North American Economic Integration and Globalization

Abstract

Morley Gunderson presents an overview of issues related to North American economic integration and globalization. He provides a particularly balanced perspective, a rarity in this area of highly charged, ideology-driven and emotional debate. He first notes that economic integration has both a deepening and widening dimension and enumerates the various aspects of these two dimensions in the context of North American integration, noting that in practice the different dimensions complement one another in a self-reinforcing fashion. He also points out that deeper and wider economic integration can foster internal consolidation since this integration is generally regarded as a precondition for external competitiveness. Gunderson pays particular attention to the issue of policy integration. He argues that the emerging competitive pressures on the North from low-cost, less regulated jurisdictions in the South is the most important consequence of trade liberalization and globalization, although there is still insufficient evidence of harmonization leading to the lowest common denominator. The policy-making process is now subject to the forces of competition that apply to business and labour. He argues that the laws and regulations that will be under the most pressure will be those that are the most inefficient, that is those that protect interest group rents and impose costs without commensurate benefits. Gunderson notes that integration represents a threat to distributional or equity-oriented policies that do not have positive feedback effects on efficiency even when the population considers such policies highly desirable. Raising taxes to finance these policies may not be the solution if mobile factors of production consequently flee to lower-tax jurisdictions. He documents the wide range of policy responses to the potential policy vacuum created by globalization and integration, including the NAFTA labour side agreement, the inclusion of social clauses in trade agreements, corporate codes of conduct, social labelling, and consumer boycotts, transnational efforts amongst unions, social groups and NGOs and union-to-union cooperation. But he finds that effectiveness of these responses to date is moot. Gunderson raises the issue of whether the more circumscribed role of governments and greater role of market forces will in fact benefit the most disadvantaged. He notes that so far this has not been the case, although whether this negative trend will continue is an open question. He concludes by cautioning that the long-run sustainability of integration depends on the equitable sharing of the efficiency gains arising from this process.Canada, North America, NAFTA, Integration, Border Effects, Policy Integration, Competitiveness