Here are four opinion pieces written by Tim Armstrong, a Toronto lawyer and arbitrator with a deep interest in the Asia Pacific Region. Mr. Armstrong and I have worked together on a number of projects.1/ Free trade with Japan: We need to look before we leap. -- the Globe and Mail, Tuesday, November 28, 2000
Scroll down, please2/ Ontario needs incentive packages to attract investment -- The Globe and Mail, Friday, December 29, 2000
Scroll down, please3/ Hold the champagne -- The Globe and Mail, Wednesday, September 6, 2000
Jump to this piece4/ Beijing is well able to host the 2008 games -- Toronto Star, Friday, July 21, 2000
Jump to this piece.Tuesday, November 28, 2000 - From The Globe and Mail Report on Business comment section. (I took the photo, which is my smallest portrait ever, running 1 inch wide in the paper
Free trade with Japan:
We need to look before we leap
TIM ARMSTRONG
Tuesday, November 28, 2000Is a Canada-Japan free-trade agreement a pipe dream or a real possibility? Some business leaders in both countries see it as an option worth considering, but important threshold issues -- policy and operational -- need to be aired so that informed decisions can be made about the feasibility of the initiative.
What do proponents envisage? Would it be a comprehensive North American free-trade agreement-style pact, with incremental elimination of tariffs and other trade barriers over defined periods? What priority sectors would be targeted, and what analysis has been done to assess the impact on those industries?
Since the conclusion of the Uruguay Round of negotiations in 1994, quantifiable progress has been made in opening trade among the 136 World Trade Organization members. What would be the geopolitical and commercial ramifications of initiating new bilateral free-trade talks when efforts are being made to kick-start another multilateral WTO round, and as China and others prepare to join the WTO?
What does Canada hope to achieve that the United States has not already accomplished? Under the Clinton administration, more than 38 U.S.-Japan bilateral agreements have been reached in such sectors as telecommunications, housing construction, pharmaceutical products and medical devices, insurance, autos and auto parts. These minutely detailed agreements -- which, in aggregate, resemble a "virtual" free-trade agreement -- need analysis to determine their relevance and possible application to Canada.
What prompts Japan's recent interest in bilateral trade agreements? Historically, Japan has espoused multilateralism, expressing reservations about the exclusionary nature of both bilateral and regional trade agreements. Now it is pursuing free-trade talks with South Korea, Singapore and Mexico, and possibly Chile.
Some have questioned whether its interest in Mexico and Canada could relate to the prospect of gaining indirect access to the U.S. market. The existing rules of origin under NAFTA would seem to prevent such backdoor penetration, but the complex "origin" rules need careful analysis.
What are Canada's principal objectives? Impediments to trade with Japan are not primarily tariff-related. More troublesome are Japan's often opaque administrative rules, regulations and practices -- problems vigorously being addressed by the United States, with slow but incremental successes. Is Canada benefiting from these structural changes?
Finally, are there other, more attractive alternatives for achieving trade liberalization with Japan? What about quadrilateral discussions with the Japanese, Americans and Mexicans? NAFTA has so integrated the North American market that it may now be difficult to contemplate an agreement with Japan that does not include all NAFTA partners.
Moreover, we are well advanced towards a free-trade area for the Americas, involving 34 Western Hemisphere nations, with 2005 as the targeted completion date. How does a transpacific agreement fit with this hemispheric initiative?
Canada has a long history of friendship with Japan. But as Charles de Gaulle said, "Nations do not have friends, only interests." Japan's current interests are focused on locking in to a solid recovery.
Expanding trade through bilateral trade agreements may be helpful for Japan, but not presumably at the expense of diverting its attention and resources from these other urgent priorities.
At a minimum, the private sectors in both countries should be assured that a Canada-Japan agreement really is on the policy radar screens in the corridors of power in Tokyo -- and Ottawa -- before embarking on what otherwise may be a quixotically futile crusade.
Tim Armstrong is counsel to McCarthy Tétrault. He has served as Ontario deputy minister of labour, Ontario's agent-general for the Asia-Pacific region, and deputy minister of industry, trade and technology.
Ontario needs incentive packages
to attract investmentTIM
ARMSTRONG
The Globe and Mail Report on Business -- Friday, December 29, 2000"Ontario really sticks out as a jurisdiction . . . that will not come to the party to support businesses that make significant investments in new processes, new product and technology." And Ontario, unlike Quebec and most U.S. states, "does not have an active role in industrial policy and refuses to discuss incentives such as loan guarantees."
Whose words are those? Some neo-Keynesian academic disciple of John Kenneth Galbraith whose head is back in the 1970s? No, it's James Fleck, president of the Burlington, Ont.-based, General Electric-controlled appliance manufacturer, Camco Inc., commenting on his company's decision to forego investment in Ontario and put $30-million in a Montreal plant, with "meaningful assistance" from the Quebec government.
The Harris government's position on financial assistance to investors remains clear, consistent and inflexible: there will be none. Instead, Ontario relies on generalized "advantages" -- a highly educated work force, favourable labour costs, research and development tax credits, low electricity costs, safe communities, competitive corporate tax rates, and so on.
To be sure, under the Harris philosophy, there have been some investment successes. Expansions at Toyota in Cambridge or Nortel in Ottawa are just a few of the more prominent examples. But while expansions are welcome, new manufacturing sites are the real prizes, and for the most part, they have been going elsewhere. To stay in the running, the ideological, almost theological, opposition to interfering with the free forces of the marketplace through industrial incentives should be revisited.
In the automotive industry, Ontario boasts that it may soon overtake Michigan, the traditional leader, in North American production. But all of the Japanese transplant assemblers in Ontario -- Toyota, Honda and Suzuki, in its Cami joint venture with General Motors -- were lured by significant financial incentives, from $400-million to $500-million for each company in combinations of grants, loans, training and infrastructure assistance.
Since Cami, no new automotive assemblers have located in Ontario. In the early nineties, Ontario lost out in bidding to South Carolina for a sizeable BMW investment, and later to Alabama, where Mercedes-Benz established its first North American assembly plant.
Are incentive packages improvident? A 1992 study by the University of Kentucky documents the payback for an incentive package worth $147-million given by the state to attract Toyota to its Georgetown site. Within six years, Kentucky had recouped $161-million in extra tax revenue as a result of its investment. And over a 20-year period, Kentucky will receive six times its original investment.
We should also be concerned with investment retention. In 1991, the Rae government was faced with potential meltdowns at Algoma Steel in Sault Ste. Marie and at de Havilland in Downsview. With the premier's active involvement, both operations were salvaged, but not without material government assistance. At Algoma, government loan guarantees were given, but fortunately, never called, due to a cyclical upsurge in the steel sector. At de Havilland, a substantial provincial and federal assistance package was provided to the new owner, Bombardier, and the plant is now thriving, employing more than 5,000 workers. Without the government's financial support, Algoma's gates would now be locked and weeds would be growing in the Downsview parking lot at de Havilland.
Recently, the government has wisely decided to reopen some foreign offices -- all in jurisdictions where U.S. states are well represented. But being there is not enough. To succeed, carefully calibrated and targeted industrial incentives can be decisive, as Mr. Fleck suggests.
Tim Armstrong is counsel to McCarthy Tétrault. He has served as Ontario deputy minister of labour, Ontario's agent-general for the Asia-Pacific region, and deputy minister of industry, trade and technology.
Hold the champagne
Many of the concessions China has made in
pursuit of WTO membership may be unattainableTIM ARMSTRONG
The Globe and Mail, Wednesday, September 6, 2000Why has so little attention been given in Canada to the ramifications of China's predicted accession to the World Trade Organization later this year?
In the United States, the bilateral accession agreement with China -- and the subsequent debate in Congress over the granting to China of most-favoured-nation trade status, now called permanent normal trade relations (PNTR) -- were front-page stories. President Bill Clinton enlisted the support of former presidents Gerald Ford and Jimmy Carter, as well as such fading luminaries as Henry Kissinger, to eke out a majority for PNTR in the House of Representatives. (The Senate is expected to give its approval next month.)
The subsequent "me too" Canadian-Chinese bilateral agreement, announced in mind-numbing bureaucratese by International Trade Minister Pierre Pettigrew last November, prompted little interest -- regrettably, in view of the scope of the Chinese trade and investment concessions and the potential economic opportunities for Canada.
Earlier this summer, I participated in a CIDA-sponsored conference in Beijing dealing with the legal and judicial ramifications of accession. While the presentations were, in the main, technical and academic in nature, the larger political and economic ramifications were the grist for much corridor discussion.
At first blush, China's significant concessions seem out of proportion to the potential advantages of WTO membership. The way the system works, all 137 WTO members get the benefits of all the most favourable concessions obtained in all pre-accession bilateral bargaining. Not surprisingly, the two most powerful and successful negotiators were the United States and the European Union. Largely as a result of U.S. and European bargaining efforts, China's industrial tariffs will fall from an average exceeding 24 per cent to just over 9 per cent by 2005.
In the information-technology sector, tariffs on computers, semiconductors and all Internet-related equipment, now averaging more than 13 per cent, will be eliminated by 2005. In the agricultural sector, China is committed to eliminating export subsidies, a concession believed to be unattainable before last fall.
Similar liberalizing measures have been promised in relation to direct party-to-party trade (eliminating intervention by state agencies) and a variety of breakthrough concessions in services, distribution rights and ownership.
Are there reasons for caution, even skepticism? It would seem so. During my recent visit, a number of potential impediments were identified:
The Chinese government has aggressively pursued WTO membership, and committed itself to significant market-opening measures of the sort outlined above, despite dissent from influential segments of the Chinese Communist Party. Already, with the privatization of some giant state-owned enterprises (SOEs), unemployment is rising sharply. Efforts to create social safety-net protection to replace the SOEs' "iron rice bowl" support for workers are lagging. Increased foreign competition is a further threat to employment. If there is a widespread, grassroots backlash from the labour force, China might be forced to retrench -- if not by reneging on its original bilateral commitments, then at least by seeking longer phase-in periods.
If so, U.S. congressional opposition may well resurface, driven by the powerful interest groups that have opposed China's membership from the outset: organized labour; environmentalists; human-rights advocates; those sectors of U.S. business harmed by cheap imports; persecuted religious organizations; the pro-Taiwan lobby; and others. These groups, spanning the political spectrum, contend that China cannot be trusted to fulfill its contractual undertakings. (John Sweeney, president of the American Federation of Labor and Congress of Industrial Associations, put it bluntly in recent testimony before a congressional committee: "China . . . has broken every agreement it has signed with the U.S. over the past 10 years."
Even less charitable is the comment made to me by an executive of a Canadian company, frustrated by his attempts to conclude a joint venture agreement with the Chinese: "For the Chinese, an 'agreement' seems to be simply a pause in negotiations." Any renewed U.S. opposition is likely to be strong -- based on arguments from differing lobbying interests -- under either Al Gore or George W. Bush.
Another risk is that the sheer magnitude of the task of enacting and amending statutes and regulations necessary to give effect to the concessions made by China is so great that, with the best of intentions, it may not be possible to complete within the given time frame.
The challenges faced by China would be difficult even in a society with long-established legislative traditions, operating under the rule of law and having an effectively functioning system of enforcement through an independent judiciary. In China, the modern legislative and judicial systems are in their infancy, having been recreated literally from the ground up, following their destruction during the Cultural Revolution. If this process becomes fractious and protracted, the main players may be driven to re-evaluate the wisdom of the concessions made in their bilateral agreements.
What are these pros and cons of Chinese membership for China and for existing WTO members? There are two principal advantages for China: gaining the right to participate in global trade policy-making, and avoiding annual U.S. congressional review of China's trading practices and controversial human-rights record. The disadvantages relate to jobs and competitiveness.
For the West, Chinese concessions greatly enhance export opportunities that, if realized, will promote domestic job growth. (This assumption is vigorously rejected by U.S. and Canadian organized labour, which fears that the shifting of production facilities to low-wage locations in China will result in job losses in North America.) Proponents also argue that propensities in China for repressive activities (such as Tiananmen Square), destabilizing military initiatives (such as Taiwan), and other domestic policies and activities repugnant to the international community should be dampened.
Both sides, by proceeding, run carefully calibrated risks. The process is well advanced and the credibility and operational stakes are high. International pressure will be intense to stay the course, make the system work, promote further economic and political reform, and capitalize on the enormous commercial opportunities in the world's fastest-growing market. But the road ahead will be longer and more difficult than predicted in the upbeat press releases from Washington, Ottawa, Beijing and elsewhere.
Tim Armstrong is counsel to legal firm McCarthy Tétrault. He has served as Ontario deputy minister of labour (1976-1986), Ontario's agent-general for the Asia-Pacific Region (1986-1990), and deputy minister of Industry, Trade and Technology (1990-1993).
This opinion piece below originally ran in The Toronto Star, Canada's largest circulation newspaper, on July 21, 2000. It was written by Tim Armstrong. Q.C., a lawyer and a former Ontario deputy minister of labour and of industry and trade. Mr. Armstrong also served as Ontario's Agent General for Asia, based in Tokyo. He is now counsel to McCarthy Tetrault, Canada's largest law firm. Mr. Armstrong is also an arbitrator.
Beijing is well able to host 2008 Games.
It will take a major event to dislodge city as odds-on favourite.
By Tim Armstrong
Why do nine cities, including Toronto, believe that they can out-bid Beijing for the 2008 Summer Olympic games? On a recent visit to Beijing, I took time out from a conference on China=s imminent accession to the World Trade Organization to tour some of the city=s sports sites and, through discussions, to try to assess the basis for the widely-held view that Beijing is the leading contender for the selection to be made by the IOC in Moscow next July.
I began my quest with recollections of Beijing in the1980s, when I was a frequent visitor as Ontario=s Agent General for the Asia Pacific Region. Fifteen years ago, Beijing faced a host of urban problems, including its decrepit and overcrowded airport, its absence of controlled access thruways, its inadequate hotel accommodations, its third-rate telecommunications services and its choking pollution. Improvements had been made by the early 1990s, but substantial problems remained and I was therefore not surprised that Beijing lost out to Athens in its bid for the 2004 games.
As a result of my recent visit, I am convinced that it will take either a domestic horror of the proportions of Tiananmen Square or an international military incident - Taiwan is the most obvious current threat - to dislodge Beijing as the odds-on favourite for 2008.
First the geopolitical considerations:
$
Its Asia=s turn. Of the modern Olympic games, fourteen have been in Europe, five in North America, one in Latin America, two in Asia and one about to be held in Oceania. After Atlanta (1996), Sydney (2000) and Athens (2004), the Asian claim is powerful if the principle of geographic rotation is to be followed.$
Of the Asian competitors - Beijing, Kuala Lumpur, Bangkok and Osaka - Beijing=s case appears by far the most compelling. With its 11 million inhabitants, it is the capital of a nation of 1.3 billion, one-fifth of the world=s population. Japan had the Games in the 1960s (Tokyo) and it would seem perverse for the first decision in the new millennium to rank either Malaysia or Thailand ahead of China$
Since 1978, China=s progress from a centrally-controlled, command system to a socialist market economy has been impressive, with annual growth rates exceeding most other nations. Its accession to the WTO, with the approval of 137 member nations, is imminent. The awarding of the 2008 Games would confirm China=s full acceptance into the international community, support its commitment to economic reform and enhance prospects for political liberalization. The IOC, known in the past for its self-aggrandizing hyperbole, now has a real opportunity - some would argue obligation - to be the instrumentality for supporting these objectives. And what a golden opportunity for Samaranch and the IOC to salvage their own soiled reputations!$
On the issue of human rights, twelve years will have elapsed since Tiananmen Square when the selection is made in Moscow in 2001. Rightly or wrongly, the fact is that the Clinton view - that political and civil rights in China will mature along with China=s embrace of market reform - has been accepted, not only by Congress but by virtually all WTO member nations, including Canada. As for the IOC, not a word is devoted to human rights concerns in the preliminary 22- part questionnaire distributed this past spring to the ten competing cities.What about infrastructure?
$
During my visit in late June, I was astonished by the physical transformation of the city. The new airport, completed last year, is the best, in design and function, that I have seen anywhere. The same may be said of the controlled- access thruway to downtown Beijing. As to the city itself, the Fourth Ring Road (65.3 kilometres, 147 overpasses) will be completed by the end of the year.$
New subway lines have just commenced full operation, with an average hourly passenger increase of 28,000, and more are in the advanced planning stages. First-class hotels have mushroomed, built and managed by some of the world=s best multinational chains.$
There are existing sports facilities in abundance - over 140, according to Beijing=s count, many used when the city hosted the First, Second, Third, Fourth and Seventh National Games, the Eleventh Asian games, the Far East and South Pacific Paralympics and several large-sized event championships and cup matches. I visited some of them: the Workers= Stadium (80,000 seats) and the aggregation of facilities used for the 1990 Asian games. Those that I viewed clearly need upgrading. The IOC has already said that to bring them to Olympic event standards, 17 will need to be renovated and eight new facilities will need to be built. Much of this renovation and new construction is underway, in part for the 2001 Universiade, the Olympic game for students, first held in Paris in 1923, an opportunity for Beijing to convincingly showcase its capacity to host a world class athletic event.How about the enviroment?
Of the problems identified by the IOC in its reconnaissance visit last year - language and translation capabilities, security, health facilities, customs and immigration issues - the only problematic one appears to be the environment. The IOC preliminary report noted AChina falls significantly below international standards@. It was clear to me during my visit that the Chinese have recognized this as their single greatest point of vulnerability. Accordingly, they have mounted a Mao-style, centrally-directed pollution clean-up program, with compliance targets which, if not met, carry unappealable Draconian penalties, including closure, for industrial and other offenders. In the week I was there, every issue of the China Daily News carried a report on progress being made on the clean-up program, which has many facets, including the transmission of substantial supplies of natural gas to Beijing from Shaanxi province to substitute for coal burning, as well as the planting of trees and grass in some 4.3 million hectares of sand areas in the 84 counties surrounding Beijing to control dust storms. This ambitious environmental/ecological improvement program is said to be funded at a cost of US$12.5 billion.
What does all this mean for the Toronto bid?
Despite the upbeat posture of the Toronto Bid Committee and its federal, provincial, municipal and corporate supporters, the case for Beijing seems overwhelmingly powerful. So far as I can see, our one possible advantage - and it should not be discounted at this stage - relates to TV viewership. If the IOC and NBC determine that TV revenues will be significantly higher from a location in a Western Hemisphere time zone, Toronto=s only competition will be Havana, in which case we should be a shoo-in. Otherwise, it will surely be a very steep uphill fight. What am I missing?
