermeasure equipment in regional navies is testimony to the fact that Southeast Asia's key shipping routes and approaches to major ports are characterized by large stretches of shallow water that are wellsuited to mining. While East Asia has not thus far experienced direct challenges to freedom of navigation, shipping has been interrupted as a side effect of displays of force. China's military activities in the

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Taiwan Strait in late 1995 and early 1996 compelled some rerouting of air and seaborne trade. Perhaps more likely are attempts during peacetime or in a crisis to unilaterally regulate maritime passage or to interdict sea lanes in contravention of the letter and spirit of the United Nations Conference on the Law of the Sea (UNCLOS). Already Indonesia, Malaysia and Singapore have taken steps to regulate passage through the Malacca Straits, with the aim of improving traffic control and taking precautions against pollution. Indonesia has gone to the extent of temporarily closing the Lombok and Sunda Straits (which it considers part of archipelagic waters) while holding naval weapons firing exercises. Increased Risk of Incidents and Accidents In Southeast Asia, the growing number of vessels and aircraft, equipped with weapons of greater range and deadliness and operated by so many different states in a relatively small area,could increase the risk of military incidents and accidents. This danger is heightened by the fact that most Southeast Asians are not adept at operating their new equipment. Submarines and long-range missile systems require well-developed operational procedures and effective command and control systems, yet few Southeast Asians have these capabilities. Although a single incident is unlikely to create a conflagration when interstate relations are good, there is a greater risk of crisis and inadvertent escalation when relations are bad. An incident in an area of disputed sovereignty—particularly an incident involving a state not encompassed by ASEAN's supposedly soothing bonds, such as China or Taiwan—could be (mis)interpreted by one or both parties as a provocation. Bolstered Role of Asian Militaries A further issue of concern is the effect of arms build-ups on the relationship between the military, the state and society. Most East Asian militaries still play a strong internal security role, at odds with Western conceptions of what a military should do; many are importantly involved in the economy; and many are poised to play a large role in leadership transitions, either directly as governors or indirectly as key guarantors of the civilian regime. This is especially the case in countries where governments are trying to manage economic reform while ensuring that authoritarian political systems remain in place, such as China, Indonesia, Vietnam and North Korea. State of the art arms

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acquisitions tend to reflect, and to bolster, the position of such militaries, which may in turn argue for defence policies that enable them to use their new equipment. In societies where secrecy surrounds the procurement process and bribery is a way of doing of business, arms transactions also frequently serve as an off-the-books source of revenue for the military or powerful individuals within it. There have been reports of widespread corruption in Thai, South Korean and Taiwanese defence procurement, and generals in Indonesia, Malaysia and China are also believed to have benefited financially from arms purchases. The influence of the military can be salutary, in favour of national unity, and even—as in the Philippines and South Korea—helpful in smoothing the transition to democracy.16 However, Asian militaries have also been noted for human rights abuses (China, Indonesia), for inhibiting the democratic process (Myanmar) and for lawless behaviour (Cambodia). The professionalization of the military, the role of the military in the economy, and the influence of the military in domestic and foreign policy formulation are likely to come under increasing scrutiny in many East Asian countries. Dispersion of Modern Military Technology One result of the ongoing Asian arms build-up is the widespread dispersion of modern military technology throughout the region. The years 2000 to 2015 will probably see a new round of military modernization, as many of the systems acquired in the first half of the 1980s will be due for replacement. Continued economic growth and continued uncertainty in the region are likely to provide, respectively, the means and an incentive to acquire weapons though the increase will not necessarily be straight-line; Asian defence spending as a proportion of GDP has gone down in recent years, meaning that states have not been spending as much as they might be able to. They will probably improve on their surveillance and sensor technologies, upgrade their C3 (command, control, communication, information) systems, and introduce "smart" weapons, that is, weapons that are able to deliver powerful payloads with a high degree of accuracy while avoiding detection and countermeasures. Such equipment is not yet widespread in East Asia. It could make a tremendous difference on the battlefield. The probability of an Asian military force posing a serious hightech challenge to a U.S.-led coalition is low in the short term; however, technological improvements could have decisive implications in

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local conflicts, as in the Spratlys, and could cause considerable headaches for any Western force that has to face the new equipment. The emergence and diffusion of new technologies, especially those drawn from civilian research and development, which are hard to monitor, also seriously complicates the task of would-be arms controllers, especially those who wish to operate from the supply side, as in the Missile Technology Control Regime or the new Wassenaar Arrangement (successor to the Coordinating Committee for Multilateral Strategic Export Controls). The civilian technologies in which Asian countries have proven themselves particularly adept— electronics, computerization, communications—are those of most value in latest generation military equipment. As long as the East Asian security environment continues to be relatively fluid improvements in weapons and related technology are likely to take on increasing importance in regional defence calculations. Whereas defence planning used to involve making predictions about specific threats or particular contingency situations, now, in East Asia, the potential enemy or contingency is much less clearly defined. Questions like "where is technology going?" become more important in their own right, and perhaps more capable of generating imitative arms "races." CONCLUSION In short, the capacity for deliberate provocation and aggression has increased in a region where there are a lot of security problems and no solid structures to contain them. The argument that economic considerations will override belligerent tendencies has yet to be proven, as is evidenced by the China-Taiwan pre-election imbroglio. Indeed, economic interests bring new disputes to the fore and give old disputes added urgency. Non-conflictual norms have not been internalized by all actors, especially key ones like China. As was suggested at the beginning of the chapter, Canada has a large stake in the outcome. Insofar as they contribute to regional mistrust and instability, arms build-ups could slow Asia's growing prosperity, hinder regional economic integration, and disrupt trans-Pacific trade and investment flows. The links between arms acquisitions, the role of the military in government and society, and human rights abuses are imperfectly understood but nonetheless problems arise, as can be seen from Ottawa's hushed-up coverage of a high-level Chinese military visit to Canada in the fall of 1996.

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More obviously, Asian arms build-ups and arms transfer policies can hamper Canada's global arms control objectives. This is most clearly evident in the Missile Technology Control Regime, where China's alleged violations (sales of missiles and related technology to Syria, Pakistan and Iran) have long been a headache. More recently, it has been seen in the divergence of positions on a proposed global ban on anti-personnel land mines, which Canada favours. Several Asian countries, such as China, make money from selling such mines and are reluctant to go along with a ban. Others, like South Korea, see land mines as an essential part of a defensive strategy. The control of small arms, which Canada and others have begun to address in the United Nations, will also face Asian opposition. The proliferation of land mines, small arms and other weapons likely to be used in civil conflicts also complicates the eventual tasks of peacekeeping forces, for example in Cambodia, where Canadian troops have been involved in training local personnel in mine removal. And if, as John Kirton suggests earlier in this volume, one of the trends in Canadian foreign policy is towards regular military intervention in combat situations, Canada must be alert to the military implications of significant force improvements in a region rife with latent instability—particularly a region to which Canada wishes to hitch its economic future. An important, unanswered question is whether Asia Pacific's emerging collaborative forums will be able to withstand the strains likely to be placed upon them by the next round of procurements and the great power jockeying in the region which could well accompany it. For Canadian politicians the issue may become increasingly difficult to ignore, as it has implications both for the relative strength of Canada's military ally, the United States, and for the foreign policy preferences of the growing Asian population within Canada, which is slowly but surely finding its political voice. Canada is working to alleviate some of the troubling consequences of East Asian arms build-ups by vigorously supporting the ASEAN Regional Forum (ARF) and by co-sponsoring numerous regional confidence building forums, most notably a series of ARF workshops on peacekeeping and the ongoing South China Sea Informal Working Group, discussed elsewhere in this volume. Canada has also co-hosted with the Koreans a series of verification workshops, which have recently been expanded to include other North Pacific countries. Still, Canadian diplomatic efforts on military security issues in East Asia are hampered by at least two important factors.

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The first is that Canada lacks credentials in the region. It does not have strong military ties with, or substantial military experience in, Asia Pacific; nor is it a significant arms exporter to the region. In 1994, the value of military goods exported from Canada to East Asia was $53.6 million, roughly 11 percent of the total value of Canadian military exports; in 1995, the value was $39.6 million, or 9 percent of the total.17 The 1994 Defence White Paper included only one paragraph on the Asia Pacific region. This indicated that Canada would play a more active role in Asia Pacific security affairs and would expand its program of military contacts with Asian countries. To this end, the Department of National Defence (DND) has recently moved to a more even distribution of naval assets between East and West coasts, correcting a preponderance in favour of the East. In 1995 the Canadian navy started making regular port visits to Asia, in an effort to raise the Canadian profile and to improve links with Asian counterparts. In 1997 Canadian ships are scheduled to visit Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. Canada also participates in the Rim of the Pacific Naval Exercise (RIMPAC), a biennial exercise organized by the United States involving the maritime naval and air forces of many of the region's navies. In 1996, DND was reorganized to include, for the first time, a directorate exclusively responsible for Asia Pacific relations. Canada has annual defence talks with Japan and South Korea and renewed its official high-level military contact with China in late 1996. It has also tried to improve its ties with Asian militaries by sending Canadian peacekeeping briefing teams to Japan, Korea, Malaysia, Thailand and Singapore. In addition, it has provided subsidized training at the Pearson Peacekeeping Centre in Nova Scotia for officers from Korea, Singapore and Malaysia through the Military Training Assistance Program, though this has not offset the loss of senior (university)-level exchanges between Canadian and Asian officers, resulting from the closure of the National Defence College in 1995. For the most part, though, Canadian interaction with regional militaries—particularly in Southeast Asia—is minimal, especially when set against the efforts of a comparable country like Australia. DND intends to broaden its activities gradually to include a more regular program of visits and exchanges in the area of peacekeeping, an expansion of the Military Training Assistance Program, which currently involves Malaysia, Thailand, Korea and Singapore in East Asia,

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and ship deployments, but it will take a sustained effort and plenty of resources to overcome the lingering perception of Canada as a "minor and part-time player" in Asia Pacific security.18 The second limiting factor is that there is little regional interest in a military security area in which Canada does have some credentials (at least globally): arms control. East Asians tend to view arms control as a Western concept with little relevance to the region. Some regional players are somewhat more receptive to proposals for confidence building, but they tend to reject completely experience gained in other regions such as Europe, again leaving Canada with little room for manoeuvre. Thus it is perhaps best for Canada to concentrate on a broad definition of security and to attempt to address only non-military sources of tension in the region, such as marine pollution, fisheries and questions of international law. One could argue that the absence of a Canadian voice on traditional security issues is not likely to make much of a difference, given that the most worrying of such issues can be resolved only by the affected states and by their great power mentors, and that other countries, like the United States and Australia, are already pursuing ways of addressing troubling aspects of Asia Pacific arms build-ups. The drawbacks of such abdication from the field are twofold. First, it does not address the domestic need, in the political and bureaucratic spheres, to be seen to be "doing something" in Asia. Second, if Canada avoids traditional security concerns, it could be accused of being naive or disingenuous and interested in Asia only for the economic benefits to itself. This would marginalize Canada even further in Asia Pacific and thwart its desire to gain a "seat at the table." The scope for movement is not great. Military issues in Asia do not lend themselves to prominent, symbolic initiatives where Canada can be obviously out in front and the issue is not likely to be a domestic political winner. Canada will have to content itself with a modest role, especially given its limited budget and its focus on trade. Still, the outline of a policy for sustained Canadian involvement might take the following shape. 1)

Continue to increase Canadian military credibility in Asia Pacific. This means more high-level visits, more officer exchanges, more ship deployments in the region, and more preparation and followup for the visits that occur. It means accrediting more military attaches to East Asia—currently Canada has attaches only in China,

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2)

3)

4)

5)

Japan, South Korea and Malaysia. It may mean having to wrestle with issues involved in selling more military goods and technology in Asia, as this may be the price of a closer relationship with armies like China's. It should mean a standing offer to help in areas where Asians are interested in Canadian experience, such as peacekeeping, cold weather operations, or equipment interoperability. Continue confidence building and preventive diplomacy efforts in the region and work to establish crisis management capabilities as well, particularly in Northeast Asia. Work quietly behind the scenes to improve civil-military relations, but call it something else, like "nation building" or "institution building" or "stability enhancement." This can involve DND using its military-to-military connections to assist those East Asian militaries which are interested in professionalization. It can also mean that CIDA will be working on the development of civil society and the improvement of public governance. Undertake some serious preparation for contingencies, such as a military crackdown in Hong Kong (would Canada send military force to try to evacuate Canadian nationals?) or the collapse of North Korea (would Canada assist in handling the refugee crisis?) or a blockade of the Taiwan Strait (would Canada assist the United States in its response?). Undertake some serious and creative thinking about arms control in the region. What does Canada want the region to look like 10 years from now? Can that future be achieved without arms control in some form or another? This subject is probably most usefully explored at the Track Two level, at least initially. NOTES I wish to thank Brian Job and Frank Langdon of the UBC Institute of International Relations and the editors of, and other contributors to, this volume for their helpful comments on a draft of this chapter.

1

"Building Cooperative Security," Statement by the Right Honourable Joe Clark, Secretary of State for External Affairs, to the General Assembly, New York, September 26, 1990. This chapter will not discuss the extent to which security was ever conceived as unilateral or unidimensional, especially by a country that went directly from the British Empire to a continental defence partnership with the United States, and which, as early as 1948, advocated NATO more for its economic and moral benefits in the fight against communism than for its military advantages.

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2

3 4 5

6 7 8 9 10

11

In the context of this chapter, "East Asia" is understood to include the North and Southeast Asian countries of the Pacific Rim, namely Brunei, Cambodia, China, Hong Kong, Indonesia, Japan, Malaysia, Myanmar, North Korea, Laos, the Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam. It does not include Australia, New Zealand and the South Pacific island states, nor does it include South Asia. The Military Balance 1996/97 (London: The International Institute for Strategic Studies, 1995), 310. "East Asia muscles in on "West," The Globe and Mail, October 11, 1996, A10. Though this chapter concentrates on conventional arms, the proliferation of weapons of mass destruction (nuclear, chemical and biological) and related technology is also a concern in the region. North Korea has long been suspected of developing nuclear weapons, although an October 1994 "framework agreement" calls for immediate suspension of the North's nuclear projects in exchange for the provision of two light-water nuclear reactors, oil shipments until the reactors are supplying energy, and steps towards diplomatic recognition. North Korea is also believed to have a chemical weapons capability and has been accused of possessing biological weapons. China continues to develop its nuclear arsenal and is suspected of having chemical and biological weapons. On the positive side, a Southeast Asia Nuclear Weapon Free Zone Treaty was signed in December 1995 by the ASEAN countries (Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam) and Cambodia, Laos and Myanmar. The Military Balance 1983/84 and 1996/97. Barbara Starr, "N. Korea casts a longer shadow with TD-2," Jane's Defence Weekly, March 12, 1994, 1. In the case of the United States, the desire to improve the capabilities of regional allies is also an important factor. Far Eastern Economic Review, May 2, 1996, 15. Japan has embarked on a review of the circumstances under which Japanese troops can be deployed overseas. Under current law and policy, overseas military deployment is permitted only in UN peacekeeping operations, and then only in non-combat roles. Under the April 1996 joint security declaration with the United States, Japan has committed itself to providing logistical support for the U.S., but only in peacetime. Greater "burden-sharing" would build support for the alliance in the U.S., but the prospect of a more active Japanese military still arouses strong apprehension in China, the Koreas and other countries that were occupied by the Imperial Army during World War II. The recent re-election of the Liberal Democratic Party ensures there are unlikely to be any sudden changes in Japanese defence policy; public opinion is still broadly pacifist and in favour of the U.S.-Japanese defence relationship. More salient questions will arise beyond the turn of the century, as Japan seems increasingly unwilling to let the U.S. dominate the relationship, especially if trade relations are sour. One explanation for this could be the fuel shortage plaguing the country (i.e., forward-deployed troops will have less far to travel, and thus will require less fuel in the event of war).

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12 Under the Korean War armistice agreement, only 35 military police from each side are allowed into the area at any one time, and only side arms are permitted. 13 Taiwanese voted overwhelmingly for President Lee Teng-hui, who favours the status quo—ambiguous international status—thus rejecting both the independence and reunification options offered by opposition candidates. 14 The Globe and Mail, March 27, 1996. 15 In this, as in other regional territorial disputes, historical claims intertwine with more recent economic interests: the islands could provide title to over 30,000 square km of continental shelf beneath the East China Sea, and to its reputed oil. 16 The harsh sentences for treason and bribery received by former South Korean generals and presidents, Chun Doo Hwan and Roh Tae Woo— death and 22.5 years in prison, respectively—may make the region's other ruling military leaders think twice about voluntarily relinquishing power. 17 In 1994, Thailand, South Korea and Malaysia were the top three East Asian destinations; in 1995, Malaysia, South Korea and Taiwan headed the list. Canada. Department of Foreign Affairs and International Trade, Export of Military Goods from Canada, Annual Report 1995 (Ottawa: Supplies and Services Canada, Canada Communication Group, 1996). 18 See Brian L. Job and Frank Langdon, "Canada and the Pacific," in Fen Osier Hampson and Christopher J. Maule, (eds.), Global Jeopardy: Canada Among Nations 1993-94 (Ottawa: Carleton University Press, 1993), 267.

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XIII Canada and Conflict Resolution in the South China Sea

TED L. McDORMAN

1 he "dangerous grounds" warning on navigational charts for the area of rocks and islets in the middle of the South China Sea, collectively known as the Spratly Islands, ensures that mariners avoid the area. However, governments of the region have ignored the warnings and sailed into the Spratlys with conflicting sovereignty claims that, on occasion, have been aggressively pursued and thus created "dangerous grounds" for regional conflict. Brunei, Malaysia, the People's Republic of China (PRC), the Philippines, Taiwan-China and Vietnam have laid claim to all or some of the islets and rocks in the Spratly Islands region. All of the above, except Brunei, have occupied and fortified one or more of the tiny isles. All of the claims include not just above-water features but also offshore areas adjacent to the islets.

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Startled awakening to the serious conflict potential of the overlapping claims to the Spratly Islands area came in 1988, with a naval skirmish between the PRC and Vietnam in which several Vietnamese naval vessels were sunk. This has been followed in the 1990s by numerous acts taken by claimant states asserting sovereignty in the Spratlys, which have been perceived by other claimants as provocative. Canada's immediate interest and official posture is that of the mariner—to steer clear of the Spratly Islands. However, through "Track Two" diplomacy Canada has ventured into the dangerous currents of the Spratlys taking as its guiding beacon the goal of reducing the conflict potential of the overlapping claims. Canada's Track Two vessel has been the South China Sea Informal Working Group (SCSIWG). Worried by the 1988 PRC-Vietnam clash, Indonesia proposed hosting informal meetings of government and academic specialists from the region to explore dispute management options for the South China Sea. Since the early 1980s Canadian ocean law and policy academics, working through the Canadian-funded Southeast Asian Program on Ocean Law, Policy and Management (SEAPOL), had been assisting in the development of a network of Southeast Asian academic and government specialists on international ocean law and policy. The credibility of Canadian expertise, the existing SEAPOL network, Canada's geopolitical disinterest respecting the Spratlys and the Southeast Asian region, and the necessity of keeping discussions at the unofficial level all conspired to make Canada a logical partner for the Indonesian initiative. Moreover, the architect of the Indonesian initiative, Hasjim Djalal, a highly respected ocean law specialist, was a former ambassador to Canada. The Canadian side of the initiative was steered by Professor Ian Townsend-Gault of the University of British Columbia and the Oceans Institute of Canada. The Canadian International Development Agency (CIDA) provided funds for the preventive diplomacy initiative. The pattern that emerged was that Indonesia directed the Informal Working Group initiative with Canada providing coordinating expertise and funds for the meetings.1 Canada's direct interests respecting the South China Sea are minimal—support for freedom of navigation, promotion of Canadian companies seeking offshore hydrocarbon work, and limiting regionally destabilizing conflict. In the wider context, Canada's Asia interests are trade, peace and human rights. Even though it is a small player in Asia,2 Canada found itself in an unique position to assist the countries

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of Southeast Asia in the creation of an informal mechanism to explore the resolution of one of the most dangerous of regional issues. With the SCSIWG having existed for a half-dozen years, it is uncertain whether the Track Two diplomatic route has led to significant results; whether it has a future; and, more importantly, whether Canada's efforts risk alienating one or more of the Spratly Islands players to the detriment of its own relations in the region. However, the conclusion reached in this contribution3 is that the use of the Track Two diplomatic route has been important in calming potential conflicts over the Spratlys, that it is worthwhile to continue the endeavour and that, to the present, Canada has not encountered any serious rebukes for its limited role in the management of the Spratly conflict potential. THE DANGEROUS GROUNDS: GEOGRAPHY, RESOURCES, CLAIMS

AND OCCUPANCY4

Geography and Resources "There is no agreed definition of the area occupied by the Spratly Islands or of the constituent members of the group,"5 a situation which is made more complicated by the differing names given to each feature by the claimant states. The number of isles, rocks and reefs in the group vary, depending upon the source. The core of the Spratly Islands area is bordered by Louisa Reef (Terumbu Semarang Barat Kecil) in the South (6°20'N 113°l4'E), Northeast Cay (Parola) to the North (11°18'N ll4 0 2l'E), Ladd Reef (Da Lat) to the West (8°38'30'N 111°40I30'E) and Flat (Patag) and Nanshan (Lawak) Islands to the East (10°50'N 115°49'E and 10°45'N 115°49'E). The area from north to south is approximately 315 nautical miles and from east to west 240 nautical miles. This Spratly Islands core is adjacent to the Philippines west coast, northwest of insular Malaysia, east of Vietnam and south of the PRC and Taiwan-China. The waters around the Spratly Islands are considered dangerous to shipping because they are largely uncharted, they are shallow and contain a profusion of moving sandbanks. The major commercial shipping route exists well to the west of the Spratlys, although uncertainty about the islands could easily cause alarm amongst commercial shipping interests and serious disruption of shipping is always possible. In World War II a Japanese submarine base in the Spratlys disrupted shipping throughout the South China Sea. The Japanese occupation and control of the Spratlys during World War II, marked by the construction of air and naval bases, a repair base

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and weather and radio stations, and by the use of the islands as a staging area, indicates the strategic potential of the disputed zone. The claimant states, fueled by mutual distrust, rocky bilateral relations and, until recently, the close military links between Vietnam and the Soviet Union and between the Philippines and the United States, have been extremely wary and suspicious of one another's actions in the Spratlys. China, Malaysia, the Philippines, and Vietnam each see this group of islands as an important component of their national defence. In some cases the defence concern is direct, in others it is due to the fear that a single claimant will consolidate control over the whole group. It is inevitable, particularly when guards are up, that what is for one country a defensive necessity is for another country an offensive threat. Both the potential shipping and the security concerns created by the Spratly Islands engage non-regional players such as Japan and the United States. Japan has not been prominently involved in the Spratly problems. However, it has been suggested that the possibility of Japanese economic sanctions against the PRC has been or may be a useful restraint on adventurist PRC activities in the area.6 The United States interest in, and commitment to, Southeast Asia is affected by memories of Vietnam, the recent withdrawal of U.S. troops from the Philippines and a retrenchment attitude in the U.S. polity. Through the 1980s and early 1990s the United States was careful not to comment on the legitimacy of respective claims to the Spratlys and went so far as to indicate that the 1951 U.S.-Philippine Mutual Defense Treaty did not apply to Philippine claims in the area. The uncertainty and lack of information about the Spratlys extends to the area's resources. Yellowfin tuna are known to migrate through certain zones of the area. Philippine fishers have long been active in some parts of the Spratlys and vessels from Taiwan-China, the PRC, South Korea and Vietnam have also sought living resources in the disputed area. The real prize, however, is hydrocarbons. The Spratly Islands are considered promising by some despite a lack of detailed geological knowledge. Until extensive exploratory work can be undertaken, the extent or existence of any hydrocarbon prize is unknown. Detailed exploratory work will only be possible when the claimant states resolve their conflicting claims or agree to cooperate in exploratory activity.

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Claims and Occupancy China (both the PRC and Taiwan) and Vietnam claim all of the islands of the Spratly Islands group and their surrounding waters. The Chinese claim is based upon historic discovery and reference to the islands in ancient Chinese documents. As one Chinese authority summarized this position: "It is irrefutable that the Spratlys have been Chinese territory from time immemorial."7 The PRC apparently has military personnel on eight or nine islands and reefs.8 Taiwan-China has occupied the largest island in the Spratly group, Itu Aba (Taiping Dao), since 1956, having replaced the Japanese presence on this island, and has built an airstrip and improved the anchorage. The 1988 clash between Vietnam and the PRC led the Defence Minister in Taipei to indicate that, on request from the PRC, Taiwan-China would assist in defending the Spratly Islands against third parties.9 Vietnam too bases its claim to the Spratly Islands area on historical discovery and documents, as well as the assertion of its claim in 1951 following the San Francisco Peace Conference, at which time Japan, which had occupied several of the islands during World War II, renounced its claim. The Vietnamese appear to occupy 21 to 24 islets in the Spratly area, including Spratly Island itself. As for the Philippines, a 1978 Presidential Decree demarcated a box-shaped section of the area, adjacent to Philippine territorial waters, over which the Philippines have claimed sovereignty. The box includes most of, but not all, the islands in the group. The Philippine claim is based on the fact of the islands and reefs of the Spratlys area being unclaimed (res nullius) following Japan's withdrawal in 1951, and on the subsequent annexation of the islands by Filipino explorer Tomas A. Cloma in 1956. In addition, the Philippines assert as reasons, history, proximity, security, economic necessity and effective occupation and control. They have occupied eight islets on which they have a significant military presence. In 1979 Malaysia publicized a map showing its claimed continental shelf, which included the southern portion of the Spratly Islands area and implied sovereignty over the islands, rocks and reefs on this portion of the shelf. No further justification of the claim has been forthcoming and thus has led one authority to comment: "Malaysia's claim is presumably based on the conviction that the islands are situated on its continental shelf, well within its declared exclusive economic zone (FEZ), security and its proximity to the mainland."10 Malaysia now occupies three to six islets, the most prominent being

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Swallow Reef (Terumbu Layang Layang), which was the first one it occupied. Vietnam has at least two occupied islets in the area claimed by Malaysia, Amboyna Cay (An Bang) and Barque Canada Reef (Bai Thuyen Chai). The Philippines occupy Commodore Reef (Rizal), in the waters adjacent to which the Malaysians arrested Filipino fishing vessels in 1988. Brunei has complained about Malaysia's claim over Louisa Reef (Terumbu Semarang Barat Kecil), a feature Brunei claims on the basis of its location within the country's 200 nautical mile exclusive economic zone. Irrespective of the legal niceties of the competing claims, the claimant states have scrambled to assert their sovereignty in the Spratly Islands. National security and resources have been the reasons for the scramble. The result has been an impressive zigzag of islet occupations and low-level military confrontation, with the ever present possibility that miscalculation or mistake will lead to explosion. THE SPRATLYS AS DANGEROUS GROUNDS

While the conflicting island and ocean area claims create the potential for conflict, it is the assertion of sovereignty through unilateral action, such as direct military confrontation, military "showing the flag," occupying and fortifying islets, enacting laws, publicizing maps showing claims, releasing historical documents to substantiate claims, arresting fishers, and granting resource concessions which create immediate conflict potential. Such assertions of control by one state require other states to denounce the action taken in order to avoid arguments based on acquiescence. In the 1990s the states with claims to the Spratly Islands have all engaged in one or more of the above noted actions and thus stirred the cauldron of unease in the region. At present, the PRC is the only claimant state that has the capacity to assert itself militarily into the South China Sea. Estimating the military prowess of the PRC and the ability of its navy and air force to appropriate and defend all or part of the Spratly Islands area is a fulltime occupation. The PRC desire for a blue water navy with longrange aircraft capacity is well known. Equipment purchases and possible deployments by the PRC strike fear in the security and military corps of neighbouring states and have led to escalating armament purchases by Spratly claimants. Whatever the military capacity of the PRC, one authority reviewing the actions of that country respecting the Spratlys has commented: "For the first time since the 1970s, the notion that China is a threat to the region is gaining currency."11

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The collapse of the Soviet Union and the American withdrawal from the Philippines has changed the geopolitical context of the Spratly Islands. It is perceived that there no longer exists a credible counterbalance to restrain potential regional adventurism by the PRC. The Association of Southeast Asian Nations (ASEAN), which includes the Spratly Islands claimant states Brunei, Malaysia, the Philippines and Vietnam, plus non-claimants Indonesia, Singapore and Thailand, was not intended to be a defence grouping, although security and defence issues are forever intruding onto the ASEAN agenda. The perceived power vacuum in the South China Sea is an important component of the danger presented by the Spratlys. If the perception of a power vacuum in the South China Sea is coupled with the capacity of the PRC to assert itself, it is the actions of the latter country with respect to these islands, as opposed to the actions of other claimants, which require special examination. The three principal types of actions undertaken by the PRC have been: paper actions (publishing laws and maps); working actions (granting oil concessions); and physical action (the 1995 Mischief Reef incident). Paper Actions In early 1992 the PRC enacted "The Law of the People's Republic of China on the Territorial Sea and Contiguous Zone," which formalized and consolidated its claim to the Spratly Islands, and also to the Paracel Islands, an archipelago to the northwest of the Spratlys simultaneously claimed by the PRC and Vietnam. Utilizing this legislation in 1996, the PRC drew baselines enclosing the waters of the Paracel Islands archipelago as internal waters of the PRC. The widely held view is that the 1982 United Nations Convention on the Law of the Sea, now legally in force and recently accepted by the PRC, prohibits a non-island state from employing such lines to enclose the ocean space of an offshore archipelago. The apparent disregard of the PRC for an international obligation it had recently accepted, together with its tacit threat to similarly enclose the Spratly Islands area, was not comforting to the countries of Southeast Asia. In 1993 the PRC officially revealed a map of its apparent historic claim in the South China Sea. The map is a reproduction of a 1947 chart produced by the Republic of China and shows a series of short, discontinuous, dotted lines hugging the South China Sea coasts of the Philippines, Malaysia and Vietnam. When the dotted lines are connected the line created encloses the entire Spratly Islands area and

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projects southward along the coast of Malaysia's states of Sabah and Sarawak to the northeast of Indonesia's Natuna Island and along the coast of Vietnam. A number of Malaysian producing wells are ensnared by the line, as is the Natuna gas field being developed by Indonesia. Despite official inquiries by the Indonesian government the PRC has not indicated the true nature of the dotted lines. Do they represent China's claim to islands? Do they represent China's claim to ocean space? Do they represent a projection of alleged historic hegemony? There is also no indication of the legal basis that would exist for China's "claims" extending southward in the South China Sea.12 The reissuance of the 1947 map put all the Southeast Asian Spratly claimants on notice that the PRC has a possible appetite for offshore areas much closer to their shores than they had previously envisioned. Moreover, the apparent inclusion within the dotted lines of Indonesia's Natuna gas field has engaged the interests of Indonesia in a more direct way than had previously been the case. The unwillingness of the PRC to clarify the meaning and legal basis of the reissued map has frustrated its regional neighbours. It remains unclear what the PRC is claiming where. Working Actions

In May 1992 the PRC heated up the Spratly waters with the granting of a hydrocarbon exploration concession to the U.S. company Crestone Energy Corporation. The concession covers an area claimed by the PRC, Taiwan-China and Vietnam, although not by other states. The PRC also announced it would use force, if necessary, to protect Crestone's activity. The Crestone block is located approximately 160 miles from Vietnam's coast and 600 miles from Hainan Island. Vietnam vigorously protested the PRC action, claiming that the ocean area was unquestionably part of Vietnam's continental shelf. Vietnam contracted with Vietsovpetro to drill in the PRC-granted Crestone concession, but the activity met with a Chinese blockade which prevented supplies from reaching the platform. Vietnam reciprocated by using gunboats to prevent a Chinese seismic research vessel, chartered by Crestone, from reaching the concession area.13 In a related move, Vietnam, in 1993, opened the Blue Dragon block, which abuts the Crestone concession and is within the dotted line "claim" of China, to exploration by Mobil. Reportedly, the PRC had intended to drill on this structure.

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Finally, in April 1996 Vietnam leased two exploration blocks to U.S. oil giant Conoco covering much of the same area as the Crestone concession.14 Not surprisingly, the PRC vigorously protested and threatened retaliatory action against Conoco's parent Du Pont. The granting of hydrocarbon concessions in disputed ocean areas is a common way for claimant states to exercise jurisdiction. The confrontational PRC-Vietnam concessions, however, create a serious risk of miscalculation, since they are more than just paper claims and require physical work activities on the concessions. However, as in many such disputes worldwide, it is American companies (Crestone, Mobil and Conoco) which find themselves on opposite sides and this decreases the likelihood of serious hostilities. It should also be noted that, despite the political manoeuvering, the PRC and Vietnam have been meeting regularly to discuss their outstanding border problems. Physical Action In early 1995 the Philippines discovered that the PRC had erected buildings on and stationed armed vessels near Mischief Reef, a barely submerged shoal approximately 135 nautical miles west of the Philippine island of Palawan. Chinese markers were also discovered on reefs and atolls in the vicinity of Mischief Reef. While the PRC claimed the structures on Mischief Reef were fishing shelters, the Philippines viewed the buildings as assertions of PRC sovereignty, designed to establish control of the area, and were alarmed by the PRC military presence so near to the main Philippine islands. The Philippine response to the alleged incursion by the PRC was to vigorously protest the action, demand immediate talks, seek to engage the direct interest of the United States in the issue, appeal for solidarity within ASEAN, and physically destroy the Chinese markers on the uninhabited shoals and reefs near Palawan. The Philippines also arrested four Chinese fishing boats in the Spratlys area which were perceived to be operating in Philippine waters. Negotiations ultimately resulted in the PRC withdrawing most of the naval vessels from Mischief Reef, although the structures remain in place, and the countries have agreed on a code of conduct which rejects the use of force to resolve disputes. The Mischief Reef incident, however, clearly focused the attention of ASEAN and non-regional states, such as the United States, on the allegedly expansionist and aggressive activities of the PRC in the South China Sea.

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In 1995 the United States issued a statement indicating that it considered freedom of navigation to be of fundamental importance to itself and that it would "view with serious concern any maritime claim, or restriction on maritime activity, in the South China Sea that was inconsistent with international law".15 A comment was attributed to Joseph Nye, Assistant Secretary of Defense for International Security Affairs, to the effect that the United States "would be prepared to escort and make sure that free navigation continues" in the event of conflict in the Spratlys.16 All the above goes beyond the previous U.S. posture of taking no position on the competing claims and is a direct result of the Mischief Reef incident and subsequent Philippine and ASEAN pressure. FORMAL DIPLOMATIC ACTIVITY

Faced with perceived provocative actions in the Spratlys, the claimant states and their Southeast Asian neighbours have been seeking diplomatic means to reduce tensions, manage the dispute and resolve the conflict. Bilateral negotiations, multilateral discussions, and an informal working group (Track Two diplomacy) are the diplomatic initiatives utilized thus far. Bilateral Negotiations Following the Mischief Reef incident, the PRC and the Philippines met to seek a way to defuse the issue. The PRC and Vietnam have been meeting irregularly to examine their conflicting claims. Other claimant states have been coming together in various bilateral combinations. Given the large numbers of competing claimant states, the Spratly Islands dispute is not one that can be fully resolved through a single bilateral negotiation. Moreover, claimant states uninvolved in bilateral discussions fear deals will be struck to their disadvantage and bilateral accords will be used, particularly by the PRC, to undermine the sovereignty claims of states. The fear, prominent in the early 1990s, of a PRC "divide and conquer" strategy has subsided, since Vietnam is now a member of ASEAN and the Mischief Reef incident has enhanced ASEAN solidarity on the Spratlys issue. While bilateral negotiations will continue to take place they are unlikely to yield significant long-term results. Multilateral Discussions Formal negotiations involving all of the Spratly claimants, a logical procedure for dealing with a serious conflict situation, have not taken

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place. The reasons are easily identified. Such formal negotiations would involve Taiwan-China, an obvious difficulty for the PRC. China has not articulated the true extent of its claim in the South China Sea in such a way that negotiators would be certain of the parameters of the discussions. Finally, a mindset exists among some of the claimants which holds one does not negotiate or compromise on sovereignty, however cleverly constructed an arrangement may be to avoid sovereignty concessions. All is all, there does not yet exist a will on the part of the Spratly claimants to engage in direct, formal negotiations. The dispute, however, is on the agenda of international diplomatic fora. In 1992 the ASEAN Foreign Ministers issued the Manila Declaration which urged peaceful resolution of the sovereignty dispute in the South China Sea. This declaration was endorsed both by Vietnam and by the PRC. The newly created ASEAN Regional Forum (ARF), which involves the ASEAN states, their dialogue partners, including Canada and the United States, and invited states such as Russia and the PRC, has provided an avenue for formal discussions on the islands. Thus far, however, the ARF has not taken any bold steps regarding the Spratlys and discussions have been confined to diplomatic generalities. Formal multilateral discussions about the Spratlys, that are ASEAN-driven, such as those held within ARF, encounter several problems. First is the continuing difficulty of the existence of two Chinas. Second is the Chinese perception that an ASEAN grouping represents a ganging up on China and, to a lesser extent, control by ASEAN of the agenda to the disadvantage of China. Third, within the ARF non-regional participants multilateralize the Spratly Islands dispute to an extent which some of the claimants find inappropriate. Fourth, even within ASEAN itself, there is not a firm consensus on the role, if any, that its non-claimant members should play in drafting a formal resolution or initiating negotiations respecting the Spratlys. Some claimants take the view that formal talks should not include non-claimants, so that Spratly talks at the ARF are inappropriate, despite the fact that the claimants are not able or willing to sit together to discuss the Spratlys. It is not, therefore, surprising that multilateral discussions have not significantly contributed to resolving the dispute, although the ARF did assist in the reduction of tensions following the Mischief Reef incident and may yet emerge as an important negotiating forum.

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TRACK TWO DIPLOMACY Establishing the Informal Working Group The difficulty of state-to-state negotiations respecting the Spratlys has long existed. As noted in the introduction, the 1988 Sino-Vietnamese naval clash emboldened Indonesia to propose an informal, nongovernmental workshop of academics and officials from the ASEAN states to discuss the South China Sea conflict. The workshop was held in 1990 and recommended expansion of the participation to include all interested South China Sea parties, which meant bringing in the non-ASEAN members Vietnam, Taiwan-China and the PRC. The subsequent workshop held in July 1991 commenced the process known as the South China Sea Informal Working Group. These early workshops were supported by small grants from CIDA through Canadian academic channels. Sustained, multi-year CIDA funding commenced in the fall of 1991, first channelled through the University of British Columbia and more recently through a private firm. The primary Canadian player throughout has been Professor Ian Townsend-Gault. The Informal Working Group initiative came at a time when CIDA, and more generally the Canadian government, supported non-traditional forms of dispute management and preventive diplomacy. Track Two diplomacy which engaged Canadian academics in the creation of forums for discussion or the provision of expertise was a hot commodity.17 The Informal Working Group initiative was simply a variant of the model, perhaps involving a clearer relationship with the regional governments, particularly Indonesia, than did other examples. Canada's involvement appeared to be low-cost—a handful of workshops—and low-risk—support for an academic exercise. While the cost calculation appears accurate, the risk assessment must be examined below. The meetings of the Informal Working Group are by invitation only and closed to the media and public. No verbatim record is kept, although summaries of discussions are produced. Communiques or press statements are usually issued with the wording carefully scrutinized by the participants. The only consistent non-Southeast Asian participation has been that of Canadian academics or consultants, although on several occasions expertise has been sought elsewhere. Government officials from Canada and other non-regional states do not attend. The Informal Working Group process is not a purely academic endeavour—the Indonesian government encourages regional

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participation and attempts to keep the process on track. Moreover, the manner in which the workshops are conducted makes them similar to a diplomatic discussion. However, in order to encourage participation and frankness and the exploration of ideas the academic veneer is preserved. The keys to the Informal Working Group have been: the ability of Ambassador Djalal and the Indonesian government to convince the concerned Spratly players that talk is better than silence, the informality of the meetings in which participants speak only in their personal capacities and the willingness of CIDA to provide funds. The Path of the Informal Working Group No one expects the Informal Working Group to achieve an immediate resolution of the Spratlys problem. From the beginning the talk has been of confidence building measures. However, at the first meeting in 1991 the participants agreed to recommend to their governments that self-restraint should be used to prevent further complication of the situation. This apparent dispute management momentum was dampened when the PRC granted the Crestone concession in 1992, an action seen by many of the Informal Working Group participants as inconsistent with the 1991 statement. Moreover, the Crestone concession pointed out the major weakness of an informal process: talk is easy. Another potential roadblock for the Informal Working Group came with the reintroduction by the PRC in 1993 of the 1947 dotted lines map asserting a "claim" to Indonesia's Natuna gas field. This map altered the role of Indonesia in the Informal Working Group from that of a disinterested, helpful party to one which characterizes a state with a direct interest in ocean, though not island, claims in the South China Sea. One effect of the map has been, however, the calming of suspicions about a covert Indonesian agenda for the Spratly discussions since there is now a patent Indonesian national interest. Thus far, the Informal Working Group has been unable to pursue in any detail the numerous proposals that have been envisioned for joint development of resources in the disputed area, freezing of new island occupation by claimants and shelving of sovereignly issues.18 Attempts at merely defining with any precision the ocean area upon which the Informal Working Group should concentrate have been blocked. While the PRC has been identified as the principal source of frustration, other Spratly claimants, notably Malaysia, have favoured an ambiguous, lessadventurous mandate for the Group. This body is now under the

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constraint that there can be no direct discussion of sovereignty questions or of conflicting maritime claims in the South China Sea.19 Soon after the creation of the Group hope existed that the Track Two procedure might be formalized by the participants and governments, thus removing some of the academic veneer of the process. All the difficulties noted above with respect to formal multilateral diplomatic discussions have conspired, thus far, to scuttle such aims. However, the Group did contribute directly to the ASEAN Foreign Ministers' 1992 Manila Declaration and has been unquestionably in the background of the limited Spratly Island discussions that have taken place at the ARF and similar formal fora. Since 1992 the Group has been seeking, through a series of technical working groups, to develop cooperation in the areas of marine scientific research, resource assessment, marine environmental protection and navigational safety, as a means of creating confidence measures that may eventually encourage the claimant states to discuss the meatier issues of the Spratly conflict. These groups have been working to develop proposals for common interest projects of a scientific or technical nature which can be funded by national or international agencies. The first success has been a small project related to biodiversity. The 1995 Mischief Reef incident and the strong response by ASEAN to the perceived PRC adventurism, coupled with the renewed interest of the United States in the Spratlys, have combined to reinvigorate the Informal Working Group. The PRC has indicated, not for the first time, an interest in continuing to talk and Malaysia appears to be less wary of the initiative. While regional tensions respecting the Spratlys ebb and flow, the Group has been the primary medium for facilitating discussion. Canadian Interests The South China Sea Informal Working Group is not an initiative under the direct control or sponsorship of the Canadian government. Canada, through CIDA, provides funds enabling Canadian academics and consultants to cooperate with a branch of the Indonesian foreign ministry in organizing closed-door meetings of relevant specialists. The Canadian government approves the overall funding and both Foreign Affairs and CIDA monitor the activities of the project. Canada was uniquely placed to provide this type of limited assistance to the Indonesia initiative. The personal relationship and the

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vision of Ambassador Djalal and Professor Townsend-Gault have already been noted, as has the existence of Canadian expertise regarding Southeast Asian ocean problems. Of equal importance is the fact that Canada has no colonial history in Southeast Asia and has not and does not have the interests of a major power in the region. The Informal Working Group project is a marriage of Canada's aid decisions with foreign policy objectives. The ultimate foreign policy objective is the avoidance of tensions within Southeast Asia that could lead to hostilities. The more immediate concern is the ability to respond positively to a request for assistance from Southeast Asia, in particular Indonesia. From the CIDA perspective, the Informal Working Group fits the new emphasis, with regard to Southeast Asia, on regional rather than national projects. More problematic for CIDA is the fact that the initiative does not involve construction or distribution, so that the projected and actual results of the expenditure of money are difficult to quantify and assess. The Canadian aid-foreign policy marriage of the 1990s usually has the overt intention of enhancing Canadian trade opportunities. The Informal Working Group initiative does not meet this objective. It cannot be expected that it will directly lead to or enhance immediate Canadian trade opportunities in Southeast Asia. Of course, Canada's foreign policy is not narrowly focused upon trade. In Asia, the foreign policy objectives also include human rights and regional peace and stability. The Informal Working Group initiative obviously fits the latter objective and is consistent with Canada's support for the more formal ASEAN Regional Forum, referred to above, and for other focal points for security dialogue which are designed to enhance Southeast Asian regional stability. More fundamentally, the non-trade objectives depend upon Canada's ability to influence national decision-making. In the more broadly defined region of Southeast Asia (including the PRC and Taiwan-China), Canada has not had significant influence of this kind. While there is a perception that Canada deliberately "punches above its weight," within the broader region there is little evidence that this is true. Canada's limited involvement in the Indonesian Informal Working Group initiative could win for it a measure of appreciation from the regional governments which could translate into influence on national decision-making and even bring trade benefits. Attempts to measure such influence are, however, difficult, if not futile.

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The Canadian participation in the Group does nevertheless present foreign policy risks. Questions of sovereignty and national territory are sensitive, frequently arousing intense nationalist passion and provoking inflamed rhetoric. Perceived interference by outsiders is usually unwelcome. The Group, while increasingly focused upon low-key confidence building measures, has flirted with the conflicting sovereignty issues which gave the initial impetus to the initiative. The closer the Group has approached the core of the South China Sea problems—competing sovereign claims—the louder have been the rumblings from some Spratly claimants, questioning both the informal process itself and Canada's support of it. Was Canada too closely allied with Indonesia and consequently supporting Indonesia's agenda? Was Canada supporting ASEAN against China? Was Canada interfering in the internal affairs of claimant states by appearing to meddle in sovereignty issues? This questioning, which may ultimately have led to strained bilateral relations, has dissipated since the Informal Working Group has dropped direct discussions of controversial issues and concentrated on seeking consensusdetermined confidence building measures. CONCLUSIONS Canada has been praised within and without the Southeast Asian region for its support of the Track Two diplomatic initiative which is the South China Sea Informal Working Group. While there exist diplomatic risks respecting Canadian engagement in a process that may confront sensitive sovereignty issues, they are reduced by the emphasis of the Group initiative on low-key confidence building measures, the broad support it has received in the region, the knowledge that Canada's role has been assumed in response to a regional need and is not an attempt to impose a solution, and the arms-length relationship between the Canadian government and the workings of the Group. This latter aspect is of particular importance. The academic countenance of the Informal Working Group makes it possible to avoid the difficulties of diplomatic negotiations (e.g., the two Chinas, formal posturing) and allows all participants a face-saving option: If the Group has successes, they accrue to the governments and the region; if the initiative fails, it was merely an academic exercise. The strength of Track Two diplomacy, frankness and informality, is also its weakness, talk is easy, results are often intangible. This observation applies to the Group. Spratly claimants can take, and

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have taken, provocative actions and tested the limits of other states. But they have also used participation in talks as a pacifier in dealing with protesting states.20 The Group now has to avoid talking about the most controversial issues and the most innovative potential solutions. This is not the fault of the process, since it merely reflects the participants' consensus. If the countries are unwilling to talk, outside efforts to initiate a dialogue will be of no avail. The Group has important work to do in building diplomatic confidence in the region. The ultimate evaluation of its efforts is the support it receives from the regional participants which, while fluctuating from lukewarm to hot, has been warm enough to warrant optimism. While support for the Informal Working Group has gathered credit for Canada in Southeast Asia, the initiative must be carefully monitored because of sensitivities about sovereignty and the possibility that the process itself may become part of the Spratlys' conflict instead of part of the Spratlys' solution. NOTES 1

2

3

4 5 6 7

A complete history of the operation of the South China Sea Informal Working Group is given by Ian Townsend-Gault, "Brokering Cooperation in the South China Sea," in L.K. Kriwoken, et al., (eds.), Oceans Law and Policy in the Post-UNCED Era: Australian and Canadian Perspectives (The Hague: Kluwer Law International, 1996), 313-26. For a recent review of Canada in Asia, see: Brian L. Job and Frank Langdon, "Canada and the Pacific," in C J. Maule and P.O. Hampson, (eds.), Canada Among Nations 1993-94: Global Jeopardy (Ottawa: Carleton University Press, 1993), 266-94. The author is not an unbiased observer. He participated in the early meetings of the process described below. He has been a collaborator and colleague of Professor Ian Townsend-Gault. Currently, he is involved in a Southeast Asia project (SEAPOL) that is linked with the SCSIWG project. This section is drawn from T.L McDorman, "The South China Sea Islands Dispute in the 1990s—A New Multilateral Process and Continuing Friction," International Journal of Marine and Coastal Law 8, no. 2 (1993), 267-70. J.V.R. Prescott, Jurisdiction in Southeast Asia: A Commentary and Map (Honolulu: East-West Centre, Environment and Policy Institute, 1981), 30. Koichi Sato, "The Japan Card," Far Eastern Economic Review, April 13, 1995, 32. Ji Guoxing, The Spratlys Disputes and Prospects For Settlement (Kuala Lumpur: Institute of Strategic and International Studies, Malaysia, 1992), 2.

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8

9

10 11 12

13 14 15 16 17

18 19 20

The numbers of occupied islands noted in the next few paragraphs are drawn from Mark J. Valencia, "The Marine Resources of the South China Sea," a paper presented to the Maritime Institute of Malaysia Workshop on ASEAN Maritime Security, October 8-9, 1996. The extent of Taiwan-China's assistance to the PRC in 1988 is noted in "China Takes to the Sea," The Economist, April 29, 1995, 41. For a recent view of Taiwan-China's perspectives on the Spratlys, see: Kuan-Ming Sun, "Policy of the Republic of China Towards the South China Sea: Recent Developments," Marine Policy, 19, no. 5 (1995), 401-09. B.A. Hamzah, The Spratlys: What Can Be Done to Enhance Confidence, (Kuala Lumpur: Institute of Strategic and International Studies, Malaysia, 1990), 7. Mark J. Valencia, China and the South China Sea Disputes (London: International Institute for Strategic Studies, Adelphi Paper No. 298, 1995), 21. See: Sun, "Policy of the Republic of China," 403-06; Hasjim Djalal, "The Spratly Islands Dispute: The Prospect For Settlement," in K.I. Matics and T.L. McDorman, (eds.), Summary and Selected Papers of the SEAPOL TriRegional Conference (Bangkok: SEAPOL, 1995), 66-67; and John McBeth, "Oil-Rich Diet," Far Eastern Economic Review, April 27, 1995, 28. See: Valencia, China and the South China Sea Disputes, and Nayan Chanda, "Show of Force," Far Eastern Economic Review, October 13, 1994, 29. Adam Schwarz and Matt Forney, "Oil on Troubled Waters," Far Eastern Economic Review, April 25,1996, 65. As cited in Nigel Holloway, "Jolt From the Blue," Far Eastern Economic Review, August 3, 1995, 22. As cited in Holloway, "Jolt From the Blue," 22. See generally: Paul M. Evans, "Non-governmental and Track Two' diplomacy: Problems and prospects," in R. Mahmood and R.A. Sani. (eds.), Confidence Building and Conflict Reduction in the Pacific, (Kuala Lumpur: Institute of Strategic and International Studies, Malaysia, 1993), 137-41 and Job and Langdon, "Canada and the Pacific," 290-92. Concerning these various proposals, see Valencia, China and the South China Sea Disputes, 50-67. Townsend-Gault, "Brokering Cooperation," 320. The various pros and cons of this type are discussed by Ian TownsendGault, "Brokering Cooperation," 319-24.

XIV Policy Implications of Canada's Trade and Investment Linkages With the Asia Pacific

BIJIT BORA

One of the significant features of the global economy in the eighties has been the economic ascendancy of the East Asia region.1 Spurred by double digit growth rates and rising levels of international economic integration, the regional economy has been the focus of considerable academic attention. Most of the interest, however, has been directed either to the examination of the economic fundamentals which might explain the high growth rates or to the issue of whether or not East Asia's increasing interdependence developed at the expense of countries outside the region. There are a number of studies in the second category which can be described as region-oriented, centring on North America and East Asia or on Europe and Asia. Some are oriented to single countries, such as Australia and the U.S., and their relations with East Asia. This paper is clearly in the second category. Its focus is on the bilateral trade and investment linkages between Canada and East Asia and

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their implications for Canadian trade and investment policy. Its scope is necessarily broad in that it includes an analysis of the trade and investment data as well as trade and investment policy. The following part of the paper reviews the bilateral trade and investment data and arrives at the clear conclusion that Canada's share of trading and investment activity in East Asia is low. Section 3 examines some of the possible explanations for this low level of economic integration, such as the levels of protection in the region and the geographic bias of Canada towards the United States. Section 4 reviews the policy options which Canada might select with a view to enhancing the linkages and section 5 provides a summary and conclusions. TRADE AND INVESTMENT LINKAGES

Not surprisingly Canada's geographic trade and investment patterns are dominated by the United States and, to a lesser extent, by Western Europe. Numerous studies have been published attempting to explain the implications of the strong bilateral relationship with the United States, especially during debates on the Canada-U.S. Free Trade Agreement (FTA) and the North American Free Trade Agreement (NAFTA). These studies have focused on issues such as complementarities, factor endowments, geographic proximity and the similarity of domestic policy regimes. The principal conclusion is that Canada's bilateral trading relationship with the U.S. is critical for Canadian economic well-being. However, the relationship with East Asia presents the greatest potential for international trade-induced economic growth. Tables 14.1 and 14.2 provide detailed data on the composition of Canada's trade with East Asia. The data is broken down into three different categories: primary products, manufactured goods and other.2 Primary products are then divided between processed food, unprocessed food, other rural, minerals and fuels. This detailed division allows us to examine the content of Canada's primary product trade. The second set of figures relates to manufacturing goods. These are divided between elaborately and simply transformed goods. The first category, as the term indicates, covers products that undergo considerable processing, such as motor vehicles, office and telecommunication equipment and processed minerals. The second set relates to those products which do not require such extensive processing, such as basic mineral manufactures consisting of diamonds, gems, pig iron, unworked copper and nickel.

Table 14.1 Canada's Exports by Type of Product: 1995 (in U.S. Dollars) U.S.

ASEAN

NIEs

Unprocessed Food

2,877,406

172,114

97,203

875,480

Processed Food

4,097,852

22,181

Other Rural

9,826,728

252,064

84,925 760,018

30,875 351,692

Minerals

1,575,080

113,935

214,813

74,863

3,799,013 584,346

15,527,607

452

2,245

914,941

56,949

33,904,673

560,746

339,131 1,496,090

1,335,155

6,783,657

478,313

20,125,151 89,915,204

463,426 501,354

336,316

970,581

55,316 568,750

984,780

792,265 1,128,581

800,336 1,770,917

624,066

Other

110,040,355 8,860,080

954,285 1,006,617 1,960,902

18,050

145,476

1,568

183,037

8,086

TOTAL

152,805,108

1,543,576

3,802,468

2,465,304

8,737,611

1,110,465

China

Japan Mexico & Chile

EU"

Other

Total

Primary Products

Fuels Total Primary Products

95,664

134,689

528,693

53,345 178,092 55,238

681,689 1,495,588 341,436 418,215 3,247,076 1,234,250

7,290,833 5,577,522

743,435 674,138

19,158,118

197,447

17,257,663

218,891 5,723,342 3,528,823

4,526,663 53,810,799

Manufactures STM4 ETM5 Total Manufactures

1,466,402 1,569,732 25,941,209 4,437,060 4,240,680 102,262,266 5,903,462 5,810,412 128,203,475 397,276 504,275 10,117,848 12,024,080 9,843,510

SOURCE: Calculations done by Trade Analysis Branch, Australian Department of Foreign Affairs and Trade, on request. 1 2 3

Association of Southeast Asian Nations Newly Industrializing Economies European Union

4 5

Simply Transformed Manufactures Elaborately Transformed Manufactures

192,132,122

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The two tables indicate that the U.S. is clearly Canada's biggest market, followed by the European Union (EU) as a group, Japan and then China.3 However, in Canada's case the rank order can be misleading and is mostly irrelevant because the United States accounts for 80 percent of exports. For example, the fact that China is the third largest market means very little since it accounts for only 1.9 percent of all exports. The newly industrializing economies (NIEs) of Taiwan, Hong Kong and Korea as a group account for 2.2 percent, while Mexico and Chile account for only half of one per cent. Table 14.1 also provides the composition of Canada's exports. It shows that manufactured goods account for 66.8 percent of exports, while primary products account for 28 percent. These figures vary considerably across the Asia Pacific trading partners, depending on their relative factor endowments. For example, 72 percent of exports to the U.S. and 63.8 percent of exports to the developing Association of Southeast Asian Nations (ASEAN) economies are elaborately transformed manufactures (ETMs), whereas only 20.2 percent of exports to Japan are manufactures and 77.6 percent are primary products. On the import side Canada's comparative advantage is shown clearly, as 96 percent of exports from the NIEs, 98.9 percent of those from Japan and 94.3 percent of those from China are manufactures. Not surprisingly, almost all of these are elaborately transformed manufactures. The share of manufacturing in imports from the U.S. and Europe is also high, at above 80 percent for both. While the United States has retained its position as Canada's dominant trading partner, there have been some changes in the geographic composition of Canada's trade. These changes are documented in Figure 14.1, which shows that imports from the U.S., EU and Japan have fallen, while imports from the developing partners in the Asia Pacific region have risen.4 These changes reflect the fact that during the ten year period there has not only been an expansion in exports from these countries due to their export-oriented policies, but there has also been a reduction in some of Canada's barriers to trade. The story is slightly different when we look at exports. The dominance of exports to the United States has been strengthened during the period, while there has been some growth in the share of exports to the ASEAN NIEs.5 Surprisingly, some of these NIEs—Singapore, Korea and Taiwan— have not been amongst the fastest growing economies trading with Canada, nor has China, which has been the most dynamic trader in

Figure 14.1 Balance of Canada's Merchandise Trade by Selected Region and Country 1985-1995

Note: ASEAN - Brunei, Malaysia, Indonesia, Philippines, Thailand; NIEs - Singapore, Taiwan, Korea, Hong Kong; EU - 15 members as of January 1, 1996. Calculated from the data in Tables 14.1 and 14.2.

Table 14.2 Canada's Imports by Type of Product: 1995 (in U.S. Dollars) U.S.

ASEAN1

NIEs

China

Primary Products Unprocessed Food 50,910 2,246,574 102,886 15,526 65,084 Processed Food 3,099,760 251,716 43,807 63,420 32,132 Other Rural 159,336 2,376,043 25,811 Minerals 1,702,637 23,191 1,349 1 6,076 Fuels 1,341,422 167 Total Primary Products Manufactures 537,130 10,766,436 124,269 180,013 4 STM 63,618 119,664 167,413 8,901,743 ETM* 87,469,813 2,049,741 5,024,917 3,021,058 Total Manufactures 96,371,556 211,359 5,144,581 3,188,471 Other 47,507 12,051 17,463 2,692,663 2,667,952 TOTAL 5,316,357 3,380,535 109,830,655 Trade Balance

42,974,453 -1,124,376 -1,513,889

-915,231

Japan Mexico & Chile 13,423 18,859 12,975 1,477 1,580

223,648 124,869 15,024 42,736 80,827

48,314 245,567 8,477,479 8,723,046 49,050 8,820,410

487,104 112,799 3,486,148 3,598,947 9,365 4,095,416

-82,799 -2,984,951

EU 3

Other

133,572 576,035 956,870 1,303,700 149,736 163,049 136,734 962,852 2,622,101 3,266,436 2,419,598 2,419,598 11,064,759 13,484,357 343,892 16,450,350

3,362,574 5,864,665 2,971,715 2,896,787 5,941,698

6,272,072 21,037,439 1,233,044 13,263,446 4,705,477 125,299,392 5,938,521 138,562,838 1,561,256 4,733,247 164,333,524 13,771,849

-4,426,270 -3,928,339

SOURCE: Calculations done by Trade Analysis Branch, Australian Department of Foreign Affairs and Trade, on request. 1 4 Association of Southeast Asian Nations Simply Transformed Manufactures 2 5 Newly Industrializing Economies Elaborately Transformed Manufactures 3 European Union

Total

27,798,598

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the region for the past three years. In terms of diversification, only Chile, Hong Kong and Mexico joined the United States as countries which have increased their shares of imports from Canada.6 This means that the already relatively strong bias of exports to the south has been further strengthened, and the already weak position of the Asia Pacific markets has been declining. Tables 14.3 and 14.4 provide an overview of Canada's inward and outward foreign direct investment position with respect to East Asia. They indicate a slightly different story of integration from the one that we observed for merchandise trade in Tables 14.1 and 14.2. In both tables we find that the bilateral level of investment with the United States is high. In 1995 the level of U.S. direct investment in Canada had reached C$113 billion dollars. In terms of trends, however, the share of Canada-U.S. outward and inward investment in the total of Canada-related investment activity has declined since 1985. In 1985 the U.S. held 75 percent of the stock of foreign investment in Canada, but by 1995 this share had fallen to 67 percent. The shift in the shares resulting from this decline accrued to European investors, whose share increased to 24 percent in 1995 from 19-5 percent in 1985, and to Asia Pacific investors, who doubled their share to 7 percent. The share of Canadian investment in the U.S. declined from 69 percent in 1985 to 53.8 percent in 1995. There was a corresponding increase in the share of investment in Europe to 21.5 percent from 14 percent and to the Asia Pacific to 11.5 per cent from 8 per cent. In the area of business7 and educational services "Canada usually runs a deficit on most categories of business services with the U.S. and the European Union, but a surplus with all remaining countries."8 This is interesting, because as can be seen from Tables 14.1 and 14.2, Canada runs a merchandise trade deficit with most Asia Pacific countries. Again, however, the region's share of total services trade makes it only a minor player. This is clearly one aspect of integration with the region that shows considerable potential.9 In summary, Canadian trade and investment patterns demonstrate a clear bias towards the United States. In the area of merchandise trade Canada is experiencing growth with the Latin American countries, especially Chile. However, in investment, the tendency of developed countries to invest in developed countries has resulted in Canadian investment being predominantly directed to Europe and United States.

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TABLE 14.3 Canadian Inward Foreign Direct Investment 1985-1995 (Can$ Millions) U.S.

1985 67,874 1986 69,241 1987 74,194 1988 76,345 1989 80,877 1990 84,353 1991 86,996 1992 89,115 1993 91,620 1994 101,514 1995 113,092

Europe

Japan

Hong Kong

Australia

Korea

Sinagpore

17,669 21,142 24,189 29,108 32,341 36,254 36,796 37,051 37,003 37,436 40,368

2,250 2,679 3,051 3,582 4,777 5,214 5,547 5,899 6,144 6,552 6,702

163 429 652 1,056 1,169 1,371 2,519 2,347 2,419 2,705 3,179

108 211 511 729 834 747 740 828 768 764 734

345 281 191 202 235 312 260 53 -6

41 70 84 95 104 92 90 110 160 208 244

19 188

Taiwan Malaysia Other Asia Asia Pacific Pacific

SOURCE: Statistics Canada, Catalogue 67-202-XPB (Ottawa: Supply and Services Canada, 1996).

22 22 25 22 51 33 32 99 102 120 91

6 4 12 17

16 25 18 47 73 104 144

285 282 1,406 872 386 454 553 877 1,421 842 516

3,219 3,978 5,932 6,575 7,572 8,249 9,769 10,260 11,081 11,315 11,797

Total 90,358 96,054 106,144 114,480 123,083 131,131 135,840 138,696 142,321 152,784 168,077

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EXPLAINING THE LOW LEVEL OF INTEGRATION

The general conclusion that we can draw from the data in Tables 14.114.4 is that the trade and investment linkage between Canada and the Asia Pacific region is relatively weak, although it shows signs of improving. But why is the level of Canadian trade and investment with the Asia Pacific region so low, when the region has had the most significant growth rates over the past fifteen years? This is an interesting question, especially when viewed from the perspective of an author who lives in Australia. In that country the topic of trade and investment with the Asia Pacific dominates the discussion on economic policy, not simply trade policy. In Canada, however, the general subtleties of trade policy are not an issue, let alone specific issues relating to the Asia Pacific. Instead, what is important is the bilateral relationship with the United States. There probably is no one simple answer to this question. The strength of the attraction of the U.S. market obviously cannot be ignored. But that should not be used as an excuse for the low levels of trade with Asia. East Asia has emerged as a dominant region for international trade, and a significant proportion of this trade takes place within the region itself.10 This feature, as has been noted by many other observers, has not been due to specific discriminatory policies. As a result, Australia has been able to access the region and benefit significantly, but Canada has not. One possible reason for the low share of Canada's trade with Asia Pacific could be the fact that Canada is preoccupied with the U.S. There is no doubt that the relationship with the latter country, its largest trading partner, is strong and the dividends seem to be materializing, but there is obviously little chance of Canada improving significantly on its 80 percent share of exports to the U.S. Perhaps the efforts to increase and cement market access that are embodied in the Canada-U.S. Free Trade Agreement and the North American Free Trade Agreement have been "tapped out." In order to increase trade and investment with East Asia Canadian eyes need to be refocused from the South to the West. In Australia the discussion of trade bias is couched in terms of a history-versus-geography trade off. On the one hand, the traditional markets of Europe and North America have been of critical importance in generating economic growth; however, the pull of geography and the growth in East Asia is diverting international trade towards that region. In Canada, however, it seems that the tradeoff does not exist and that it is history and geography that act

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TABLE 14.4 Canadian Outward Foreign Direct Investment 1985-1995 (Can$ Millions)

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

U.S.

Europe

Japan

Hong Kong

Australia

Korea

39,586 42,027 46,091 48,809 52,615 55,475 58,398 61,471 61,828 68,835 76,505

8,258 8,651 11,819 13,325 16,951 19,850 22,964 22,000 25,062 28,872 30,486

2,250 2,679 3,051 3,582 4,777 5,214 5,547 5,899 6,144 6,552 6,702

199 286 376 397 399 572 549 804 1,414 1,827 3,042

108 211 511 729 834 747 740 828 768 764 734

18 20 21 22 54 57 74 89 160 174 254

Sinagpore Taiwan Malaysia Other Asia Asia Pacific Pacific

25 20 84 122 181 162 143 195 152

899 1,242 1,842 1,836 1,490 1,804 1,949 2,019 2,111 2,257

193

2,011

177

SOURCE: Statistics Canada, Catalogue 67-202-XPB (Ottawa: Supply and Services Canada, 1996).

39 62 67 66 79 82 114 91 108 116 137

1,063 1,124 1,006 1,038 1,036 866 832 775 788 1,125 1,177

244 244 286 340 264 350 752 841 1,358 1,957 2,187

Total 57,224 61,497 70,641 76,169 84,273 91,462 101,761 107,451 114,860 131,394 142,347

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together to develop and maintain the U.S. as Canada's principal trading partner. A recurring theme, when low levels of penetration into any country are being explained, is the incidence of protection. A substantial volume of work has been directed towards this issue, especially in relation both to the difficulty that APEC and East Asian economies will have in achieving their stated goal of free trade in the region by the year 2020 and to the role played by these protective barriers in encouraging export-oriented industries.11 Studies indicate that the levels of protection in developing East Asia (ASEAN6 without Singapore but including China) and in some Newly Industrializing Economies (Taiwan and Korea) are still relatively high when compared to levels in developed APEC economies. More importantly, many of these countries have "spikes" in their tariff profiles which indicate that some sectors are very heavily protected. Therefore, the argument that "their rates of protection are high" seems to have some support. However, upon closer examination one finds that it cannot be an explanation for low levels of trade. The plain and simple fact is that the protective measures of some economies in Asia, which are relatively severe, are not targeted or aimed at Canada. The only scope for preferential treatment is that provided by the ASEAN Free Trade Agreement (AFTA), which allows for the application of reduced tariffs on a limited line of products to members of the ASEAN. However, during the time period referred to in Tables 14.1 and 14.2 the impact of AFTA has been minimal. Moreover, the scope for trade diversion from AFTA is extremely low because of its narrow product range and low depth of preference.12 Certainly, the ambition of ASEAN to accelerate tariff cuts and expand product coverage in order to reach a stated goal of free trade in 2003 may create an issue for the future, but it does not explain the current low levels of Canadian penetration. A good case to illustrate the point that the issue in East Asia is not necessarily market access is China. China is now the second largest host to foreign direct investment and one of the most important trading nations in the world in terms of growth. Yet Canada's exports to China increased at a trend rate of only 6.5 percent between 1991 and 1995. During the same period the growth trend rate of exports for all other APEC members, except Mexico, was higher than Canada's. In fact, only Mexico and Canada recorded negative growth rates in the importance of China as a market for their goods.

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Another argument put forth is to the effect that much of what Canada has to offer, such as resources, is already produced in Asia, or is being supplied by Australia. This would not be the view of serious economists. Canada has been fighting this argument constantly with respect to the threat of labour-intensive imports from Mexico. The law of comparative advantage suggests that Canada would have something to trade with East Asia, and this potential is further amplified by the fact that the significant growth rates in the region are creating a demand pull, or income effect across the board for all commodities and services. One line of argument, however, that does not seem to receive much currency in Canada is that Canada has simply "missed the boat" when it comes to the Asia Pacific. Most of Canada's trade efforts since the early eighties, in terms of analytical thinking, policy direction and resources in the Department of Foreign Affairs and International Trade (DFAIT), have been focused on the bilateral Canada-U.S. relationship. Recent initiatives, intended to refocus policy direction towards the Asia Pacific—the appointment of a Secretary of State for the Asia Pacific, the elevation of the APEC to a Bureau status within the DFAIT, the offer to host the APEC Leaders meeting in Vancouver and the announcement of 1997 as Canada's Year of Asia Pacific—are all to be commended. In the end, however, Canada has to ensure that it is counting not inputs but outputs. The orientation of Canada's psyche in matters of trade must be turned towards the west to a significantly higher degree than it is today. This does not mean other initiatives should be ignored, but that there is a necessity to develop a trade policy strategy, a point which I shall address in more detail below. Developing the human capital base in Canada for handling Asia Pacific issues is a long process. Recent increases in immigration from the region to Canada have increased the profile of the Asia Pacific substantially. These kinds of impacts affect the social fabric of the nation and will encourage lateral thinking about the Asia Pacific in terms of cultural acceptance and superficial knowledge of the region. Intensive efforts to develop Asia Pacific studies and, in particular, policy expertise on the region are required to complement this process. Such efforts need not be restricted to academia or to the private sector. They should be aimed at both groups. The establishment and servicing of bilateral Chambers of Commerce within the region provide an excellent example of the type of facilitation measure that should be developed. Of course, we can have high profile ventures

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such as the Team Canada visits, but the problem is to increase the long-term understanding of the region. TRADE POLICY OPTIONS: THE LITTLE ENGINE THAT COULD

There should not be a single approach to enhancing trade and investment with East Asia, but rather a basket of policies designed to complement each other, so that the overall objective of increasing integration is achieved. Depending on the type of forum, these policies can be characterized as bilateral, region and multilateral. They also need to be distinguished as being concerned with liberalization or facilitation. In the previous section of the paper we highlighted issues such as the level of protection and the policy impediments in the region. These terms include the traditional border barriers, but there are other difficulties in enhancing international economic integration that are related to domestic policy differences and asymmetric information.13 The "psyche" argument put forth in the previous section is an impediment to integration that cannot be handled within the confines of international fora. It is an issue that requires unilateral policy response by Canadian governments and institutions. Let us consider the options available to Canada in various regional fora and then turn to the issue of facilitation. Bilateral The role and importance attached to the bilateral route to increased trade and investment seem to be different for Canada from what they are for other countries such as Australia and New Zealand that face similar bilateral market access issues. The antipodean countries have no doubt that non-discriminatory trade liberalization is the only answer. Therefore their efforts are deployed in the World Trade Organization (WTO) and APEC.14 Canada, on the other hand, can be characterized by its adoption of, and perhaps by its zeal in signing, discriminatory agreements, the FTA, NAFTA, the Canada-Chile Free Trade Agreement and the Canada-Israel Free Trade Agreement. Could Canada pursue a bilateral strategy in the Asia Pacific region? The answer is simply no! The problem with this approach to trade liberalization is that one needs a willing partner. If Canada were to look for a willing partner in East Asia it would be unlikely to fine one. The reason for rejection would be the simple fact that Canada would not be an attractive partner. It does not offer suitable enough market

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access, having a market of only 30 million people; this observation does not even take into account the political difficulties arising from a trans-Pacific free trade agreement. A more compelling reason is that it is unlikely that any country would jeopardize its stance on Most Favoured Nation (MFN) treatment. The East Asian countries have taken a strong position on the idea of MFN liberalization and were keen to ensure that it was a precondition to the establishment of APEC. The ASEAN members are struggling with this issue, as they expand the ASEAN Free Trade Agreement and considering multilateralizing its commitments. Signature of bilateral discriminatory agreements would erode their credibility and the argument that open and non-discriminatory trade policies have been responsible for initiating their high growth rates and are required to sustain these rates over time. Engaging Canada in bilateral talks would undermine this commitment. Canada has, moreover, not helped its own credibility by continuing down the track of bilateral trade deals. There was substantial support in East Asia for the FTA, since, like the Australia-New Zealand Closer Economic Relations (CER) Agreement, it was designed to cement an already strong commercial relationship between the two countries, and this, combined with the relatively low margin of preference, meant that the level of trade diversion was bound to be low. However, NAFTA was the start of the credibility slide, because of its ambiguous contribution to the multilateral trading system. Paradoxically, there was some support for NAFTA from non-NAFTA members, since there was a threat that, if the agreement was not ratified by the U.S. Congress, other trade agreements, in particular the Uruguay Round agreement, might also not be ratified. Clearly, this meant accepting the lesser of the two evils, which was NAFTA, in preference to a destabilized multilateral trading system.15 Currently, the increasing propensity to sign bilateral agreements such as the agreements with Chile and Israel, the proposed TransAtlantic Free Trade Agreement and flirtatious offers to Australia and New Zealand appear to indicate that Canada is addicted to bilateral agreements. Instead of fearing that it would be a spoke of the wheel in which the U.S. would be the hub, it almost seems as if Canada has expressed its desire to be a hub. Whatever the reason for the proliferation of bilateral agreements this phenomenon does not appear to be the result of a concerted and developed trade strategy. Continued efforts to promote bilateral agreements also seem to imply acceptance

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of the theory that protection is the issue, which is a point already addressed earlier in the chapter. Regional Approach Here lie the greatest opportunities and challenge for Canadian trade and investment policy. Vigorous participation in APEC, NAFTA, the Free Trade of the Americas initiative and the proposed Trans-Atlantic Free Trade Agreement has elevated the status of the regional approach as an attractive trade policy option. As expected, Canada's approach to a particular regional initiative varies with Canada's objectives. The regional initiative of relevance here is of course APEC. Despite Canada's preoccupation with negotiating bilateral trade rules it has been supportive of the unconditional MFN liberalization concept put forth by Australia.16 This, of course, stands in contrast to the U.S. preference for negotiated conditional MFN. The stance on unconditional MFN earned some respect from the Western Pacific members of APEC. Siding with the Americans would have made it difficult for Canada to claim that it had an independent economic policy. Canada's differences with the U.S. in APEC were further amplified during the discussions on the APEC non-binding investment principles that continued throughout 1994. Canada and the U.S. sent their most experienced investment negotiators to APEC, where their positions contrasted strongly with those of representatives from investment promotion agencies that were sent by other APEC member economies. Despite their experience and their familiarity with each other's investment policy Canada endorsed the approach by the Asian APEC members, which was to settle for weak language within a non-binding instrument, while the United States, on the other hand, preferred stronger language, especially in light of the fact that the instrument was non-binding.17 Eventually, the U.S. Trade Representative, Mickey Kantor, endorsed the non-binding investment principles in order to avoid being tagged as the "spoiler." This series of events was important for Canada because it signalled to other APEC members that Canada was attempting to develop its own independent approach to APEC instead of following the "American Line." Hence there is scope for Canada to work within APEC to satisfy its own national economic objectives.18 However, given the history of APEC and the importance of 1997 for APEC's development, these past successes are for the most part irrelevant. This year Canada carries a special burden, as the host of the

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APEC summit, which has not fallen upon any other host since APEC began: how to tackle the erosion of APEC's credibility. The Individual Action Plans posted in 1996 in Manila have been less than impressive. Most were simply restatements of existing policy, although there were a few highlights, or "nuggets" in APEC language. There was, however, plenty of fodder for the critics of APEC. For the most part this glaring weakness was overlooked for a number of reasons. First, there was the huge endorsement given to the Asia Pacific by President Clinton. Second came the positive steps on China-U.S. relations, and third, the advancement of the Information Technology Agreement. In 1997 Canada will have to arrest the slide, since Malaysia is the host in 1998. Most APEC watchers are aware that very little is expected of Malaysia, so a weak performance by APEC in 1998 will not be a problem. However, if 1998 is the third year in a row of weak performances there is no question that Canada will not look good, since APEC itself, and not Malaysia, will be under scrutiny. How can Canada ensure that APEC is a moderate success in 1997 and thereby elevate its status in the region? First and foremost will be the task of ensuring that the commitment to trade and investment liberalization is still secure. While this sounds simple and transparent enough, the obstacle to achieving this target may not be the East Asian APEC members but Canada itself. Canada has chosen to concentrate on the third pillar of APEC and Part II of the Osaka Action Agenda.19 There is no discounting the importance of these activities to APEC, but it appears that Canada is willing to trade liberalization for economic and technical cooperation. In order to give the trade liberalization agenda a higher degree of priority Canada will have to convince other APEC members to deliver packages in Vancouver that will strongly signal to other countries that APEC is serious about liberalization.20 One way to do this, and this is a challenge to the Canadian government, is for Canada itself to post a significant liberalization package itself. In so doing it can challenge other APEC members to follow its lead. What might this package contain? Well, in very simple terms what East Asia, Australia and New Zealand would like to see is a multilaterization of Canada's NAFTA commitments. If Canada is serious about APEC and MFN liberalization, then it can tackle the credibility problem, as well as the systemic issue of proliferating bilateral agreements, by a unilateral reduction of barriers to NAFTA requirements. Such a bold move would not only be received positively by other APEC members, but would also force

BIJIT BORA

them, under the spotlight, to match the offer. The critical point here is that Canada's success in 1997 as APEC host will not be determined by the number of ministerials it hosts, or by the fact that St. John's, Newfoundland will be hosting delegations from Brunei, Papua New Guinea and other East Asian economies, but by the quality of the final communique and the demonstration that APEC is still on track to deliver its commitments. It is outputs, not inputs, that count! Multilateral At the beginning of 1996 there was considerable optimism and excitement within the trade policy community about the July APEC Trade Ministers' Meeting, the November Subic Bay Leaders' Meeting and the December Ministerial of the World Trade Organization. While there have been some modest achievements at these meetings none has been truly significant or sensational, with the exception perhaps, of progress on the Information Technology Agreement. Canada participated actively in the WTO Ministerial and its preparation. It was most visible in the efforts it made to develop a work program in investment. This is to be applauded and, if progress can be made on investment, Canada, along with Japan will be credited with the success. An important aspect of the multilateral trade policy is the changing landscape of the global economy. Border measures such as tariffs and quotas are now less relevant; instead, issues such as the linkages between trade and other issues, for example, investment, environment and labour, are the focus of attention for trade policy makers. The emergence of these issues is reintroducing the North-South element which dominated trade policy in the post-World War II period. One of the landmark achievements of the Uruguay Round Agreement was the full and active participation of the developing economies. The WTO Ministerial in Singapore demonstrated, however, that this cooperative approach is showing signs of splintering. The developing economies are having considerable difficulty in meeting their Uruguay Round commitments. Canada could play a role in bridging this gap between broadening the rules-based multilateral system while still maintaining the participation of the developing economies. Another multilateral trading system issue which offers a role for Canada is the further development of the work program on the Committee on Regional Trade Agreements (RTA). NAFTA was one of the principal catalysts for the establishment of this Committee. Its

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contribution to the multilateral trading system has been questioned by some economists. NAFTA provoked genuine fear in East Asia that it would trigger the collapse of the General Agreement on Tariffs and Trade (GATT).21 The RTA Committee will have to show understanding for these fears, especially in light of the fact that East Asia was behind APEC's adoption of unconditional MFN. The picture of Canadian trade policy toward the Asia Pacific region and Canadian trade policy in general depicted in this paper may seem incoherent to the general reader. This is not surprising because most analysts outside Canada, and perhaps some within the country, have the same view. Canada did develop a trade strategy in the early 1980s in response to increasing tensions with the United States. Two papers were published charting out a future for Canadian trade policy.22 Since then, however, that policy seems to be lacking direction. There has been a recent attempt at igniting the trade policy debate in the post NAFTA, Uruguay Round and WTO world.23 The document in question is What's Next: Canada, the Global Economy and the New Trade Policy, by Michael Hart. The status of this publication is unclear. It was written with the consent and support of the Department of Foreign Affairs and International Trade. However, it was not put out as a discussion piece by the government; it was published by the Centre for Trade Policy and Law, a trade policy think tank. Thus it does not represent a department view. What is needed is a strong policy paper from the government to address the issue of complementarity of bilateral and regional agreements with the multilateral trading system. Had such a document existed, Canada's expectation for APEC in 1997 would have been clear and transparent. Facilitation The choice of St. John's as the location for the APEC Senior Officials' Meeting may seem curious, but there is a positive aspect to the diversity of meeting places which characterizes the program organized by DFAIT. One problem with Canada's psychological orientation towards Asia Pacific is that, apparently, only British Columbia is, and should be, concerned with the region. The travelling APEC show is an opportunity for other parts of Canada to be exposed to the dynamism of the region and be informed of the issues facing Canada as a nation, as opposed to British Columbia as a province. The most impressive facilitation device that has been used by the Canadian government and should be encouraged is the series of

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Team Canada24 visits to various countries. The most recent visits were to Pakistan, India, Malaysia and Indonesia in January 1996; to China and Japan in November 1996 and to Thailand, the Philippines and Korea in January 1997. How successful have these encounters been? There are a number of benchmarks. One could be the dollar value of the deals signed. Another is based on an exit survey of participants. After the 1996 trips the Canadian Chamber of Commerce conducted such a poll and the results are confirmation of success. When asked if the visit was a door opener, 93.6 percent of the respondents said it was and 89 percent saw the mission as having added momentum to their business. Networking and social interaction were also prominent during the visit. Eightyseven per cent felt there was a good mix of social activity and business, while 82 percent networked with other Canadian business representatives, as well as those from the region. While these results seem on the whole quite positive, the genuine question about the contribution of these trips to net exports has not yet been answered; at issue is whether they were merely photo opportunities to sign existing deals or occasions which produced new opportunities. A second area of focus for facilitation activities is the academic sector. One element of the Australian integration with Asia is the presence of Australian universities in the region, and the importance of Asian studies in Australian universities.25 Australia also has significant exports of educational services to the Asia Pacific and these bring substantial benefits such as commercial linkages. As Martin Rudner points out in Chapter 10 of the present volume, Canada's educational linkages with Asia Pacific are very weak. A related issue is that of the lines of communication between academia and the government. The Economic Council of Canada, and to a lesser extent the Ontario Economic Council, facilitated this important tool for policy development. The former, in particular, published studies written by academics covering a wide range of policy sectors and not simply trade policy. Now, however, no such vehicle exists.26 There are, of course, the APEC Study Centres which have been established in most APEC economies. The Canadian Centre is in Vancouver and is housed within the Asia Pacific Foundation. The idea of these centres is, in general, a good one. However, it is not clear whether there is scope for them to make an active contribution to the trade policy debates in Canada or whether their activity is limited to networking amongst a small group of academics. Without leadership,

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openness, and a willingness to have these institutions engage all academics and non-governmental organizations there is a risk that they will evolve into "virtual" study centres. Given the broad range of APEC activities, there is also the possibility that trade and investment liberalization may become lost in the agendas of the working groups. There are a number of other centres for Asia Pacific in Canada, although they do not have the right to carry the APEC name; the 1997 Year of Asia Pacific should be exploited by them to encourage students and staff to examine Asia Pacific issues. Of course, the usual fiscal restraint response will be heard, but this is where the provincial and federal governments should step in. The dismal trade and investment performance with respect to the region, as highlighted in section 2 of this Chapter, should be motivation enough to develop and maintain targeted Asia Pacific programs. A third area of focus for facilitation activities should be the nongovernmental organizations in the region. There are many in existence, but let me highlight three of the key institutions, especially since they relate directly to APEC. First, is the Pacific Basin Economic Council (PBEC), the second is the Pacific Trade and Development Conference (PAFTAD) and the third is the Pacific Economic Cooperation Council (PECC). PBEC consists solely of private sector representatives. Its membership is limited, but it is still the first private sector business organization in the region. PAFTAD has been in existence since 1967 and has provided, for the most part, the intellectual input into Pacific economic cooperation. PECC is a tripartite organization consisting of twenty-two members: each National Committee has representatives from the private sector, academia and government. Many members of the APEC Eminent Persons Group cut their teeth in PAFTAD and PECC meetings. In some ways the two bodies could be considered the parents of APEC. Canada should not ignore the role played by these institutions in the region. PECC, in particular, has official observer status at APEC meetings and since 1994 has been acting as a sort of "unofficial" research arm for the Committee on Trade and Investment.27 Years ago Canada was a driving force in PECC and PAFTAD, with Carleton University's Professor Ted English as the principal mover. Since then, however, its participation in these NGOs has been fragmented and in some cases inconsistent. One strategy for facilitating further linkages in the region would be to strengthen and broaden Canada's participation in these NGOs.

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CONCLUSIONS

Canada's economic integration with the East Asia region has been inconsistent with the deepening integration of East Asia with the international economy. Despite the openness of its economy Canada's trade and investment are still heavily biased towards the U.S. and Western Europe and there is clear evidence that it is ignoring the opportunities present in East Asia. Taking advantage of these opportunities is not an easy task, but according to the evidence Canada's efforts in the past decade have not been impressive. Disorganized approaches to trade policy and passive attempts at engaging the Asia Pacific region have not yielded any results. High profile initiatives such as the Team Canada visits have been helpful, but they appear for the most part to be photo opportunities, with very little evidence of long-term benefits to the Canada-East Asia trading relationship. This paper has not sought to be prescriptive about the correct mix of policies. It has simply highlighted the need to address the issue, especially in light of what appears to be a fragmented approach. Tensions and differences still exist between East Asia, North America and Western Europe over trade policy issues. Canada will have to pursue policies which are in its interest, but which do not amplify the tensions between the regions. The quality of the APEC Leaders' Meeeting in Vancouver will be a yardstick for a severely critical evaluation of Canadian trade policy. A weak outcome of that meeting, combined with weak revisions of the Individual Actions Plans, will have serious implications for APEC's credibility; many will be quick to blame Canada. Canada will not be able to respond by pointing to the list of meetings held, or to the fact that the APEC flag was flown from British Columbia to Newfoundland. In the end, it is the output that counts. Canada will have to show leadership if it really intends APEC to be an effective vehicle for trade and investment liberalization.

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NOTES I am grateful to Ashfaq Ahmad (Industry Canada), Garth Parry (Australian Deptartment of Foreign Affairs and Trade), and Tim Page (Canadian Chamber of Commerce) for assistance in obtaining data, as well as a number of people in the Canadian Department of Foreign Affairs and International Trade for discussions relating to Canadian trade policy. Thanks also goes to the editors of the volume for helpful comments on the first draft. I am, of course, responsible for all errors and omissions. 1

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3

4

5

6 7

8

Defined as the members of the Association of Southeast Asian Nations (ASEAN6—Brunei, Philippines, Thailand, Singapore, Malaysia and Indonesia), Taiwan, Hong Kong, Korea, China and Japan. Vietnam is now a member of ASEAN, but has only recently showed strong economic growth. The classification is based on the Australian Department of Foreign Affairs and Trade Exports Classification System (TREC3). The system uses the Standard International Trade Classification, Revision 3 data to allocate traded items to each category according to a prespecified concordance. There are other methods of categorizing merchandise trade. For example in B. Bora, "Trade and Investment Developments in APEC: 1980-1993," in P. Lloyd and L. Williams, (eds.), Trade and Migration in the APEC Region (Melbourne: Oxford University Press, 1996), 14-32, various intensities of production such as capital-labour- and resource-intensive are used. Canada's trade with its partners in the Asia Pacific Economic Cooperation forum (APEC) has grown from U.S.$204.9 billion in 1991 to U.S.$308.3 billion in 1995. Canada's total trade with all countries has increased from U.S.$246.6 billion in 1991 to U.S.$353-5 billion in 1995. Between 1991 and 1995 each of the ASEAN6 members showed a growth trend raising their exports to Canada to double-digit figures. The overall growth trend for the group was 21.1 percent. The only countries to show negative growth during the period were Chile, whose exports to Canada declined from U.S.$345 million to U.S.$222 million, and Japan. Between 1991 and 1995 the share of Canada's exports directed to the U.S. market has increased from 75.8 percent to 80.4 percent. The markets that have shown significant expansion are Chile, whose growth trend between 1991 and 1995 was 23 percent, Mexico (17.1 percent), Hong Kong (12.2 percent), United States (12.6 percent) and New Zealand (10.7 percent). This information is obtained from the disaggregated country data used to construct tables 14.1 and 14.2. Business services include a host of categories: consulting, transportation related, management and administrative, research and development, computer services, equipment rental. For further information see Canada's International Transactions in Services, 1993-1994 (Ottawa: Statistics Canada, 1995). L. Schembri, "Canadian Exports of Business and Education Services to the Asia Pacific Region," in R. Harris, ed., The Asia Pacific Region in the Global Economy: A Canadian Perspective (Vancouver: University of Calgary Press, 1996), 165-196.

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9 10 11

12

13

14

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16

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18

Although it should be made clear that we are not stressing the bilateral deficit as an issue. What matters is the overall trade position, not the bilateral position as stressed by the U.S. See B. Bora, "Foreign Direct Investment," in B. Bora and C. Findlay, (eds.), Regional Integration and the Asia Pacific (Melbourne: Oxford University Press, 1996), 78-98. The key studies in this area, written by the Pacific Economic Cooperation Council's Trade Policy Forum, are Survey of Impediments to Trade and Investment in the APEC Region (Singapore: APEC Secretariat, 1995), Milestones in Liberalisation: Market Opening Measures by APEC Members (Singapore: APEC Secretariat, 1995) and Perspectives on the Manila Action Plan (Manila: Pacific Economic Cooperation Council, Philippine Institute for Development Studies and The Asia Foundation, 1996). See L. Low, ASEAN Free Trade Agreement, in Bora and Findlay, Regional Integration ..., 197-206, and East Asian Analytical Unit, ASEAN Free Trade Area: Trading Block or Building Block?, (Canberra: Australian Government Publishing Service, 1994), 197-206. Border barriers to trade are sometimes referred to as impediments to shallow integration. Non-border, or domestic impediments to trade, are referred to as deeper integration. For more discussion of these issues see B. Bora, "The Asia Pacific Economic Cooperation Process," Papers from the 22nd Australian International Trade Law Conference (Canberra: Australian Government Publishing Service, 1996), 9-33. They do have a bilateral agreement known as the Closer Economic Relations Agreement (CER). However, as Robert Scollay points out in "Australia New Zealand Closer Economic Relations Agreement," in Bora and Findlay, (eds.), Regional Integration ... , 184-196, both countries have essentially replaced the agreement with a program of unilateral tariff reductions. For more on the negative effects of NAFTA and the role of regional trade agreements in the multilateral trading system see B. Bora, "North American Free Trade Agreement," and R. Snape, "Which Free Trade Agreement," in Bora and Findlay (eds.), Regional Integration ... , 158-183 and 49-64. The cornerstone of the multilateral trading system is unconditional MFN treatment, which means that a country offers its tariff rates in a nondiscriminatory fashion to its trading partners. Conditional MFN treatment is the cornerstone of discriminatory trade agreements, which means tariff preferences are offered only the members of the agreement. To say that APEC has subscribed to the unconditional MFN principle means that it will not offer tariff preferences solely to APEC members. These points are based on personal observation. During 1994, the author was the Pacific Economic Cooperation Council's representative in the APEC Investment Experts' Group. The significance of the APEC Non-Binding Investment Principles and Canada's important decision to support them lies in the achievement of the principles themselves. Progress will be slow in many areas of trade and investment liberalization. The advancement of investment issues had to be carried out in a consultative and cooperative manner. This so-called "Asian" approach is opposite to the detailed, legislative, negotiated approach advo-

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19

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21 22

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cated by the United States. For more on the role of the Non-Binding Investment Principles see B. Bora and E. Graham, APEC's Non-Binding Investment Principles (San Francisco: Asia Foundation, 1995) and B. Bora, "APEC's Non-Binding Investment Principles: A Step Forward?" in C. Green and T. Brewer (eds.), Investment Issues in the Asia Pacific (New York: Oceana Press, 1995), 137-156. The Osaka Action Agenda, which outlines the plan to implement the Bogor Declaration of "free and open" trade and investment by 2010 for developed economies and 2020 for developing economies, is divided into two parts. Part I deals with liberalization and facilitation and focuses on border and non-border barriers as we have described above. Part II is based on economic and technical cooperation for the purpose of ensuring that the APEC economies can attain sustainable growth and equitable development. For more on this see Bora, "Asia Pacific Economic Cooperation Process." One aspect of the Individual Action Plans posted in Manila was the propensity of most APEC members, Canada included, to add policy measures which were outside the APEC timeframe and policy agenda. As a result, while the list may have looked impressive, in most cases there was very little that could have been attributed to APEC. See Bora, "North American Free Trade Agreement," 158-183. These two documents, External Affairs Canada, A Review of Canadian Trade Policy and Trade Policy (Ottawa: Minister of Supply and Services Canada 1983) and External Affairs, Canadian Trade Policy for the 1980s: A Discussion Paper (Ottawa: Minister of Supply and Services Canada 1983) were part of the Government of Canada's trade policy review project in 1982-83M. Hart, What's Next: Canada, the Global Economy and the New Trade Policy (Ottawa: Carleton University Centre for Trade Policy and Law, 1994). While I describe the propensity to sign bilateral agreements and the general state of trade policy as incoherent, Hart goes further and says that "rather than pursuing regional initiatives in faddish fits and starts, we need sustained, concurrent and coherent efforts in North America, Latin America, across the Pacific and across the Atlantic," (Hart, What's Next..., 22). The Team Canada concept is that of a visit by a "team" of private sector representatives to a country, or a group of countries in the company of the prime minister and some provincial premiers. Each visit targets a region and hosts meetings between senior officials, while also providing networking and business opportunities for the private sector. This point is emphasized by R. Pomfret "Australia's experience with East Asia: Lessons for Canada," and also in R. Harris, "Overview," both in Harris, The Asia Pacific Region ..., 615-647 and 1-20. Michael Hart in What's Next makes the suggestion that the DFAIT should have a visiting position for an academic styled along the lines of the Clifford Clark Visitor in the Department of Finance (Hart, What's Next, 71). This is a good idea and would provide more of a focus on trade than the existing Jules Leger, Norman Robertson and Marcel Cadieux fellowships. It has now completed two studies at the specific request of APEC's Committee on Trade and Investment. It sends an expert to each meeting of the CTI and also the Investment Experts Group.

XV Re-engaging China: Striking a Balance between Trade and Human Rights

B. MICHAEL FROLIC

On January 25, 1996, Lloyd Axworthy became Canada's Minister of Foreign Affairs. His appointment was interpreted by some as a move "to shore up support among traditional Liberals who feared that human rights and democratic values were being overlooked in the party's trade-led foreign policy."1 He replaced Andre Ouellet who had once said that with respect to advancing Canada's position on human rights internationally, "Canadians can't be Boy Scouts." Besides appointing Axworthy, Prime Minister Chretien chose Art Eggleton to be the new Minister for International Trade and Pierre Pettigrew to be Minister of International Cooperation and La Francophonie. Both Christine Stewart, Secretary of State for Latin America and Africa, and Raymond Chan, Secretary of State for Asia Pacific, retained their posts. As John Kirton observes in Chapter 2 of this volume, "the shuffle was widely thought to mark a move toward a younger cabinet that would, in the international affairs portfolio as elsewhere, shift the

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government's image and policies from the right to the left as an election approached." Foreign Minister Axworthy favoured a more activist foreign policy, putting emphasis on the promotion of Canadian values and human rights, and providing a stronger focus on environmental concerns and transparency in international relations. At the same time he was less committed to trade as the dominant focus of Canadian foreign policy. His style was "hands on" and inclusive, and it was expected that under his leadership a wider range of groups and individuals would be consulted in the search for a more balanced foreign policy. Indeed, this was the case with respect to Canada's evolving China policy—a policy characterized by inclusiveness, moderation and institution building, the sale of two Candu reactors, broader engagement with China, and limited progress in human rights. This chapter examines the evolution of Canada's policy towards China in the past year and the way it has changed since the disruption of relations following the events in Tiananmen Square in 1989. It discusses the government's efforts to maximize trade and economic links with that country and the growing attention Canadian policy-makers have paid to the future of Hong Kong when the city is returned to Chinese sovereignty at the end of June 1997. The chapter also discusses the reasons why Canada has increasingly adopted a moderate stand on human rights, preferring to take a low-key approach in presenting Canadian views to Chinese officials. As we look to the future of Canada-China relations, we must assume our overall bilateral relationship will increasingly be affected by China's own political stability and the possibility of growing social and political unrest in the postDeng era as a result of the forces unleased by rapid economic growth and a strengthening trend to political decentralization. CHINA POLICY BEFORE 1996 After the Tiananmen Square massacre Canada's relationship with the People's Republic of China (PRC) was in disarray. Canada sought to rebuild ties in a way that could preserve fundamental objectives of developing economic and trade links and of "engaging" China, while simultaneously expressing official and public outrage at the events of 1989- This policy was difficult to sustain because of its inherent contradictions, and Canada drifted into the 1990s uncertain how best to proceed. Two-way trade initially declined in 1990, rose substantially in 1992, only to drop again in 1993. Frustrated over their country's

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inability to engage China on human rights issues, especially with regard to the harsh penalties meted out to students who had demonstrated during the Tiananmen episode, some Canadians resorted to loud bouts of "megaphone diplomacy." This culminated in the ignominious expulsion of three federal MPs from China in early 1992 after they had vigorously attempted to turn their visit into a confrontation over human rights policy. In the early 1990s the Conservative government seriously considered tying the funding of new aid projects to stipulated improvements in China's human rights record. While "linkage" had substantial emotional support among Canadians, the government finally concluded that it would reduce opportunities for engaging China and would likely damage trade without necessarily advancing democracy or human rights. From 1992 onwards trade began to emerge ascendant and the human rights agenda was consciously softened and directed into manageable initiatives such as legal reform and support to women's organizations. The Canadian ambassador in Beijing at the time noted: How could I have been spending that much time on public affairs activities?... ever since May C92) I've been involved almost full-time in commercial matters ... the number of Canadian business visitors seems to be doubling by the week ... is this how trends affect policy?... one deals with public relations only when nothing more immediate is at hand?2

After the transition from Brian Mulroney's government to that of Jean Chretien in 1993, this trend towards the maximization of trade objectives became more pronounced. High level visits, suspended in 1989, resumed, and served to restore most of the structure, if not the spirit, of the pre-1989 relationship. A rush of business activity culminated in the Team Canada visit of 1994, which has almost become a legend. Over 400 Canadian business representatives joined the Prime Minister, two ministers, nine provincial premiers, the territorial leaders and the head of the Federation of Canadian Municipalities for meetings in Beijing and Shanghai. Almost 1700 Canadians and Chinese attended a mammoth banquet in the Great Hall in Beijing. They signed contracts and memoranda of understanding in the amount of C$8.5 billion, including a commitment to move to the final stage of negotiations for the sale of two Candu reactors. The total amount of deals made or committed was almost 50 percent greater than the entire two-way trade between the two countries in 1994. It

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was the most productive trade mission in Canada's history, and up to that time the largest foreign trade mission ever hosted by China. Aside from these remarkable trade successes, the visit also symbolized the full restoration of bilateral relations. While many Canadians remained uncomfortable with China's human rights record and the PRC's unwillingness to condemn what had happened at Tiananmen, the visit of Team Canada, headed by Prime Minister Chretien, was an acknowledgement that, after six years, relations had "normalized." Following the visit, Tim Reid, President of the Canadian Chamber of Commerce, observed that the trip was: "A real landmark in the way Canada conducts itself internationally ... A real partnership between the private sector and government ministries and officials ... This is a clear statement that Canada wants to be a player out there in a serious way."3 The Team Canada concept was not universally applauded by Canadians. Andrew Coyne noted that Canada "managed to excuse the Chinese government's unfortunate habit of torturing and murdering dissidents to underwrite its nuclear ambitions with two new Candu reactors and to implicate this country in a colossal environmental disaster in the making, the Three Gorges Dam."4 Later, in 1995, in Beijing, advocates for enhancing women's rights criticized Canada for paying lip service to women's programs while "wasting Canadian money on big, male-dominated trade extravaganzas such as last fall's Team Canada trip."5 But these were minority views. For the most part Canadians accepted the economic realities of the Team Canada mission and the subordination of other policy objectives to the maximization of trade goals. The astounding success of the mission validated the Team Canada concept and it was henceforth utilized by the government as the main instrument for promoting better relations not just with China but also with other countries in Asia and Latin America. By 1995 Canadian relations with the PRC had improved to such a point that Li Peng, the Chinese Premier, could visit Canada to commemorate the 25th anniversary of the Canada-China relationship. The irony of welcoming Li Peng, called the "butcher of Beijing" because he allegedly gave the order to shoot unarmed Chinese citizens at Tiananmen, was not lost on Canadians. But six years had passed since 1989 and Li's trip was carefully managed to keep him out of the public spotlight and away from his critics. The City of Toronto protested in a formal letter to the Prime Minister that Li was not welcome

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"because of his appalling human rights violations,"6 but he had not been scheduled to visit Toronto in any case. His Canadian trip was uneventful, in contrast to an earlier visit to Germany where angry demonstrators had forced authorities to cut short his stay. In Canada he focused on trade-related matters, although officials took pains to announce that the Canadian side had repeatedly pressed its views on human rights and democracy to the Chinese Premier in both formal and informal conversations. CANADA-CHINA RELATIONS IN 1996: AN OVERVIEW

The 1995 trade figures showed that Canadian exports to the PRC had increased by 50 percent in just one year. Two-way trade was at an alltime high—C$7.8 million, which was 2.6 times greater than 1990. Not only had bilateral trade prospered but Canada had increased by 40 percent the proportion of its exports to China represented by valueadded goods. Prospects looked rosy for the conclusion of the sale of the two Candu reactors, provided that financing and other details could be worked out. Qiao Shi, one of China's top leaders, Qian Qichen, the Foreign Minister, Prime Minister Chretien, Minister for International Trade Eggleton, and Raymond Chan, the Secretary of State for Asia Pacific, were all scheduled to make official visits during 1996. In January 1996, in Beijing, the two sides held the first bilateral discussions at the official level dedicated solely to human rights. This was a substantial achievement. From the Canadian perspective the meeting provided an opportunity to talk about such issues as the reincarceration of Wei Jingsheng, China's leading democracy activist; the kidnapping of the young Panchen Lama, a Chinese act which had upset the Tibetans; reports that female babies and children were being deliberately neglected in Chinese orphanages; and the preservation of human rights and individual liberties in Hong Kong after 1997. The Chinese side used this meeting to press Canada to prevent the tabling of an anti-PRC resolution at the upcoming UN Commission on Human Rights in Geneva. The Chinese wanted Canada to play a mediating role with the European Union, which was supporting the resolution. Later, Canadian officials pointed to this meeting as an example of genuine progress in Canadian efforts to have a meaningful human rights dialogue with their Chinese counterparts. In charting a course for its relations with China in 1996 the government was seeking a balance between the Team Canada approach and the views of those who wished to push China more

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vigorously on its human rights record. In retrospect, the senior officials most responsible for the formulation of policy in this area, the Prime Minister and his Foreign Minister, were following parallel but somewhat divergent paths. The Prime Minister's public face was fixed on Team Canada and the successful conclusion of the Candu reactor deal. For him the human rights dialogue was at best a sideshow. In November 1996 Chretien went to Shanghai with two ministers to finalize this C$4 billion deal. There he spoke of the rapidly growing economic partnership between the two countries and linked the sale of the reactors to Canada's growing awareness of the Asia Pacific and Canada's expanding role in the region: "Canadians are experiencing a profound change in the way we see ourselves and our place in the world. Canada is proud to be a Pacific nation. I can tell you there is a growing sense of excitement about our connection to the Asia Pacific region."7 To the dismay of many Canadians Chretien was seen playfully bouncing a large red pompom on Li's head and tenderly squeezing his shoulder. A Canadian government official observed that "they (Chretien and Li) are certainly very friendly with one another. Even their wives are friendly. It's all very friendly."8 While the Prime Minister was busy promoting expanded trade with China, his Foreign Minister, in a version of the good-cop/badcop routine, was developing a range of programs in the softer area of "human rights, good governance and rule of law." Groups and individuals with an interest in human rights, environmental issues and social policy were being consulted more often by the Minister and senior DEAIT officials. As Kirton notes in his chapter, small groups of officials and outsiders were meeting frequently "for free-wheeling, academic-style discussions of policy issues." Axworthy seemed to be looking for new ideas and going outside the regular decisionmaking process, although not with the intention of replacing existing channels. For example, this author was invited by the Minister in the fall of 1996 to participate in a "consultation on Canada-China relations" hosted by the Canadian Centre for Policy Development, an organization set up by DFAIT to facilitate interchange between government officials and the broader policy community. The stated purpose of the consultation was to provide the Minister with policy options with respect to the promotion of political stability, security and respect for human rights in China. Trade and economic relations were not a major focus of the discussion. The group was primarily comprised of academics, representatives of Amnesty International and members of

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the Canadian Chinese community. After a lively discussion, the group concluded that with respect to China, trade and human rights goals were not necessarily in conflict and that the "trade versus human rights issue" was based on a false dichotomy which implied that Canada had to choose one over the other. The expectation was that increased trade activity could be matched by judicious pressure on the Chinese government in the area of human rights. FOUR PILLARS AND FIVE PRIORITIES Trade and human rights are currently the broad parameters defining the space in which Canada's China policy is formulated and implemented. These are the areas which consistently capture the most media attention and which resonate most strongly with politicians and the broader community. But the bilateral relationship is also comprised of other strands. The web of foreign policy stretches across a range of issues, such as peace and security, political and intelligence reporting, development assistance, immigration, cultural and educational programmes, and, in the case of China, the role of some 850,000 Canadians of Chinese origin. In 1994, after the Liberals had presented their blueprint for Canadian foreign policy,9 Andre Ouellet, then Foreign Minister, said that Canada's China policy rested upon "four pillars." This became a mantra for Canadian officials attempting to explain Canadian relations with China after 1994. The four pillars were designed to encourage China to maintain its open door policy and become more integrated into global and regional activities and policy areas. The first "pillar" was "economic partnership," which represented the trade component in the bilateral relationship. The primary focus on trade was rationalized in two ways: that economic partnership creates more work and prosperity in Canada ("jobs, jobs, jobs"); and that it promotes economic reform in China by transferring technology and (capitalist) values. Economic reform, in turn, brings political liberalization; so, in effect, the more trade, the more democracy. The second pillar, "peace and security," addresses conventional issues of international diplomacy, including dialogue with the Chinese on nuclear non-proliferation, arms control, peacekeeping and regional security. This is where Canada is engaging China directly, bringing it into Asia Pacific and other international institutions, and dealing with specific issues such as China's entry into the World Trade Organization (WTO), the 1997 transition in Hong Kong, the implications of China's

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rapid military modernization, and the Taiwan Straits crisis. The third pillar, "sustainable development," essentially covers environmental management issues, water pollution, population problems and related social issues. The fourth pillar, "human rights, good governance and rule of law," focuses on the development of an ongoing constructive dialogue on human rights issues both bilaterally and multilaterally. This is an area in which the Canadian International Development Agency (CIDA) has established a number of successful programs. In the explanation of the China policy the "four pillars" identify broad objectives and provide an image of coherence. They legitimate a number of key concepts, such as engagement, dialogue and good governance. They provide a better framework for policymakers than the simpler trade/human rights polarization. However, the four pillars are too broad to serve as a framework for analyzing the conduct of Canada-China relations in 1996. Instead, it is more useful to talk of a hierarchy of priorities, based on what were the most important tasks of Canada's China policymakers in 1996. There were five priority areas in Canada's relations with China in 1996: maximization of economic and trade links; negotiation and planning for the 1997 Hong Kong transition; China and Asia Pacific security; human rights and good governance; and the Deng Xiaoping succession and its consequences. Maximization of Economic and Trade Links The first priority was to get final approval for the C$4 billion sale of Candu reactors. In addition, the government lobbied hard for two major corporations, Nortel and Manulife, to win major contracts. Nortel was seeking to expand its position as one of China's five major suppliers of telecommunications equipment, a multibillion dollar market. Manulife was close to becoming the second of the only two foreign insurance companies permitted to do business in the PRC. In addition, the government wanted to help Bombardier sell China a large number of Challenger and Dash-8 aircraft. At least three major Canadian trade missions, all involving ministers or the Prime Minister, were scheduled for 1996. The goal was to increase bilateral trade above the C$10 billion level to meet the Prime Minister's publicly stated objective of C$20 billion by the year 2000. When Qiao Shi visited Canada in April, the Canadian side saw this as an opportunity to get a first-hand look at one of the contenders to replace Deng Xiaoping as China's next "paramount leader." The

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encounter was certainly a main accomplishment of the visit, but trade dominated the agenda. Qiao was reminded that China was Canada's number two trading partner in the Asia Pacific (after Japan) and its number four trading partner in the world as a whole. Prime Minister Chretien intended to build on the success of the Team Canada trip, and Qiao was told that Canada wanted to match its commercial capabilities with China's requirements in areas such as infrastructure, agriculture, energy and leading edge technology. Qiao visited the Bombardier plant, spoke with representatives of the Canadian business community and discussed the impending sale of two Candu nuclear reactors. On June 3, 1996 Raymond Chan, Secretary of State for Asia Pacific, attended a business seminar organized in southern China by the Canada-China Business Council (CCBC), a private organization with close connections to the government and representing some 200 Canadian companies doing business with China. Since 1978 the CCBC has been the premier Canadian business organization focusing on China. Chan noted that "our government was elected on a jobs and growth agenda. One of the key goals of that agenda is to dramatically increase Canada's trade activity in the rapidly expanding Asia Pacific region." He stated that "Canadian areas of expertise match up perfectly with sectors that the Chinese are trying to build up, such as energy, telecommunications, financial services, natural resources, agri-food and environmental protection." He further observed that it was time for Canadian business to focus on China's booming regional markets, not just on doing business in Beijing and Shanghai. The Canadian government was placing a high priority on gathering market intelligence on these regional markets. Chan announced the appointment of an additional Canadian Trade Commissioner, to be stationed in Beijing, "to help Canadian companies pursue the growing number of projects financed by the World Bank and the Asian Development Bank in China's regional markets." This brought to 15 the number of Canadian trade officers stationed in China: nine in Beijing, two in Shanghai, one in Guangzhou and three in Hong Kong. In his speech Chan referred to Canada's support for China's early accession to the WTO, and his government's commitment to develop stronger business links through development cooperation programs administered by CIDA. In his conclusion, Chan put Canada's trade goals into a wider perspective of engagement and social change:

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My government has never believed that our international relationships can be reduced or simplified to a trade versus human rights argument. Systematic and wide ranging contact leads to calls for greater openness and freedom. Trade reduces isolationism. Trade also expands the scope of international law and generates the growth required to sustain social change and development. A society that depends little on trade and international investment is not open to the inflow of ideas and values.10

When the Prime Minister went to Shanghai in November 1996 it was primarily for the purpose of announcing the sale of the two Candu reactors. The C$4 billion deal was the biggest single transaction in the history of Canada-China relations. The cabinet had approved a package of C$1.5 billion in financing. The balance of the project was to be supplied by Hitachi and Bechtel, with Japanese and American funding, respectively. According to Chretien, more than 100 Canadian companies were involved in the deal which "would support 27,000 Canadian jobs over the next six years."11 AECL vice-president Gary Kugler observed, Li Peng likes nuclear power. He likes the CANDU reactor ... For a project of this size, the deal came together very quickly. The fact (that) there was good political support really helped. Canada and China have an excellent relationship these days and you can't underappreciate the significance of that. We depended on it a lot.12

Less spectacular, but almost as significant, was the agreement that marked the return of Manulife to China after 50 years. The company had done business in China from 1897 to 1947; in the latter year it was forced to close its operations. After eight years of trying to resume operation, it secured Chinese agreement for the creation of a joint venture in China selling insurance, making Manulife the second foreign company permitted such access to this potentially lucrative market. However, the price was not cheap for Canada's largest insurer. Manulife chief executive officer Dominic D'Allessandro estimated that the company spent C$10 million to win this agreement. Was it worth it? D'Allessandro said, "We're very optimistic. When we look back on everything that has happened, we can say that we were pioneers. We blazed a path."13

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Critics of the Candu deal focused on possible violations of environmental assessment procedures. Elizabeth May, Executive Director of the Sierra Club, planned to take the government to court, alleging that the cabinet had dropped requirements for a public environmental review of the project to facilitate the sale. Both the Sierra Club and Energy Probe argued that in its haste the government had undermined the Canadian Environmental Assessment Act. Terrence Corcoran, writing in the Globe and Mail observed that "[t]he Prime Minister's eagerness to cozy up to these corrupt dictatorships and totalitarian regimes was never more evident than during his stopover in Shanghai to sign the infamous Candu nuclear power deal. From top to bottom this transaction is a dishonest flouting of Canadian principles and possibly Canadian laws, carried out behind a screen of deceptive information." The cabinet's amendments to the environmental assessment regulations were rushed through and not published until the day on which Chretien announced the sale in Shanghai. Corcoran was concerned that the C$1.5 billion was not a regular Export Development Corporation (EDC) loan but was money "borrowed on the back of Canadian taxpayers." In his view the same government that refused to bail out Canadian Airlines was lending taxpayers' money to "the corrupt government of China ... the world's largest fascist state."14 This public criticism was brief and ineffectual. The Candu deal was seen by most Canadians in positive terms. The government reassured the public that the Candu was perfectly safe, that none of the financing came from general revenues, and that the sale was not being subsidized at below-normal interest rates. The Prime Minister had personally shepherded the deal to its completion and it and the other commercial agreements promised jobs, lots of them. If dancing with Li Peng was part of the process, that, too, could be accommodated. Memories of Tiananmen had faded after seven years. Business was the best way to open up China, especially since human rights pressures by themselves produced no visible change. In the words of one businessman, "Why not at least get some profit while you are waiting for them to change how they behave?"15 Negotiating and Planning for the 1997 Hong Kong Transition In terms of time spent by government officials on relations with China, trade and commercial affairs took pride of place by a wide margin. But Canadian policymakers also devoted a great deal of attention to

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Hong Kong in 1996. The return of the city to Chinese sovereignty at midnight, June 30, 1997 did not merely involve the fate of Hong Kong under Communist rule, but also raised, for Canada, concerns about the future of an estimated 150,000 Canadians of Chinese origin living there. Two decades of immigration had brought large numbers of Chinese to Canada, principally from Hong Kong. In 1986 4,000 immigrants arrived. Between 1987 and 1995 almost 250,000 left Hong Kong for Canada. Of the more than 850,000 Canadians of Chinese origin in Canada today close to 500,000 originally came from Hong Kong.16 Most of these immigrants are clustered in two cities, Toronto and Vancouver, in substantial Chinese communities numbering 400,000 and 300,000 persons, respectively. While Canadians of Chinese origin did not have a high-profile role in Canadian politics in the past, two events—the repression at Tiananmen in 1989 and the impending return of Hong Kong to China in 1997—have brought them into the political process. In 1989 groups of Canadian Chinese, in particular human rights activists and representatives of the business community, met with government officials in the aftermath of Tiananmen. These consultations have become part of the process of making China policy under both the Conservatives and the Liberals. The appointment of Raymond Chan, a Canadian citizen of Hong Kong origin, as Secretary of State for Asia Pacific in 1993, was a watershed. As the first Minister of Chinese background he had, as one of his key roles, the representation of the interests of Canadians of Chinese background. This meant that the Hong Kong issue now had a high profile in Cabinet. The Canadian Chinese "community" is really many communities. While recent immigrants from Hong Kong make up by far the largest proportion, the category of "Chinese in Canada" also includes those who have lived in Canada for several generations—refugees from Vietnam, immigrants from the PRC, and smaller groups from Taiwan and from other countries scattered throughout the world. Even the Canadian Hong Kong "community" is comprised of a variety of groups and opinions shaped by age, class and date of arrival in Canada. If there is any one issue that unites them it is concern over the future status of Hong Kong and the flow of people to and from that city. What worries a large number of these Canadians is that the integration of Hong Kong into China may impede the movement of people both for commercial purposes and for further immigration to Canada. In 1996 the Hong Kong issue troubled Canadian policymakers for three reasons. First, what would happen to the 150,000 Canadian

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citizens currently living and working in Hong Kong after June 30, 1997? How would Canada provide them with appropriate consular protection? This was especially important since China does not recognize dual nationality. In November 1995 Prime Minister Chretien met China's President Jiang Zemin "at the margins" of the Asia Pacific Economic Cooperation (APEC) Summit and expressed his concern. Reporting on this meeting Raymond Chan said, "there still isn't any decision or final clarification of what people may need to live or come and go from Hong Kong."17 By April 1997 the matter had still not been fully resolved, despite continuing discussions with the Chinese. The Minister noted, "Canadians with more than one passport will have to choose which passport they want to travel on when entering Hong Kong after July 1, 1997. We recommend they use their Canadian passport because without that we will not be able to provide them with the protection and consular assistance to which they have been accustomed."18 Second, would the Canadian Commission in Hong Kong continue to function after Hong Kong's absorption into China, and if so, on what basis? Negotiations on this issue proceeded during 1996 and culminated in an agreement signed in Ottawa on September 19, 1996 during the visit of Qian Qichen, China's Foreign Minister. With this agreement the operation of the Canadian Commission, to be called a Consulate General after June 30, 1997, would continue "in the Hong Kong Special Administrative Region of the People's Republic of China," as regulated by normal diplomatic procedures (the 1963 Vienna Convention on Consular Relations).19 Third, what was the prevailing view in Canada about the possible limitation of the rights and freedoms of Hong Kong dwellers after 1996, and what could the Canadian government do about it? The Canadian government had been one of Hong Kong's strongest supporters from 1990 onwards, encouraging the "internationalization" of Hong Kong through a series of bilateral agreements, promoting Hong Kong's membership in APEC, and fostering closer links between the Canadian "Hong Kong community" and those living in that city. Representations were made frequently to Chinese authorities about the preservation of pluralism, fundamental human rights and democratic trends in Hong Kong after 1997. At high level visits Hong Kong was on the Canadian agenda; for example, Qiao Shi was told during his April 1996 trip that, while Canada would not publicly oppose China's decision to bypass the existing Hong Kong Legislative Council, it was nonetheless not happy with China's unilateral action.

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The Canadian side told Qiao that the policy of "one country, two systems," agreed upon by the Chinese and British for Hong Kong in 1984, meant that moderate dissent must be encouraged. Canada supported the principles of cooperation, continuity and clarity in the future governance of Hong Kong. These principles largely reflected the prevailing opinions of key members of the Canadian Chinese community. During Qiao Shi's visit it was clear that the majority of this community desired a stable relationship with China and Hong Kong, at the expense of more democracy if that had to be the choice. Those doing business in Hong Kong wanted to maintain a secure business climate. Aggressive lobbying for more rights was not on their agenda. The Chinese groups that were so critical of the PRC after Tiananmen seemed to have melted away, to be replaced by a more conservative, business-driven and realist perspective. Thus, the principles of cooperation, continuity and clarity resonated with the dominant views of the Chinese "community" in 1996. In a sense the career of Raymond Chan reflected this shift. Chan had been a strong "democracy activist" after Tiananmen, to the extent that he had advised and supported the three MPs who had been expelled by the Chinese in 1992 for trying to confront the Chinese authorities on human rights. But in 1993 Chan became a minister and suddenly was engaging China on trade issues. He still had strong feelings regarding China's abuses of human rights and communicated these feelings to Chinese officials, but now he changed his tactics and the venues in which he would engage China. The same may be said of Canada's policy regarding the Hong Kong transition: the policy became more "realist" and less confrontational. Some have interpreted this as an abandonment of a Canadian commitment to democracy and human rights. For example, Emily Lau, one of the Hong Kong Legislative Council's most critical members observed during a recent trip to Canada: The trouble with the Canadian government and other governments in the West is that they are very much under the influence of the business lobby ... I have a suspicion that (during these high level visits) they all spend a vast amount of time talking about trade and only one or two minutes talking about Hong Kong.20

This may be an unfair caricature of Canadian Hong Kong policy as it has evolved in the period just before the transition. The government, Canadians of Chinese origin, and indeed most Canadians, are

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choosing to wait and see, giving the PRC the benefit of the doubt, in a situation where other Canadian options are difficult to imagine and clearly unsustainable. China and Asia Pacific Security When Prime Minister Trudeau initiated discussions with the PRC in 1968 with a view to establishing diplomatic relations, his first objective, and that of most members of the foreign policy community was not trade, but rather to end China's years of isolation by bringing that country into the world community. This has always remained a central theme in Canada's China policy. When Qiao Shi came to Canada in 1996, just after the Chinese had escalated their confrontation with Taiwan, one of the main objectives of the talks was "encouraging China to become a force for global peace and security." Qiao was urged to end China's nuclear testing and to participate fully in ASEAN's Regional Forum (ARF), an organization designed to promote security in the Asia Pacific region (see Acharya's chapter in this volume). The Canadian message to China was that, through participation in multilateral regional institutions, China would be seen as a responsible global citizen. This would soften the general perception, especially among China's neighbours, that China's rapid military modernization and more robust presence in the region posed a threat to their long-term security. Qiao was also told that Canada continued to support China's application for entry into the WTO and was willing to negotiate acceptable terms for China's admittance. This would bring China into yet another international organization, promote multilateral institutions and introduce greater transparency into the PRC's trading relations. The PRC provoked the Taiwan crisis of March 1996 when it staged missile tests barely within breathing room of Taiwan. As a result the U.S. sent battleships and aircraft carriers to the area. This action reminded the Canadian media, politicians and the informed public of China's unsatisfied nationalism and its potential for destabilizing the Asia Pacific region. It also focused attention on Canada's one-China policy which denies diplomatic recognition to Taiwan while permitting economic and trade relations. Canada, which has maintained this policy since 1970, urged the Chinese side to resolve the issue peacefully. In meetings with senior Chinese officials the government reminded the PRC that what China considers an internal matter had international ramifications, directly destabilizing relations with other

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countries in the region, disrupting fishing and navigation channels and threatening to involve the U.S. in a military confrontation. The Chinese action increased pro-Taiwan sympathies in Canada. In the light of China's aggressive tactics and the subsequent landslide electoral victory for Taiwanese President Lee Tenghui—viewed as a repudiation of China's threats and a triumph for democracy—federal MP Nelson Riis wondered publicly whether Canada should not "seriously consider upgrading its relations with China ... I think Canada's position in the face of China's threats was rather wimpy. But maybe the time is coming when President Lee could go to Canada and have a round of golf with our Prime Minister."21 While Canada's Taiwan policy did not change, at high level meetings during the remainder of the year the Chinese side took pains to remind the Canadian government not to encourage such statements by Canadian parliamentarians or to permit them to visit Taiwan. In the eyes of many Canadians government policy appeared to be supporting an authoritarian bully who violated human rights, instead of encouraging 21 million people who were practising newly-found democracy. The key Canadian strategy with respect to Asia Pacific security was to engage China both bilaterally and in multilateral institutions. At the bilateral level, the two countries continued meetings at the senior officials' level to discuss regional security issues and cooperation. On October 26, 1996, for the first time since Tiananmen, Canada hosted an official visit by a Chinese military delegation. This precipitated a critical reaction in the press on the part of Canadians who emphasized the repressive role played by the People's Liberation Army (PLA) at Tiananmen and assumed that Canada was hoping to sell large quantities of arms to China. In fact, the main purpose of the trip was to engage the powerful Chinese military in a constructive dialogue. Two weeks after the visit, at a consultation organized by the Minister of Foreign Affairs, participants from different sectors within the policy community reiterated their support for further exchanges with the Chinese military with the following statement: Considering the important political role the People's Liberation Army will play in the formation of the post-Deng government, Canada needs directly to engage the PLA in Track Two dialogues within APEC, ASEAN, and NPT [Nuclear NonProliferation Treaty] and should engage the PLA in Canadian civil control of military and other relevant experience as a democratic, confidence building and counter-nationalism effort.22

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Canada's use of Track Two instrumentalities has added a special dimension to its China relationship. At a recent dialogue in Toronto Canadian academics had detailed discussions on multilateralism, confidence building and cooperative security in the Asia Pacific region with a group of Chinese Ministry of Foreign Affairs officials, ranking PLA officers and senior scholars.23 This interchange of views was followed by further seminars with government officials in Ottawa. In mid-1996 Canada co-sponsored a Track Two initiative to manage potential conflict in the South China Seas by working on confidence building measures designed to "enmesh" China in peaceful settlement of potential conflicts in this area.24 In the Council for Security Co-operation in Asia Pacific (CSCAP), an alliance of the principal nongovernmental research institutions concerned with regional security issues, Canada played a key role, seeking, for example, solutions to the Korean problem in its North Pacific Working Group. The object of this activity, funded by the government but conducted in non-official arenas, was to create an infrastructure that will promote multilateralism and bring China into the international community. Track Two diplomacy is a relatively inexpensive policy, but the dividends are large and it suits Canadian middle power means and objectives. Moreover, the Chinese side, cautiously exploring regional and global institutions, was attracted to Track Two activities as a low risk/high gain encounter.25 It is difficult to measure the degree of success of any of these policies. If a criterion of success is increased involvement of China in regional institutions then we can surely say that this has happened. The two countries have expanded their bilateral cooperation in security related matters and, aside from the Taiwan Straits crisis, China behaved quite responsibly in the region in 1996. There were no major conflicts, and potential crises such as territorial disputes in the South China Seas are being discussed in multilateral fora with China participating. These are positive signs, although one can, to be sure, ask who knows how China will act when it is militarily stronger or just eager to flex its new muscles? How much the current relaxed situation in the region has to do with Canadian efforts is unclear—probably less than we think—but in broad strategic terms 1996 was a success story for Canadian policy makers.

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Human Rights, Good Governance, Rule of Law In the ideal world promotion of these values should be at or near the top of the agenda. In the real arena of policy and diplomacy, however, they normally do not occupy such a place. That they did so in our China relationship after 1989 is solely due to popular Canadian reactions to Tiananmen. By 1996, however, economic and trade relations, the future of Hong Kong, and security issues ranked higher than human rights on the Canadian policy agenda, despite the appointment of a minister who gave promise of devoting more of his attention to human rights issues. In 1996 Canada talked a great deal about human rights, good governance and rule of law in China, and instituted several imaginative new programs in this area. At every high level visit human rights were mentioned in discussions with Chinese leaders; for example, during Qiao Shi's trip Canadian interlocutors asked "that China take further steps to bring its national system into conformity with international human rights obligations."26 In September 1996, when this writer met Qian Qichen, the Chinese Foreign Minister, it was possible to talk with him in a constructive, non-confrontational manner about human rights in China.27 During Qiao's visit a Chinese official was quoted in the Canadian press as saying that the PRC "appreciated Canada's attitude towards human rights because it allows an exchange of views instead of confrontation."28 The human rights issue is perplexing and the subject of much Canadian soul-searching. How can Canada have good relations with countries that shoot their own citizens? Should Canada punish them by isolating them? But that is precisely what we do not want to do. Canada's policy since 1970 has been designed to produce the opposite result, to engage China and open it up politically and socially. Anyone who lived in China 30 years ago knows how vastly the country has changed, not just in the economy but also in the realm of individual freedom. Of course, its starting point is far behind our experience, the journey ahead is long, and Canadians are very impatient. Moreover, the understanding of "human rights" is not always the same here and in Asian countries. Hence the confusion and the soul-searching. In the fall of 1996 the Senate held hearings on Asia Pacific policy. The following comments by Senator Pat Carney, a strong human rights supporter, are worth noting. She observed that the Canadian agenda was changing and the Canadian definition of human rights was being challenged by Asian governments:

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I am remembering when Raymond Chan was simply a human rights activist before he was an MP and he and I and one Svend Robinson used to go and rabble-rouse on human rights ... I asked him recently if his view of human rights had changed and he said yes it had because in his position as Secretary of State for Asian Affairs, he had found that in many cases human rights was just a code word for political action in some of these Asian countries and that in the view of the people he was dealing with, their view of human rights had nothing to do with what his view had been when he was out demonstrating against Tiananmen Square.29

In formulating and implementing a workable human rights agenda the government had to establish balance within a set of objectives and, most importantly, ultimately had to secure Chinese support for this agenda. In late 1995, in Beijing, Max Yalden, head of Canada's Human Rights Commission, set the tone for a more moderate, institutionalized human rights agenda in the coming year. Yalden said that he "didn't come all the way out here to express misgivings about shortcomings ... I never asked to tour prisons and never asked to meet dissidents. I deal with equality rights ... I have the impression, from what I've read about what's going on in this country, that they are making a genuine effort to improve the rights of women, for example, the rights of the elderly, the rights of the disabled."30 Yalden's remarks, which upset human rights activists, set the stage for the first official dialogue between the two countries since 1989- The meeting, which took place in January, 1996 was conducted in a low key fashion, with each side presenting its views. The Chinese listened to Canadian concerns about the 14-year jail sentence handed out to Wei Jingsheng, China's best-known dissident, about the alleged deaths of hundreds of orphans in Shanghai, and about the kidnapping of Tibet's new Panchen Lama. But Liu Hainan, Director of the Law Institute of China's Academy of Social Sciences, reminded the Canadians that "the discussions need to be on an equal footing, rather than just accusing each other.... It's like two neighbours. If you beat the children of your neighbour, it's not possible to be good neighbours with each other."31 Also, in January, CIDA outlined six priority areas in its delivery of official development assistance. One area was "human rights, democracy and good governance" and included "increasing respect for human rights, including children's rights; promoting democracy and better governance; and strengthening both civil society and the security of the individual." Another area was "women in development,"

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which was designed "to support the full participation of women as equal partners in the sustainable development of their societies." In the course of 1996 CIDA funded programs with China worth several millions of dollars, involving dialogue on human rights and democracy with Chinese academics, criminal law reform (which has led to a new Chinese code of criminal law incorporating the presumption of innocence), and the training of women entrepreneurs and support for Chinese women's non-governmental organizations (NGOs). Other projects are close to realization: a training program for Chinese lawyers in cooperation with the Canadian Bar Association; a project to develop closer ties with China's Parliament, the National People's Congress; and a program linked to the emergence of elections at the village level in China. These are promising, if not dramatic, initiatives. In the words of CIDA officials "they are designed to promote Canadian objectives, to engage China in the area of human rights effectively, without alienating them."32 Still, Canada was spending millions of dollars for projects that did not deal with prominent issues, such as repression in Tibet, the arbitrary arrest and imprisonment of dissenters, prison and child labour, and forced abortion. In response the government, with Minister Axworthy taking the lead (and supported strongly by the Secretary of State for Asia Pacific), pointed to 1996 as a year in which progress had been made in improving human rights, and linkages and dialogue had been institutionalized with Chinese counterparts. Participants in the November consultation with the Foreign Minister observed that: Canadian policy on trade and human rights need not be in conflict if Canada matches increased trade with increased pressure on the Chinese government for human rights reform. Canada should have modest policy goals in this area. Canada should publicly denounce new arrests, name the imprisoned and document cases of abuse of the Chinese rule of law. Attention should be given to providing lower levels of government with the opportunity internally to pressure the leadership in Beijing.33

The Deng Xiaoping Succession and its Consequences The work of managing the modernization of any country is daunting. To be in charge of China, a country of 1.2 billion people, is to face a task of heroic proportions. One Chinese city, Chongqing, now has more people (30 million) than all of Canada. The miracle is that for

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nearly twenty years China has managed a modernization project that has led to the longest sustained economic growth of any country in modern times. It has made an extraordinary transition from a command economy, to "market socialism" with a minimum of economic and political dislocation. While the Soviet Union failed in its task, China did not. China has abandoned decades of isolation to become one of the world's major trading nations. Today it stands poised to become the world's largest economy in terms of total GDP by 2010. In coming to terms with this new and powerful China policy makers have worried about regime stability, especially that of a one-party state that has already endured one difficult challenge to its authority in 1989. Remembering factional struggles in previous communist succession crises, Canadian foreign policy analysts had to assess the sustainability of China's economic performance and the capacity of the Party to manage this effort. In 1996, as Deng Xiaoping, the "paramount leader" personifying the new China, slipped closer to death, DFAIT and other government officials outlined scenarios and made judgements about the likely political and economic stability of China in the next few years.34 Generally Canadian policy makers were positive about the short term, but more pessimistic about the middle- to long-term stability of the regime. One assessment noted: Internal events ranging from rural migration, the destitution of state industries, chronic unemployment and rising corruption and crime were identified as factors that would inevitably force change on China. Beijing's authority over the provinces could well be the first casualty. In addition, civil unrest and its suppression by the military could become a common occurrence and an unstable economy could become the wellspring for Chinese nationalism.35

Most informed Canadians foresaw political continuity rather than conflict in the immediate post-Deng succession period. China's leaders were agreed upon a basic course of reform, and Tiananmen and the collapse of the Soviet Union had taught them that unified leadership had to be the number one priority. Deng had already been absent from day-to-day decision making for several years, and while Jiang Zemin was not a dramatic figure he appeared to be in solid control. Consequently, none of the scenarios predicted a major regime collapse and/or struggle for power directly in the wake of Deng's death. The most positive forecast predicted continuing economic growth and more political decentralization, though no immediate

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challenge to the authority of the Communist Party and its 57,000,000 members. In this projection China becomes further enmeshed in international relationships and continues to open up both its economy and its politics in the next few decades. Another scenario predicted strong economic performance but with continuing authoritarian governance: This could be a very challenging scenario for Canada. China would be a very attractive commercial partner, with strong demand, a thriving market, and perhaps the rule of law on the commercial side.... At the same time, authoritarian governance would mean China would receive constant attention as an abuser of human rights.... Domestically, and in the international community, the issue of China, and China's refusal to accord basic human rights, would be a constant preoccupation...36

A third outlook focused on the Hong Kong transition as a litmus test of post-Deng politics. A leadership uncertain of its power, or engaged in factional struggle, might react repressively in Hong Kong. This would have serious repercussions if Canada had to accommodate a large number of migrants fleeing the city. For example, "a relaxation of visa requirements to deal with the influx, and the sudden unreliability of background checks by the Hong Kong police, results in an influx of criminals into Canada." In this projection, "returning passport holders, migrants and refugees overwhelm an unprepared Immigration and Refugee Board, leading to domestic disquiet."37 A further pessimistic scenario was predicated on a decline in China's economic performance, which would be accompanied by a crisis of legitimacy for the regime. The latter would respond with coercive measures in the first instance, precipitating strong Canadian criticism and, possibly, a weakening of the bilateral relationship. In 1996, however, it is fair to say that DFAIT had a positive view of post-Deng China, one that anticipated continued economic growth, a stable leadership succession, and moderate political change. Doomsday scenarios, such as a massive outflow of refugees from Hong Kong, or a regime collapse, were seen as unlikely to occur. The assumption was that, at least in the short run (usually put at three to five years), stability was more likely to be the norm. In 1996 the key indicators were positive: DFAIT political analysts saw no evidence of major factional disputes; the Deng Xiaoping succession seemed to be institutionalized; the regime felt secure enough to permit a modest

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engagement in the area of human rights; economic growth continued to barrel on, confirmed by positive projections from the World Bank and other international analysts. When Deng finally passed away in early 1997 and nothing happened, the positive assumptions were validated, at least in the short term. MODERATION, INSTITUTIONALIZATION, AND INCLUSION

Canada's China policy in 1996 succeeded in meeting its key objectives—the engagement of China, maximization of bilateral trade opportunities, and the promotion of Canadian values. The Prime Minister's public persona of Mr. Team Canada gave the highest official sanction to a policy in which trade was the number one item. At the same time the new Foreign Minister, Lloyd Axworthy, took up the cause of democracy and human rights in a non-confrontational manner, partly blunting criticism that Canada had abandoned its principles in favour of trade. Trade and human rights were the parameters defining Canadian relations with the PRC, but a number of other issues, such as the return of Hong Kong to China in 1997, the growing needs and influence of the Canadian Chinese community, Asia Pacific security concerns, and speculation about post-Deng China were part of the broader web of bilateral issues. Canadian policy was based on the "four pillars" defined in 1994 ("economic partnership," "peace and security," "sustainable development," and "human rights, good governance, and rule of law.") On an operational level Canada's bilateral priorities in 1996 ranked in the following order, beginning with the most important: trade, Hong Kong, security, human rights, regime stability. Bilateral relations were characterized by moderation, institutionalization and inclusion. Moderation now characterized Canada's policy in human rights. Canadian strategy was to engage China in areas which promised dialogue rather than confrontation. Thus, legal reform and training of judges replaced public demands to free dissidents or to inspect Chinese orphanages. Examples of institutionalization included the establishment of annual meetings at the officials' level on human rights, regular visits of military representatives and an expanded roster of high level visits in both directions. Inclusion was an outcome of Minister Axworthy's working style and view of the foreign policy process. More individuals and groups were consulted on a range of issues by the government. This gave DFAIT the opportunity to meet with representatives from business, the media, Chinese

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community organizations, human rights advocacy groups and academics. While some critics might argue that inclusion tends toward cooptation, the outcome was a more balanced Canadian policy on China that attracted fewer critics and drew on substantial public support. In that sense, Canada's China policy in 1996 has to be viewed as a success. NOTES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Jeff Sallot, "Foreign Affairs gets new shift to centre-left," The Globe and Mail, January 26, 1966, A4. Fred Bild, "Canada's Response to China in the 1990s: A View From the Field," Unpublished paper, University of Montreal, 1996, 11. Department of Foreign Affairs and International Trade, Team Canada Mission to China One Year Later, (Ottawa: Canada Communications Group, October 1995), 6. Andrew Coyne, "How you gonna keep'em down on the farm after they've seen Beijing?" The Globe and Mail, November 14, 1994, A14. Personal communication from delegate to the Beijing Conference. "Peng not welcome Toronto says," Toronto Star, October 11,1996. David Crane, "Deal will create jobs at home, Chretien says," Toronto Star, November 27, 1996, B9. Rob Mickelburgh, "Tough Chinese premier thaws," The Globe and Mail, November 27, 1996, A18. Interviews with DFAIT officials. See also Department of Foreign Affairs and International Trade, Canada in the World: Government Statement, (Ottawa: Canada Communications Group, 1995). "Notes for an Address by the Honourable Raymond Chan, Secretary of State (Asia Pacific) at the Canada-China Business Council's Opportunities in the Yangtze Delta Region Seminar," June 3, 1996. Crane, "Deal will create jobs ..." Mickelburgh, "Tough Chinese Premier thaws." Rod Mickleburgh, "Manulife open for business in Shanghai," The Globe and Mail, International Business Section, November 27,1996, B9. Terrence Corcoran, "The Candu man," The Globe and Mail, November 29, 1996, B2. Personal communication from CEO of company that has been doing business in China for ten years. DFAIT and Citizenship and Immigration Canada, Greater China in 2010: fora Scenario Development Partnership, Ottawa, 1996, 33David Vienneau, "PM seeks answers on Hong Kong rights," Toronto Star, November 19, 1995, A14. Michael Hanlon, "Use Canadian passports, Hong Kong visitors told," Toronto Star, March 25, 1997, A15. Understanding on Consular Matters, signed by the Honourable Lloyd Axworthy, Minister of Foreign Affairs of Canada, and His Excellency,

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20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

Qian Qichen, Vice-Premier and Minister of Foreign Affairs of the People's Republic of China, Ottawa, September 19, 1996. Michael Hanlon, "Record over Hong Kong poor, Canada told," Toronto Star, March 15, 1997, A13. Rod Mickleburgh, "Lee defiant after election win," The Globe and Mail, March 25, 1996, All. Canadian Centre for Policy Development, "Memorandum: China Consultation Follow-up," November 26, 1996. Meeting with Qian Qichen, Foreign Minister of the PRC, Ottawa, September 19, 1996. See Chapter XIII by Ted McDorman for a discussion of conflict in the South China Seas. Meeting with Qian Qichen, September 19, 1996. From discussions with Chinese officials, Toronto, January, 1997. Discussion with DFAIT officials, March 20, 1997. "Human rights on agenda for Chinese visit," Toronto Star, September 16, 1996, A8. Senate Standing Committee on Foreign Affairs, Evidence of the Hon. Pat Carney, November 26 1996 (Ottawa: Publications Service, Parliamentary Publications Directorate, 1996), 1600-12. "Yalden won't be rocking China's boat," The Globe and Mail, November 29, 1995, A10. Rod Mickleburgh, "China discusses rights," The Globe and Mail, January 19, 1996, A10. "CIDA and the Foreign Policy Statement," January, 1996, 2. "Memorandum: China Consultation Follow-Up," November 26, 1996. Greater China in the Year 2010, A Scenario for a Development Partnership. "Memorandum: China Consultation Follow-up..." Greater China in the Year 2010..., 8. Greater China in the Year 2010..., 6.

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ACRONYMS ABAC ACCC ADM AFTA ALP AMM ANZUS APEC API ARF ARF-SOM ASEAN ASEAN-ISIS

APEC Business Advisory Committee Association of Community Colleges of Canada Assistant Deputy Minister ASEAN Free Trade Area Australian Labour Party (ASEAN) Foreign Ministers Meeting Australia, New Zealand and United States Asia Pacific Economic Cooperation Active Pharmaceutical Ingredients ASEAN Regional Forum ASEAN Regional Forum Senior Officials Meeting Association of Southeast Asian Nations ASEAN Institutes for Strategic and International Studies ASEAN-PMC ASEAN Post-Ministerial Conference ASEM Asia-Europe Meeting AUCC Association of Universities and Colleges of Canada BAG Budget and Administration Committee C4I Command, Control, Communications, Computer and Intelligence Systems CANCAPS Canadian Consortium on Asia Pacific Security CAP Collective Action Plan (APEC) CBIE Canadian Bureau for International Education CCBC Canada-China Business Council CEC Canadian Education Centres CER Closer Economic Relations Agreement (Australia-New Zealand) CIDA Canadian International Development Agency CITES Convention on International Trade in Endangered Species CMEC Council of Ministers of Education (Canada) COCOM Coordinating Committee for Multilateral Strategic Export Controls CSCAP Council for Security Cooperation in the Asia Pacific CSCE Conference on Security and Cooperation in Europe CSIS Center for Strategic and International Studies CTBT Comprehensive Test Ban Treaty

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CTI CYAP DFAIT DFI DMZ DND EAEC EC EEZ ENGO EPG EPZ ETM EU FDI FEEEP FEMA FIPA FIRA FTA FTAA FY G7 G8 GATS GATT GDP GMP GNP HK HRD IAP ICHRDD IFOR ILO IMF

Committee on Trade and Investment (APEC) Canada's Year of Asia Pacific Department of Foreign Affairs and International Trade (Canada) Direct Foreign Investment Demilitarized Zone Department of National Defence (Canada) East Asian Economic Caucus Economic Committee (APEC) Exclusive Economic Zone Environmental non-governmental Organization Eminent Persons Group (APEC) Export Processing Zones Elaborately Transformed Manufactures European Union Foreign Direct Investment Food, Energy, Environment, Economic Growth and Population (APEC) Foreign Extraterritorial Measures Act Foreign Investment Preferential Agreement Federal Investment Review Agency Free Trade Agreement Canada-U.S. Free Trade Area for the Americas fiscal year (government) Group of Seven (Canada, France, Germany, Great Britain, Italy, Japan, United States) Group of Eight (G7 & the Russian Federation) General Agreement on Trade in Services General Agreement on Tariffs and Trade Gross Domestic Product Good Manufacturing Practices Gross National Product Hong Kong Human Resources Development Individual Action Plan (APEC) International Centre for Human Rights and Democratic Development Implementation Force (NATO) International Labor Organization International Monetary Fund

ACRONYMS

ISTWG ITAC MFN NAFTA NATO NEP NIC NIE NGO NORAD NPCSD OAS ODA OECD OSCE PAFTAD PBEC PCO PECC PLA PM PMO PPA PRC R&D RIMPAC RTA SAGIT SCCP SCFAIT SCSC SCSIWG SEAPOL SEATO SMEs

Industrial Science and Technology Working Group International Trade Advisory Committee Most Favored Nation Status North American Free Trade Agreement North Atlantic Treaty Organization National Energy Program Newly Industrializing Country Newly Industrializing Economies Non-governmental organization North American Air Defence North Pacific Cooperative Security Dialogue Organization of American States Official Development Assistance Organization for Economic Co-operation and Development Organization for Security and Cooperation in Europe Pacific Trade and Development Conference Pacific Basin Economic Council Privy Council Office (Canada) Pacific Economic Cooperation Council People's Liberation Army (China) Prime Minister Prime Minister's Office (Canada) Protocol of Provisional Application (GATT) People's Republic of China Research and Development Rim of the Pacific Naval Exercise (Australia, Canada, New Zealand, United States) Regional Trade Agreement Sectoral Advisory Groups on International Trade (Canada) Subcommittee on Customs Procedures (APEC) House of Commons Standing Committee on Foreign Affairs and International Trade (Canada) Subcommittee on Standards and Conformance (CTI) South China Sea International Working Group Southeast Asian Program on Ocean Law, Policy and Management Southeast Asia Treaty Organization Small and Medium-Scale Enterprises

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STE STM TPRM TREC3 UMAP UMNO UN UNCED UNCLOS UNCTAD UNDP UNESCO UNPROFOR U.S. USTR WB WG WSLN WTO

State Enterprises Simply Transformed Manufactures Trade Policy Review Mechanism Trade Exports Classification System (Australia) University Mobility in Asia and the Pacific United Malays National Organization United Nations United Nations Conference on Environment and Development United Nations Convention on the Law of the Sea United Nations Conference on Trade and Development United Nations Development Programme United Nations Educational, Scientific and Cultural Organization United Nations Protection Force (former Yugoslavia) United States United States Trade Representative World Bank Working Group (APEC) Women Senior Leaders Network World Trade Organization