1. Carving Out Space: Culture and Financial Services in an otherwise regionally integrating market PPAS 2110-6.0 Week 20: 17 February 2011

2. Introduction This week we are going to look at two policy areas where states have either “carved-out” exemptions to trade and investment liberalization or market regulations have precluded investors from taking advantage of the potential to regionally integrate – Culture – Financial Services

3. Culture When we consider “cultural products” as a form of production Canada is at a disadvantage given the relative size of our market, the way we share a common lifestyle with Americans and English Canada doubly so due to sharing a language with the majority of Americans Canadian students of culture politics tend to use the language of colonial and imperialist studies to describe the way US cultural influences “invade” and “dominate” Canada’s cultural spaces

4. Perhaps a more useful term is “asymmetrical” This asymmetry leads to calls for government intervention to protect “Canadian Culture” – Positive promotion: subsidies, grants and other supports “cultural protection” – Restrictions on importation and investment “cultural protectionism” Canada shares these concerns re: US with other countries, e.g.: – Mexico has a strong tradition of cultural nationalism – UNESCO treaty on Cultural Diversity US considers such activity to be simple matter of economic protectionism

5. Why does this matter? – Culture is the ultimate form of power In Canada US relations there is also an asymmetry of how the issue is managed to compare to the asymmetry of impact – In Canada culture is a key governmental concern in negotiations and day-to-day management of relationship with US – In US it is a sectoral trade issue US basically “tolerates” Canada and Mexico’s views on culture but does not accept them as being legitimate. Hence we have the cultural exception in CAUSFTA and NAFTA but US keeps trying to ensure it is narrowly read and used as little as possible by threats of action in other areas if it is used

6. Chapter notes that in English Canada US cultural production is dominant in almost every sphere. However, Quebec is not producing own material either most is imported from France. Table 14.1 shows that foreign production dominates most areas of mass media. Is that a bad thing or does that show Canadians are more cosmopolitan than other people? How much Canadian culture do we need to consume to be uniquely Canadian?

7. Chapter concludes by suggesting that the difficulties in using cultural protectionism will likely only grow and that focus in Canada should be on cultural protection instead What does the future hold for Canadian culture. As markets that produce culture integrate, Canada’s uniqueness will likely erode and a hybridization is likely (A Canadian variant of something else or many other things) and again we have to ask if that is necessarily a good or bad thing or just evolutionary?

8. Financial Services In spite of regional integration and the NAFTA regime, financial services have not fully integrated. Why: – They are intangibles (not sure this is true). – Distinctive histories and market characteristics in the three NAFTA countries, i.e. customers want different things (more likely) – Costs of complying with differing regulatory and legal regimes keeps firms from entering new markets, i.e., regulation as a burden to trade and economic efficiency (more likely still)

9. NAFTA requires three parties to open financial services to investment from other parties and trade from other parties. What this has come to mean is that if a firm agrees to comply with another country’s regulations it must be allowed in. What is paradoxical is that in many senses the “bridges” needed to create an integrated market already exist and are used regularly even if the intermediaries through which a customer access the bridges are country-specific. Something book does not touch on but is worth thinking about. In order for a genuinely integrated market to emerge would need a set of North American financial regulators. Would US agree to give Canada and Mexico seats on the board of such an agency? Not likely as would require them to surrender control over a share of the key to their global hegemony the power of US financial markets.

10. For the Groups We are now at the stage of the game where we have our priorities in each group and have to start thinking about how to address them. Each agency in the group has to consider how it will get something out of this. It is not just what you want but how can you use it to build the power and influence of your individual agency and hence your own importance as a leader of the agency?

11. What is your mandate what do you do, can you make a recommendation that will elevate the stature of your organization, gain new resources for it, etc.? This is where it gets sort of nasty because you won’t get anything unless you help others achieve their own goals. So look for win-win opportunities within your groups and good luck. Next week is break The week after we have to finalize each group’s positions and each of you has to start writing your own individual briefing papers.