Canada and the Eurozone Crisis

10 11 2011

As frequent readers of this blog will know, Canada and the European Union are in the process of negotiating a free trade agreement, commonly known as CETA. The negotiations began back in 2009. Canada and the European Union completed the ninth round of talks on 21 October in Ottawa. At the close of last month’s bargaining round, Steve Verheul, who is Canada’s chief negotiator, said that his goal was  to reach an agreement on most of the major issues by early 2012. It sounds as if real progress has been made.

So far, so good. However, an article about the negotiations that appeared in today’s edition of Embassy, an online journal devoted to Canadian diplomacy, speculates that the CETA deal could be derailed by the spiralling debt crisis in the Eurozone, which is throwing the continent’s economies and political systems into chaos. The last few days have seen resignation announcements by Greek Prime Minister George Papandreou  and Italian Prime Minister Silvio Berlusconi. As I write this, the European Commission has just announced that it is cutting its growth estimate for the European economy. The bad economic and political news is coming now in a seemingly continuous stream. The sovereign debt crisis has raised some really profound questions about the whole nature of the European political system and the nature of democratic legitimacy. Some of Europe’s leaders believe that the best way to respond to the crisis is change the EU’s political system and move even further away from national sovereignty: France and Germany are certainly pushing for closer integration of economic and fiscal policies in the euro zone (i.e., the right of European Commission to veto national budgets). Read more here and here. To add to the atmosphere of crisis, Ed Milliband, the leader of the British Labour Party, has called for an emergency super summit of EU leaderson the grounds that the existing political institutions of Europe are broken.

What does all of this mean for Canada and the CETA agreement? In the current climate, it is increasingly difficult to predict what sort of condition the European economy will be in in 2012, when the CETA agreement is finalized and presented to their respective governments for ratification. Indeed, it will be hard to predict who will be in power in many of the European countries and what their attitudes to trade liberalization may be.

The recent events in the Eurozone underscore the need to reflect on and to discuss the CETA agreement and what it might do for both Canada and the EU. It is, therefore, a fitting time to gather to talk about CETA.

Next Friday, 18 November 2011, a small conference on CETA will be taking place in London. Full details of the conference are available here. To attend the conference, you must pre-register by 15 November.


The Greek Referendum and the Globalization Paradox

3 11 2011

I teach a class on the history of globalisation. It is designed for both students doing degrees in history and IR and politics students who want some historical background. Right now, the students in this class are reading Dani Rodrik’s book The Globalization Paradox.

One of the core arguments of this book is that there is a fundamental incompatibility between globalization on the one hand and democracy and national sovereignty on the other. Participation in the global economy sometimes requires governments to impose economic policies that often go against the will of the majority of the people living in the country. We can live in a globalized world or a world of sovereign and democratic nation states, but we can’t have both, at least according to Rodrik.

I’m not entirely convinced by Rodrik’s thesis. However, in the last few days, we have seen a striking illustration of this point. Greece was recently offered an assistance package by the other European countries that was conditional on the Greek government, which is nominally socialist, making massive structural reforms. These reforms, which involve tax increases, mass privatisation, and cuts to benefits, are unpopular with Greeks. Many Greeks resent the fact that economic policy in their country is now being set by foreign politicians, which seems like an affront to the idea of national sovereignty and downright undemocratic. However, Greece’s leaders agreed to the deal in the belief that it is absolutely necessary for the country’s continued participation in the Euro, which has facilitated economic exchange between Greece and the outside world.

After his return to Greece, the Greek PM decided to hold on referendum on the austerity package he had negotiated with the other European leaders.  In effect, he was reneging on the deal he had agreed behind closed doors with the other EU bigwigs. You can justify the decision to call a referendum on the grounds that it is democratic, but in practice giving the people a say threatens the policies necessary for Greece to remain part of the Eurozone, and possibly the EU as well. Whether leaving the Eurozone and the EU would be good for Greece is, I suppose, a value-laden question. Most anti-globalization people would cheer this outcome as a victory for people power. Most neo-liberals would decry this move as a step backwards to autarky and nationalism. What is clear is that democracy, or at the very least direct democracy, isn’t always compatible with pro-globalization policies.

To my mind, this is a fantastic “teachable moment.” I’m looking forward to hearing what the students have to say about this complex issue with obvious parallels with the breakdown of the gold standard.