For decades the larger Great Lakes trans-border region has been vital to both nations' economies. Once the center of the North American mass production economy, the "industrial heartland" or "rust-belt" as termed by many, is now a world leader in building a region based on high performance principles and practices. The emergence of NAFTA and the expansion of globalization has brought about continuing growth and economic interdependence for the northeastern border regions between Canada and the United States. In fact, the first and second largest concentrations of regional trade on the northern border pass through the US-Ontario border area and the US-Quebec border area respectively. Trade between these areas accounts for eighty percent of the value of all US-Canada merchandise trade. However, the implementation of NAFTA has challenged the economic development of this region and has obligated its industries and governments to focus on regional solutions rather than the priorities of individual states or provinces. The changing nature of trade has obligated this region to reconstruct the focus of its manufacturing industries, social policies and even the very nature of their cities. For example, trade has increasingly become more focused on a north to south axis rather than an east to west axis and industries in this region have become more directed towards high-tech and high-value added production. However, differences in socio-economic power between the two nations and a lack coordination between government, non-government and business organizations hinders the progress of change. Even the threat of Quebec's breakaway from Canada has hindered prospects for a fully integrated economic system in this trans-border region.

With the goal of a fully integrated regional economy which can succeed in today's increasingly globalized world economy in mind, the purpose of this chapter is to demonstrate the growing economic significance of the Great Lakes area as a transnational border region. Therefore, this chapter will look at the importance and the positive effects of the interdependencies which encourage bi-national cooperation without ignoring the problems which might hinder the success and coordination which NAFTA intends to advance. There are two main themes in this chapter: interdependence and change. The first part of the chapter will outline the extensive interdependencies that characterize this region's economy including some of the immediate concerns these interdependencies represent. The second part of the chapter will then focus on the socio-economic and political problems resulting from the changing nature of trade since the implementation of NAFTA. It will also discuss the need for restructuring and other means of promoting economic success.

Part One: Interdependence

It is well to acknowledge that there can be no pretense of describing in a full-bodied way the scope and the intricacy of this relationship. We are dealing with an ongoing interplay of vastness and intimacy &endash; of similarities and differences, of the past and the present, of the public and the private &endash; all gathered together in a drama of disparities and of alternating attraction and rejection that has no counterpart in the international community.

Interdependence Comes Naturally

Bordering the immense waterways of the Great Lakes and the St. Lawrence river valley, the northeast trans-border regions naturally share a common area of interest. Even the path of the border which cuts directly through the middle of three of the Great Lakes illustrates the idea of a natural interaction. This region includes, on the Canadian side, the provinces of Ontario and Québec, including the two largest cities in Canada, Toronto and Montreal. On the American side, because of their proximity to the border and the nature of the bulk of their trade, the states of Illinois, Indiana, Michigan, Minnesota, New York, Ohio, Pennsylvania, and Wisconsin are the most likely to be affected by what happens in the northeast border region because of NAFTA. This includes cities of major economic importance as well such as Chicago, Detroit, Cleveland, and Buffalo. Obviously, the concentration of so many economically important cities in one region is one way to demonstrate the importance of focusing on the trans-border regions.

Interdependence Comes with Trade Agreements

The history of trade agreements between the US and Canada has also had a big impact on this region because of its long-held intention to further integrate the markets.

[NAFTA] builds on fifty years of bilateral and multilateral negotiations with the United States. The agreement takes a hodgepodge of existing agreements and ad hoc arrangements and translates them into a coherent and binding framework of rules tailored to the trade and investment realities of the twenty-first century.

The Autopact of 1965 was a bilateral agreement which integrated the automobile industry, a major sector of the two economies of this region. At this time automobile production was almost completely controlled by four American companies; however, because of the pact Canada could consider the automotive industry as "North American" despite the high degree of US ownership. Essentially, the pact provided for free trade between the two countries in original equipment parts and in almost all newly manufactured vehicles. It excluded trade in some specialized vehicles, tires, parts, and accessories. NAFTA promises the preservation of this pact. However, there are many who claim that the Autopact became obsolete with the implementation of the Canada-US free trade agreement and NAFTA. Nevertheless, the autopact helped foster integration trends.

The Canadian-US free trade agreement was implemented in January 1, 1989. This agreement restricted anti-dumping duties, countervailing duties and emergency measures. It opened up more government procurement contracts to competition from US producers, relaxed business travel restrictions, granted mutual access and national treatment for service providers, and set in motion a carefully delineated legal process for administering trade disputes. This agreement was important to the northeast border region because it began a process of trade restructuring. What resulted was that the losers were the traditional businesses such as food processing and makers of furniture, appliances and clothing which were all labor intensive industries. The winners became the high-tech companies which pay more because of the skills required to produce a product of greater value. It was at about this time when the northeastern Canadian border regions began to focus their production more towards the high-tech manufacturing industries. What became more evident with CUFTA was the need to coordinate policies involved in trade restructuring. For example, the US and Canada have faced similar problems in the manufacturing industry. The changing nature of trade and the extensive amount of interdependency between the two nations necessitated bi-national cooperation.

When NAFTA was implemented, it incorporated many of the rights and obligations of CUFTA. Although some Canadians may dispute it, the basic elements of CUFTA remained intact, including provisions to protect cultural industries, social services, and supply-managed commodities. Furthermore, it must be noted that CUFTA created neither a customs union nor an economic union. Each country was free to develop its own distinct approach to trade policy and multilateral institutions and there was no obligation to harmonize international policies. However, despite fears over losing national sovereignty, growing interdependency and a change in the nature of trade have obligated policies to become more regionally orientated. As Gabriel Grant argued in the introduction to this volume, "NAFTA has contributed to the emergence of various semi-autonomous trans-border regions within North America, via a process referred to... as ëglocalization'." Therefore, trade, finance and other socio-economic issues have taken on a bi-national significance. This has translated into an increased economic and political importance for the northeast trans-border region.

Interdependence comes with trade

Needless to say, the northeast trans-border region has been an area of trade interaction of enormous proportions for a long time. Moreover, this region is the largest and most abundant area of trade in the world's biggest bilateral trade relationship. Looking at the overall picture, statistics from Canada reported in 1995 that 79.7% of Canada's exports were to the US and 75% of their imports were from the US. These figures have increased since the implementation of NAFTA in 1992 (Figure 1). From a regional viewpoint, figures show that the US relies heavily on trade from the two provinces which make up this region. In fact, 79.7% (or $27 billion) of Québec's exports go to the US and 88% (or $107 billion) of Ontario's exports go to the US. Figure 2 shows the export and import figures of the individual Great Lake states which are most involved in this interdependent trade relationship. The single largest category of merchandise trade consists of manufactured and industrial goods followed by metals, minerals and chemicals, agricultural products, wood and paper and energy. As can be seen in Figure 3, it is the manufactured and industrial goods which are the most substantial portion of US exports. On the Canadian side the manufacturing sector is also the most important but there is also a significant trade in raw materials and energy.

Figure 3

Because of the large manufacturing sector in this area, one of the most significant factors of interdependence is the structure of the transnational production process which is fundamental to this area. There is a dense network of cross-border production in this region, consisting of numerous finished products and resulting from processes that involve movement back and forth between the two countries. That is to say that one side provides certain semi-finished goods or raw materials which will contribute to the final product produced on the other side. It is because of this integrated relationship that trade conflict is minimal in this area. Whereas in other trans-border regions competition is fierce because both sides produce the same goods, this area depends on a very interdependent cooperative relationship. The Detroit-Windsor relationship is a perfect example of this concept. "Physically linked by a bridge and a tunnel that connect the central cores of both cities, the economic integration now being experienced along other segments of the border has long been a feature of the automotive industry that dominates these two cities." Windsor's economy depends on providing Detroit auto manufacturers with molding and machine tooling. Ironically, this relationship has led Windsor to be considered more of a suburb of Detroit rather than as a purely Canadian city.

The branch plant economy form of organization is also fundamental to this region. The branch plant economy is one in which a large proportion of Canada's manufacturing establishment consists of American owned branch plants located in Canada in order to gain access to the protected market. This system has created a duality in the Canadian economy since some firms produce for the North American system as a whole while others, protected by tariff barriers and operating at high cost, produce only for the Canadian system. Since the current trends of globalization and the implementation of the NAFTA have worked towards minimizing all barriers and towards the redirection of trade in this region, this duality has created a tension which exacerbates the fears of plant relocation and subsequent job loss.

Firms operating at high costs in the protected market will lose locational viability, and plant closures are likely. Industries in which there is excess production capacity in the US will be especially vulnerable. Similarly, many Canadian branch plants of US firms will lose their raison d'être and may disappear from the economic map.

The energy trade sector is also a major area of interdependence. In fact one of Canada's main bargaining tools is its huge potential as an energy supplier. In this area hydro-power continues to be the energy resource of greatest interest because of Canada's massive water supply. Accessing Ontario and Québec's hydro-electric power has become a major interest to American companies in the northeastern US which face problems of supply. The North American Electric Reliability Council forecasted a "1.8 percent average annual growth in electrical energy demand for the northeastern US as a whole until 1997." This high growth rate has already been exceeded. Beginning in 1979, New York became Québec's biggest hydro-electricity customer, demonstrating the region's interdependence. "In constant dollars, Québec hydro-electricity sales on the US market increased fourteen-fold from 1978 to 1987, with the overall figure in 1987 bordering on $350 million." New York, because of electricity imports from Canada, ranks highest in use of electricity derived from hydro facilities &endash; around 18% of total state use.

With the implementation of NAFTA, the energy trade has become even more complicated. This is because of the proportional sharing provisions in NAFTA's energy chapter which limit the ability of provinces to reserve domestic production of energy goods for local consumption. "If exports are restricted for conservation purposes, the US and Mexico must be guaranteed the same proportion of total Canadian supply as they used in the most recent thirty-six-month period." For Québec and Ontario hydro-electric producers, this means that if domestic demand grows in the US, the ability of provinces to cut back exports to serve the increased domestic demand will be restricted. This introduces a financial cost to Canada and its domestic consumers whose water supply has been locked into supplying the US and Mexico. As Sarah Mitchell will discuss in chapter 2, the environmental costs of energy production are also increasingly becoming a major concern for Québec and Ontario, and due to interdependency, to the northeastern United States as well.

Interdependence Comes with Bilateral Investment

The interdependence of this region can also be demonstrated by the significant bilateral investment. Both countries have a considerable stake in each other's general prosperity. Several automobile giants and other large multi-national corporations which attract large amounts of investment are located in this trans-border region. The branch-plant system of production in this region also allows for capital to travel freely between nations. Corporations invest in each other's counterparts, and industries on both sides rely on resources and parts from across the border &endash; naturally supporting investment. For example, "in the mid-1980's, US corporate affiliates in Ontario comprised more than a third of the province's manufacturing employment and an even higher share of related value-added. Canadian direct investment in the Great Lakes states is less pronounced but still accounted for 55,000 more jobs in 1987 than in 1977." Furthermore, the Great Lakes-New York trans-border region constitutes the most important center of finance and investment between the US and Canada since it includes Toronto, the financial center of Canada and numerous US centers of investment including New York City, Chicago and Boston.

However, with the implementation of CUFTA and NAFTA, numerous corporations relocated to the US side of the border and even to Mexico because they no longer have to worry about tariffs on imports into Canada and because the US and Mexico have lower wage standards.

The deregulation of capital allows it to operate throughout an integrated economic space in which tariffs and other border restrictions are being dismantled and standards are being harmonized, enabling it make decisions about how to organize production and where to add value, where to locate new investment, where to close down a facility. . .

Therefore, Canadian investment in the US has grown faster than US investment in Canada. Figure 4 shows the growth of investment since the implementation of the free trade agreement. The change in investment shows that US direct investment in Canada &endash; which effects jobs the most &endash; has not gone up as much as it has in the US from Canadian investors. "Canadian corporations have shown more interest in investing in the US - by raising their holdings by 38.7% - than US firms have shown in Canada where their holdings went up by 25.8%." It is these worries that often make many Canadians in the industrial corridor of the Great Lakes leery about their future under NAFTA.

Part Two: The Changing Nature of Trade

We must master change, not run from it. We must meet competition, not hide from it. There is no sanctuary from the difficult realities of the unfolding decades.

-former Prime Minister Brian Mulroney

Change Calls for a Global Reorientation

The aforementioned trends of growing bilateral trade, growing investment and breaking down of borders of high tariff barriers and other protectionist measures has led the larger Great Lakes trans-border region, to realize the changing nature of trade. This region's long experience with bi-national trade has primed it for the development of a truly global economy. NAFTA facilitates this evolution. The most significant point of progress has been economic restructuring geared towards the manufacturing industries and trade direction. Because of the changing nature of the industries which characterize this region, major centers of trade have began to focus their trade more and more on north-south lines rather than east-west lines. As mentioned earlier, manufacturing has become increasingly involved in high-tech and high-value added goods production as opposed to the mass production of labor-intensive, low-value added goods. The trade of high-value added goods fosters an export based economy which decreases dependence on inter-state or inter-province trade. According to the Council of Great Lakes Governors, this trend has allowed for the northeast trans-border region to become more continental and more global.

[T]he region's revitalized economy creates competitive advantage through flexible production, low cost, continuous improvement, and high quality. Whereas once the region was focused inward, it is now broadly focused, comprising manufacturing hubs and regional supply networks, whose output is nearly as likely to be exported overseas as it is to be marketed domestically.

High-performance reindustrialization demands an increasingly global perspective since it is no longer domestically orientated. Therefore, this trans-border region has made itself literally the gateway for US-Canadian trade, worth more than $50 billion per year.

Furthermore, the increasingly global nature of the Great Lakes bi-national economy has added economic and political importance to the region. This trend of globalization and the growth of interdependency has obligated the northeast border region states and provinces to cooperate in order to solve their common problems. The need for regional solutions as opposed to national solutions is a part of the process referred to earlier as "glocalization".

Change Calls for Regional Reconstruction

The renewed economic importance of the Great Lakes-New York trans-boundary region plus the increased facilitation of trade, calls for a reconstruction of economic spaces, including cities and industries.

Implementation of the FTA and the consequent removal of impediments to a natural interaction between contiguous Canadian and US regional economies has meant creation of new economic spaces in which cities have new opportunities for rationalizing their production, increasing their exports, participating in previously impossible cooperative ventures, and enhancing their competitiveness and vitality.

The quotation above implies that the cities in the trans-border region must come to regard themselves in a new economic space since the old relationship to other Canadian cities has changed. Since a single integrated economic space would make Canada's border regions very vulnerable to US penetration (because they are all concentrated in one area), Canada's border regions and especially the cities in this region need to reevaluate where they stand and how they can best fare in an increasingly globalized economy. US border regions and cities in the northeast need to also look at their positioning in relation to what it happening on the Canadian side.

There are two different sorts of relationships between border region cities (Figure 5). First of all, there are the bridge cities such as Detroit-Windsor and Buffalo-Toronto. A bridge city facilitates the flows of goods between the two economies, and must provide an adequate border-crossing infrastructure, legal and commercial service providers, and linkages into each of the ëbridged economies.' In the case of Detroit-Windsor, economic integration has been a trend since Windsor found a niche in molding and machine tooling for the auto industry in Detroit. However, Buffalo could better follow this example by more efficiently linking its economy to that of Toronto. Buffalo has been in sectoral decline, while Toronto has become a very economically vital and thriving city. With Toronto now the dominant city in the Canadian economy, Buffalo has already benefited. Free trade agreements have facilitated interaction and caused firms to reconsider their positions and requirements for economic prosperity in the new economic space.

Canadian cities have also worked towards improving their economic viability by marketing themselves as "point-of-access" cities to the US economy and its multi-national corporations. Numerous organizations in Canada have published material to increase recognition of the concept that Canadian cities in the northeastern border regions are viable options to American cities for basing multi-national corporations because of their relative positioning in relation to major centers of business in the US. For example a report published by the government of Canada places attention on the idea that,

What is less appreciated about the US market is that it is all easily accessible from Canada. There are more than 110 million consumers within a day's drive of Southern Ontario. Montreal, Halifax and Moncton are within a day's drive of New York City, Boston and Philadelphia.

Toronto, and Montreal in particular, have worked to market themselves as ëpoint-of-access' cities.

They have attempted to make themselves more attractive as possible headquarters sites and decision-making centers on a continental basis through which economic actors may gain access to cities in the US or even in Mexico. Toronto and Montreal market themselves as cities where the livability quotient is higher and where accessibility to the US is very simple &endash; just short airline trips from the heart of the US economy. Furthermore, Montreal has an advantage for firms in which daily communication with a parent company in a French speaking country is important.

The evidence presented above is yet another example that it is the border regions that are the most affected by the changes brought about by NAFTA. For decades the northeast border region has been interdependent because of the manner in which its industries are set up and by how these cities are geographically located. Now, with the restructuring changes involved with the implementation of NAFTA and the realities of an increasingly global economy, these areas are looking for the economic and social stability and growth that NAFTA promised to foster. After all, it ironically takes strong borders to eventually have a borderless continent &endash; the ultimate goal of NAFTA.

Change Has its Difficulties

The changing nature of trade has introduced several obstacles to progress. These include, job relocation and unemployment as well as difficulties in coordinating policies. First of all, the break down of trade barriers has allowed for the transfer of labor intensive industries to areas where labor is cheaper and production is more profitable. This has forced out industries such as textiles, furniture, raw material, and agriculture in Ontario and Québec where most of these industries were located. The governments of these provinces as well as the governments in the states, have come to realize that their future under NAFTA must involve more high-tech manufacturing, service industries and US oriented trade in order to be able to compete in the new continental environment. For example, the Council of Great Lakes Governors published a report addressing a "high-performance revolution". This report discussed the necessities coordinating policies which favor the advancement of this trend:

[The high-performance revolution] has been led by relatively few firms that have taken outstanding initiative, developing worker training programs, innovating new communications systems, and working with banks and regulators to develop alternative financing and compliance strategies on a case-by-case basis. Before high-performance manufacturing can benefit the entire region, government must work to develop an infrastructure and business climate that can nurture a critical mass of high-performance firms. . .

However, the asymmetrical relationship between the US and Canada has hindered the implementation of regional policy. Ninety percent of Canada's population lives along the border and Seventy-five percent of Canadian trade is done in the border regions. This factor has kept the Canadian provinces preoccupied with the decisions of the US while American policy makers are often not similarly concerned with issues of interest to Canadians. With the implementation of the free trade agreements, trade with the rest of North America has become increasingly important for Canada just as it has for the US. Therefore, both sides wish to advance in order to better compete in the world economy; if both sides have opposing interests, it is difficult to compromise. Although the economic dominance of the US gives it greater ability to conduct its own policies, ignoring Canada's interests will impede the progress of trans-border regional development. As NAFTA tends towards glocalization, the opportunity both nations share to build supportive, compatible trade policies becomes less an option and more an imperative.

Change Means Common Goals, Compromise and Coordination

In order to coordinate policy it is important to see where each side is coming from and what their goals are. First of all, for both the US and Canada, NAFTA provides an opportunity to promote an effective utilization of economic resources in North America. No longer will protectionist measures, such as high tariffs, hinder the flow of goods across the borders or affect where a good was manufactured. That is to say that "the utilization of comparative advantage and economies of scale will facilitate a more rational utilization of resources." This means that firms can have lower input costs while still increasing output. This factor is especially important for the manufacturing industries in the Great Lakes trans-border region. Second, securing access to each other's markets is another important motive for both sides, since NAFTA is to serve as insurance against the potential hostile external trading policies of the participating nations. A regional North American arrangement could be a means of avoiding the disputes over the use of subsidies and countervailing duties. Ideally, there will be no reason to subsidize the production of certain goods or raw materials nor to have any other sort of protectionist measures. Economic cooperation will increase which will allow both sides to realize that if one side succeeds than so does the other. Lastly, NAFTA can be seen as a way to improve the competitive position of both the US and Canada in the world economy.

However, it is evident that NAFTA has not yet created perfect harmony in the heartland because discord still exists. It has been difficult for many corporations, farmers, government officials, nationalists, laborers and individual citizens to come to terms with some of the transitions which NAFTA has imposed upon them. Tensions pull from both sides making compromise and coordination difficult. Why is this? One author suggests that it is necessary to look at the realistic ramifications of both sides having the same motives.

Trade between Canada and the United States is highly intra-industrial, which could give support for transfers between Canada and the US. However, this is not a relevant consideration if both countries integrate on a basis of economies of scale and experience the same rate of losing and winning. It is only relevant when at least one partner in the integration loses more than the other countries that there exists a theoretical argument for economic transfers.

This suggests that in order for integration to advance, one side or the other has to give more. Because the Canadian-US relationship is highly asymmetrical &endash; meaning that the US is more powerful both politically and economically &endash; it is overwhelmingly likely that Canadian policies are the most prone to being compromised. Therefore, it is the inherent nature of the relationship between the US and Canada which causes problems in the coordination and implementation of policies. As the next section will demonstrate, the attempts of individual governments in the northeast border region to temper the hardships of transition and socio-economic crises, confirms the need for the coordination of regional policies.

Change and the Manufacturing Sector Crisis

In the 1992-1993 recession, which coincided with the implementation of NAFTA, the industrial corridor of the northeast border region experienced its worst economic recession since the Depression in the 1930's. There was a large increase in structural unemployment caused by plant relocation and permanent job loss. Unemployment in Canada reached 11.6% in late 1992. Furthermore, restructuring and the stripping down of social expenditures created a very difficult social situation when programs such as Unemployment Insurance were cut back. Because Canada suffered the brunt of the manufacturing sector crisis which occurred during the 1992-1993 recession, the Ontario and Québec governments were forced to realize that economic restructuring programs were an immediate necessity for dealing with a future under NAFTA.

Many argue that it was only because of the recession that economic conditions were so bad and now economic conditions are on the upswing. However, it is also argued that it was a direct result of CUFTA and NAFTA. Whichever view might be right, job loss continues to be the most pressing problem in this trans-border region. For the Canadian and American industrial and manufacturing centers of the northeast border region, NAFTA initiated the transferring of small, medium and large manufacturing plants to US or Mexican bases where labor is cheaper and environmental restrictions are fewer. Figure 6 shows the manufacturing job losses between 1988 and 1994. After the implementation of CUFTA, from 1989 to 1992, the total manufacturing employment, according to Canadian figures, fell continuously from 2,144,000 to 1,783,000 for a total loss of 361,000 jobs or 17% of all jobs in the manufacturing sector. Therefore, there were several contradictions to what the Canadian Department of Finance was saying. They had argued that,

The economic benefits from the Agreement will begin to be realized shortly after its implementation. Investment spending for new plant and equipment will increase as Canadian firms move to take advantage of their enhanced and more secure access to the huge US marketplace. Increased consumer and investment spending will result in stronger economic growth and enhanced job creation.

However, the labor movement and other popular movements opposed to the free trade agreement, pointed out that the inherent branch plant structure and high levels of US ownership would lead to branch plants shutting down and moving to the US rather than being restructured to serve the North American market as a whole once the remaining barriers were gone. In 1992 alone, 17 US owned plants in Ontario employing 3,034 workers were closed, according to data compiled by the Ontario ministry of labor.

It is impossible to separate the impact of a free trade agreement from the impact of other policies and other economic forces, but as one Canadian author argues, "It is still the case that the changing economic relationship between Canada and the US has played a significant independent role in the crisis. And it is surely undeniable that the free trade agreement has had some influence upon trade and investment flows between Canada and the US."

Change and the Resulting Social Crisis

With job losses continuing to grow as manufacturing plants move southward a difficult social problem arises. For example, during the recession, Toronto lost more than 10% of its businesses due to closure and relocation. The city's tax base shrunk during 1992 for the first time in its history which resulted in forced cuts to social services. Furthermore, the shift in direct investment was also a factor which lowered the possibility of job creation. It became the provincial governments duty to work towards attracting investment and to work on restructuring their respective economies to deal with the problems that they had encountered.

However, because of the nature of the trade agreement, the provincial and national Canadian governments were limited in their ability to initiate regional development programs. Once again the asymmetry between powers came into play. This is because the US uses trade actions to confront government programs in Canada that directly or indirectly support exports to the US, or that detrimentally affect the interests of US-based corporations. This is typically done by levying a countervailing duty on goods entering the US commensurable with the amount of "subsidy" that the Canadian government provides. For example,

Canadian regional development programs are constantly challenged by the US as ëunfair subsidies to trade.' Although Canada or Mexico could retaliate with similar measures, the reality of an asymmetric relationship may preclude this.

This reality of asymmetry needs to be taken into consideration by the US government. The US can influence the sustainability of NAFTA by acknowledging Canada's efforts to support its economy and its citizens. If Canada is unable to implement policies this slows the development of the border region on its side. The socio-economic difficulties of Canada will hinder the prosperity of the trans-border region as a whole. The US needs to reevaluate its trade policy in regards to its impact on the development of programs needed to support the well-being of the trans-border region. It is the goal of "glocalization", which focuses on the autonomy of regions, that needs to achieved.

Nevertheless, there have been programs implemented to soften the affects of job losses. It is important to discuss these programs in order to find out what has worked in the past and what might work in the future. The bulk of these programs have worked towards training the work force on more high skilled jobs which have increasingly become the focus of economic prosperity in the northeast border region. The powers of the provincial governments have been enhanced on Canadian side for the primary goal of implementing regional development strategies. According to a publication put out by the government of Québec, the objectives of the regional councils in the provinces are: to decide on development priorities and planning strategies, the management of regional development funds, and to reach accords with the national government in Ottawa. As mentioned earlier, it is clear that because of Canada's dependence on border trade, more power has been given to the provincial governments to implement regional development strategies. The US should take notice of the following examples of Canadian relief programs which have helped to strengthen socio-economic prosperity for the region in order to better gear its policies towards regional development.

The government of Ontario put out a publication in 1992 called "Investing in Tomorrow's Jobs" which focused on moving past the negative side of restructuring &endash; plant relocation and job loss mainly. Incidentally, this was a report from a pro-NAFTA organization, which recognized the importance of refocusing attention towards ways in which Ontario can cope with a more global economy. "The balance of positive and negative impacts is predicted not only on the macroeconomic climate, but also on the strategic capacity of people, organizations and systems in the economy to anticipate change."

The report called for government involvement in attracting investment. For example the ESPRIT project (Enterprise Strategic Planning Revenue In Transformation), worked towards "business re-engineering" by using, "new technology and organizational change to yield significant gains in efficiency and productivity." Furthermore, transition assistance funds totaling $160 million were made available to schools, colleges, universities and hospitals to begin the process of restructuring and reform throughout their operations. The government also worked at improving the quality and speed of the regulatory system so that environmental regulations would not be compromised but that business would still be attracted to Ontario. The Ontario Training and Adjustment Board (OTAB), was also established as an independent agency of the government. OTAB priorities were to,

Implement substantial qualitative and quantitative improvements in the workplace and sectoral training. There will be an increased emphasis on developing training that produces portable, generic and certifiable skills. The incorporation of these characteristics into workplace and sectoral training recognizes the importance of skills and knowledge as important factors in productivity, job security and mobility.

By 1995 the Ontario budget plan declared success in making Ontario a better place to do business than it was five years ago with investment at an all time high. "Business has demonstrated its confidence in the province's future through its record level investment. Business investment in new machinery and equipment last year reached its highest level in Ontario history &endash; and it will be even higher this year." The 1995 Ontario budget plan also initiated the JUMP start program to help 66,000 more young people to get their first job by implementing training programs.

However, the implementation of development programs on the Canadian side is not without tension. The Canadian Labor Congress disagreed with the Department of Finance and the Ministry of Trade and Finance. In 1996 this organization put out a report which told a different side of the story. This report endeavored to show how social programs were being "weakened by pressures to level the playing field for corporate investors." They claimed that the real winners of NAFTA were the large transnational corporations. Furthermore, they claim that unemployment problems had not been solved, and that the few jobs that were created were mostly low-wage and often part-time positions. In fact unemployment was barely below 10% in 1995. Real wages for unionized workers in the private sector also remained unchanged between 1988 and 1994, despite soaring productivity. They also complained about the changing shifts in investment which they claimed to be moving away from Canada. All together, what the Labor Congress argued was that NAFTA is controlled by the corporate giants. And this is not the only organization to argue that NAFTA is being taken over by the corporate agenda. Numerous groups on the internet publish statements which claim that the whole thing is a scheme for the takeover of Canada. For example,

While sneaking the copies out of the Trade Negotiations Office safe, Kealey said she saw documents the Canadian public was never intended to see, including the step-by-step plan for the implementation of the free trade deal, which gave dates for specific events in the process of merging Canada and the U.S.

For the northeast border regions, these tensions translate into a difficult path for implementing regional development programs. Continued strain against further restructuring attempts will slow progress and may even aggravate job loss in certain sectors. Coordination and compromise of goals and ideas is a pressing necessity.

Change and a Unity Crisis?

It is not only the economic side which suffers difficulties of coordinating policy &endash; the political side has its problems as well. Many argue that Canada suffers a unity crisis which hinders its ability to implement programs. Therefore, although this problem may seem far away from any border concerns, it is important to discuss because it affects the Canadian government's ability to implement restructuring and development programs designed to create a strong trans-border region with the US.

Undoubtedly, the most important factor affecting Canada's unity is Québec's attempts for independence from the rest of Canada. And coincidentally enough, the parameters of NAFTA help give Québec a better chance at independence, according to Québec. The sovereignty bill says that, "In accordance with international law, Québec shall assume the obligations and enjoy the rights set forth in the relevant treaties. . . to which Canada or Québec is a party. . . in particular, in the North American Free Trade Agreement."

Furthermore, it is interesting to note that the NAFTA approval rating is higher in the Québec province than in any other province. This is because NAFTA has assisted Québec economically and psychologically in its effort to extricate itself from a position in the Canadian economy which they consider to be one of restriction and dependence. Québec wishes to use NAFTA as a tool to focus trade more on north-south lines rather than having to be so dependent on its east-west trade with the other provinces. For example, in its 1989 review of the economy, the coordinating body of greater Montreal, Communauté Urbaine de Montreal, argued that the free trade agreement created a "new emphasis on north-south trade flows (which) will also reduce the importance of Toronto as the logical site to serve the Canadian market, since markets will increasingly be defined in a continental context."

This quotation also demonstrates the idea that Québec's dissent arises not only from cultural differences but also from feelings of betrayal and neglect by the rest of Canada because they do not feel that their interests are addressed in Ottawa. Toronto's positioning as the financial and industrial center of the Canadian economy led to the erosion of Montreal's position as a major Canadian business metropolis and Québec's resulting peripheralization. With the advent of the free trade agreements, continued peripheralization was predicted because of the predominance of trade in the Great Lakes region and the promised strengthening of this relation through NAFTA.

Economic change has left Québec peripheral in the continental economy. Indeed, prospects for any reversal of the strategic importance of Southern Ontario relative to other geographic regions within Canada (including Québec) appear remote. The Ontario Liberal government's strong opposition to liberalized trade aside, the ratification of the Canada-US Free Trade Agreement points to further concentration of the Canadian economy in Southern Ontario.

The significance of the peripheralization of Québec for the border regions is that Québec is working towards strengthening their own programs of regional development along the border and towards increasing their trade relations with the US on their own. Therefore, Québec has made it difficult for the Canadian federal government to impose any of its programs, making uniform free trade border region reforms difficult.

However, already three times Québec referendums have failed to declare Québec's sovereignty. Although these results have led towards even stronger attempts to achieve their goal. The US position has been to stay out of the situation and does not actively support either side. Nevertheless, it is important that the US understands the nature of political relations in Canada and the difficulties that might arise in implementing regional development programs.

Conclusion: Interdependence and Change Necessitates Coordination and Solutions

We cannot compete in the world by withdrawing from it. We cannot gain freer access to the world's markets by limiting access to our own. We cannot grow and prosper by shrinking from opportunity and turning our back on reality.

-former Prime Minister Brian Mulroney

It is evident that ignoring the problems presented in this chapter can only aggravate the future successes that NAFTA promises. Therefore, the constraints on the economy that many perceive NAFTA to be responsible for, need to be softened in order to make a smoother transition possible. If alterations are not made, it is most likely that the most vulnerable will be hurt. It is workers and families who will bear the costs of economic restructuring and the loss of economic opportunities. This burden will grow in the absence of adequate social and labor adjustment programs. Particularly vulnerable also in this region are low-skill immigrant and ethnic group that are at the bottom of the income skill who work in the labor intensive industries which are the most likely to disappear from this region. Government efficiency is a necessity. The programs implemented to help in the restructuring transition need to be strongly supported and successfully carried out. This cannot be done unless both nations realize the importance of regional coordination as opposed to separate national trade policies and development strategies.

Therefore, a disunity problem cannot be ignored if solutions are to be successfully applied towards creating an economically strong border region. If Québec is to separate the realities of a new situation need to be addressed. A newly independent Québec nation could suffer a major economic downturn and a smaller Canadian nation could suffer from economic stagnation. Disunity could only hinder the smooth progression of NAFTA's implementation. Here again government efficiency is necessary to help to reduce the asymmetries not only between Ontario and Québec but also between the US and Canada. Restructuring on a continental basis should benefit all sides in proportion to their needs. Therefore, the US cannot ignore Canada's concerns if it wishes to successfully achieve its goals. Because if they succeed, we succeed.

In conclusion, the realities of a global world economy and the changing nature of trade have granted the Great Lakes-New York trans-border region added economic and political importance. "Glocalization" and the growth of interdependence has necessitated the coordination of regional policies to address common problems. However, the shocks which NAFTA manifests have required economic restructuring for this region. The realities of an integrated North American economy have presented this area with socio-economic problems such as manufacturing plant relocation, job loss, social disunity and a compromised Canadian government and economy. Although this border region has the lowest amount of cross-border conflict in NAFTA, if cooperation is to continue Canada's socio-economic difficulties cannot be ignored. The US can facilitate the sustainability and success of NAFTA by cooperating with the programs which Canada has already implemented. The high degree of interdependence which this region enjoys is growing but the rate of growth needs to be matched with programs which can soften the transition. In Chapter 6 of this volume Colin Johnson will discuss policy recommendations to address the concerns of this trans-border region. What needs to be realized is that the importance of a strong border economy in the larger Great Lakes region calls for solutions to the socio-economic problems. For if a borderless economy is the ultimate goal, we need to fix the borders before we can erase them.