State Trading Enterprises and Multilateral Trade Rules: The Canadian Experience
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Public enterprises (Crown Corporations) and regulated private monopolies are a long-standing characteristic of the Canadian political economy. Canada has certainly not been exempt from the global trend towards privatization and regulatory reform; nevertheless, Crown Corporations remain for many a symbol of national unity and strength, as well as something that is seen as differentiating us from the United States. Thus, the ideological agenda of privatization advanced in the 1980s by the Conservative Mulroney government met with considerable public resistance. In the end, a grab-bag of Crown Corporations were privatized, but as of the early 1990s these enterprises still accounted for 15.7 percent of corporate assets and 11 percent of GNP. More recently, the pragmatic, rather than the ideological, approach to privatization of the Liberal government has resulted in some national symbols, such as the Canadian National Railroad Company (CN) being sold off with extraordinarily little public outcry—the Liberals have handled labour relations issues sensitively, and have deftly managed as well the deployment of alternative policies to deal with, for instance, rural development concerns. Increasingly, Canadian privatizations have been accompanied by an open approach to foreign investment—in the CN case no restrictions were placed on the purchase of shares by foreigners, and in the petroleum sector, the nationalization of which was a major trade irritant during a certain period of Canada-United States relations, foreign capital and participation is now welcomed and Petro Canada has been privatized. In justifying privatizations, the Chretien government has emphasized the unsustainability of subsidization to loss-making enterprises and a changing regulatory and global trade environment, rather than the Thatcherite ideology that made the Mulroney program unpopular. With respect to regulated monopolies (whether public or private) and regulated industries where enterprises are granted special privileges, change has been either slow or has come in a piecemeal fashion, without much thought to the competition or other regulatory issues to be resolved in a shift to a competitive market. In telecommunications, the monopoly in long-distance voice traffic was ended by a regulatory decision in 1992 without a prior public debate or any legislative action. The regulatory authority has been making up rules of the game for a competitive market as it goes along, at the same time as foreign competition continues to be limited by ownership restrictions, as will be discussed in detail in a later section of the chapter. Not even the ultra-right-wing Harris government in Ontario has dared to risk unpopularity by dismantling the liquor or the electric power monopolies. The one government that moved towards liquor demonopolization, Alberta, nevertheless retained a monopoly on importation and wholesale trade. And cultural industries also remain sacred cows, where a host of protective measures including Canadian control, ownership, and content requirements remains broadly popular—to the point that in the Sports Illustrated dispute, where Canada lost both at the WTO panel and Appellate Body level, there may be some pressure for the government to remain in non-compliance with the GATT, even if this entails paying compensation or opening up Canada to retaliatory action. At the same time, a kind of faction is emerging in government policy circles in favour of using trade pressures as a beginning point for a re-thinking of a wide range of instruments of cultural protectionism. The political risks of doing so remain high. This chapter is intended to provide a tour d'horizon of the interaction of state trading practices in Canada with the world trading system, past, present, and emerging. Because the focus of this conference is on the trading system, I have certainly not attempted to present an overview of public enterprise, privatization, and related regulatory reform in Canada—instead I have selected areas where I believe there have been significant issues of trade policy and law intertwined with domestic regulation and deregulation of such enterprises. In defining the scope of this undertaking, it is important to recognize that the expression “state trading enterprises”, as it appears in Article XVII of the GATT includes not only state-owned and/or -controlled enterprises engaged in trade, but any enterprise that has been granted by the state “exclusive or special privileges”. This includes, in my view, privately owned and -controlled enterprises in Canada in sectors like broadcasting, telecommunications, and financial services, where entities must be licensed and conform to a variety of regulatory requirements in order to participate in the sector concerned (particularly where there is a discretionary element in the granting of a license, such as broadcasting or where, at least in the past, monopoly rights have been granted, such as telecommunications). Also, Article XVII applies to marketing boards, which application is confirmed in an Interpretive Note to Article XVII. Moreover, while the GATT applies only to goods, I have taken a broad view of my mandate and examined the trade issues in these service sectors as a major part of the chapter, if only because so many of the important trade issues now focus on the involvement of STEs in the services sector. In any case, even Article XVII itself arguably applies to these enterprises in as much as they are purchasers of goods.
Source Publication
State Trading in the Twenty-First Century
Source Editors/Authors
Thomas Cottier, Petros Constantinos Mavroidis, Krista Schefer
Publication Date
1998
Recommended Citation
Howse, Robert L., "State Trading Enterprises and Multilateral Trade Rules: The Canadian Experience" (1998). Faculty Chapters. 887.
https://gretchen.law.nyu.edu/fac-chapt/887
