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50 trade and investment — variables that are easily measured. Merchandise trade is recorded and investment, at least direct investment, is often very obvious — factories are hard to miss or hide. However, newer economic activities, especially services and the so-called knowledge economy, are less well catalogued and measured, so we may already be overstating the overall level of integration because it is the industries we can see most easily that appear to be the most heavily integrated. Recently, these established industries, such as automobile manufacturing, have been growing. But more dynamic growth in future is likely in knowledge-based sectors. These are still in the early stages of policy reform or even initial policy formation: services trade discussions are only just beginning in the WTO; market access in Japan is still new territory; financial services, especially in Asia, are steadily opening up; and e-commerce is in a state of flux in terms of both form and content. The prudent approach for policymakers is to be multilateral in their approach to reducing barriers to services trade and in attempts to secure market access. It is very hard to forecast just where these new industries will find a home and whether geography, such as our proximity to the US, will be much of a factor at all. Overall, the issue is not really between choosing greater integration with the US or with Asia. Rather, it is how to structure policies so that we do not preclude closer ties with Asia in the context of our existing relationship with the US. The access to the US we already have is the envy of all other countries. Yet these advantages can be better leveraged to the mutual benefit of Canada and its Asian partners. For example, Canada should benefit from NAFTA through increased attraction to foreign investors as a base for manufacturing to serve the entire North American market. However, in the case of Asia, the capital inflow has not been spectacular. High-profile failures like the Hyundai car plant in Bromont, Quebec have not helped. Since NAFTA came into effect, FDI into Canada from Asia has increased by only about 8.7% a year on average — hardly a flood. In fact there is considerable untapped potential for Asian investment in Canada as a platform for North American operations. The lack of response so far may reflect a lack of promotion overseas of Canada as a gateway to the US market. Of course there are other factors, like labour productivity, tax rates and government incentives, that investors consider in selecting the site for a new plant. There is a great deal of ignorance or misinformation in Asia about the competitiveness of the Canadian economy — hardly surprising as the same misinformation is widely accepted in Canada itself and turns up often in the debate on tax rates, brain drain and productivity. 8 Similar access at much lower wage rates offered by Mexico may also be a factor working against Canada. A greater level of integration, especially a full currency union, would make Canada more attractive by reducing or removing all exchange fluctuations for foreign investors looking to the US market and would rapidly bring about an equalization of tax and wage rates. But it is a solution that looks at Canada’s role in North America in isolation from its relationship with the rest of the world. Another way to build on our NAFTA ties may be to develop a re-export trade with Asia via the US. Globalization is not simply the manufacture of products in low-cost countries for export to North America and Europe. It involves locating facilities in the production chain at the most suitable location for the process involved. Canada is well placed to provide knowledge-based input. Already an unquantified volume of Canadian components are
part of US-assembled goods bound for Asia. This includes considerable “soft” input like design or research and development. A first step in developing a re-export strategy would be to undertake a study of the level of business already going on in order to gain a better understanding of how policies could facilitate re-export trade. ACT OR BE LEFT OUT The countries of Asia are facing an increasingly regionalized world, and there are mounting signs that they are moving toward a defensive response. Japan has begun negotiations with Singapore and South Korea aimed at developing a network of bilateral trade pacts with its Asian neighbours: a possible prelude to forming a free-trade zone in East Asia. 9 In part, this is a response to Tokyo’s perception of the future of WTO negotiations. Separately, at a Seoul meeting of ASEAN nations, South Korea, China and Japan last October, South Korea’s reformist President Kim Dae-jung called for the formation of a new East Asian regional grouping to confront NAFTA and the EU. 10 Chinese economists have also spoken of a Northeast Asian economic zone. Clearly momentum is building toward creating an economic bloc in Asia — something which would likely supercede the much broader APEC process. Ottawa should move quickly to strengthen its formal relationship with Japan or South Korea or risk being shut out of the benefits of closer ties with Asia. Our NAFTA access is one of the assets we can bring to the bargaining table in negotiating any such agreements. 51 Emphasizing the wisdom of a trade deal with Asia are signs that the US commitment to more liberalized trade and investment flows, including greater North American integration, is waning in the face of a domestic political backlash. Despite NAFTA, a number of Canadian industries have found local protectionism can override market-opening commitments made at a national level. Cross-border flows of money and people face growing impediments as Canada is caught up in the US preoccupation with fighting the drug trade and, more recently, terrorism. Washington politicians, always responsive to their domestic constituencies, were surprised by the strong opposition to liberalized trade expressed on the streets of Seattle in December. The refusal of the US Congress to extend President Clinton’s power to negotiate international trade deals has always been interpreted as a partisan move by the Republican-dominated Congress against a Democrat president, rather than a sentiment against liberalization. However, Congress is likely to be less enthusiastic about further liberalization after the WTO debacle, no matter who is president. These domestic pressures can be expected to grow once the long-running US economic boom of the 1990s comes to its inevitable end. While these may be relatively short-term reversals of the underlying US support for economic liberalization, they also suggest that now may be the best time for Ottawa to pursue greater integration with Asia. South Korea and Mexico have recently begun bilateral discussions about concluding an investment agreement. This is especially disappointing to Canada as South Korea is the Asian country with which Ottawa has moved furthest in seeking a closer relationship. A multilateral approach to liberalization and integration is the best policy option. However, balanced regionalism may be the most practical. We have achieved a high level of integration in our own North American region. The time is opportune to develop more formal links with Asia, probably through Japan.
Page 1 and 2: asia pacific foundation of canada 1
Page 3 and 4: ○ ○ ○ ○ ○ ○ ○ ○ ○
Page 5 and 6: October 2000, we will hold the firs
Page 7 and 8: OVERVIEW 1 asia in convalescence 7
Page 9 and 10: ○ ○ ○ ○ ○ ○ ○ ○ ○
Page 11 and 12: GRADE ‘98 Inward Investment C- In
Page 13 and 14: THE CHALLENGE OF GLOBALIZATION Unde
Page 15 and 16: The largest pool of investable Cana
Page 17 and 18: enabled Canada to take a stronger r
Page 19 and 20: emoval. However, most of the change
Page 21 and 22: MAJOR EVENTS 2 a year in review 21
Page 23 and 24: stock markets were climbing. As the
Page 25 and 26: six-fold in Thailand. With the exce
Page 27 and 28: the past played a very small role i
Page 29 and 30: it had allowed in recent years. A m
Page 31 and 32: SECURITY BACKTRACK While economic c
Page 33 and 34: Outbreaks of violence in other part
Page 35 and 36: ECONOMIC RELATIONS 3 looking for a
Page 37 and 38: TODAY’S DELAY IS TOMORROW’S LOS
Page 39 and 40: ○ ○ ○ ○ ○ ○ ○ ○ ○
Page 41 and 42: to achieve operating efficiencies t
Page 43 and 44: Finally, foreign investment by Cana
Page 45 and 46: NORTH AMERICAN INTEGRATION 4 too mu
Page 47 and 48: similar to that with the US with on
Page 49: British Columbia provides a recent
Page 53 and 54: ASIAN EXPERTISE 5 hidden advantage
Page 55 and 56: cautioned that “not every Asian C
Page 57 and 58: usiness skills to enhance Canada-As
Page 59 and 60: 6 DEVELOPMENT ASSISTANCE ODA for a
Page 61 and 62: the term “development assistance
Page 63 and 64: The report emphasizes the need to
Page 65 and 66: ASIA PACIFIC FOUNDATION OF CANADA 7
Page 67 and 68: CANADIAN EDUCATION CENTRE NETWORK T
Page 69 and 70: NOTES CHAPTER 1 1. Based on markets
Page 71 and 72: NOTES 5. Research by Tamim Bayoumi
Page 73 and 74: REFERENCES —. Statistics Canada.
Page 75 and 76: REFERENCES United Nations Conferenc
Page 77 and 78: STATISTICAL APPENDIX ASIAN MOTHER T
Page 79: STATISTICAL APPENDIX CANADA’S TRA

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