The dynamics of federalism, subnational markets and trade policy-making in Canada and the US

ABSTRACT

Preferential trade agreements are now the dominant trend in the international trading regime. Unlike earlier ‘first generation’ agreements, the new agreements became more comprehensive in their coverage, impinging on areas that are subject to subnational jurisdiction of federal systems. Given constitutionally-prescribed competences allocated to subnational governments, the diversity of interests and sensitivities of subnational entities bring deeply entrenched regulatory practices under scrutiny. Few studies have focused on whether the combination of economic liberalization and political fragmentation will push federal and sub-federal entities to address domestic market fragmentation. We examine whether international market liberalization fosters domestic regulatory and structural reforms to cross-border barriers to trade in Canada and the United States. We show that while the political incentives and functional pressures generated by free trade agreements have fostered attempts at addressing internal market restrictions in Canada, the US has not followed the same path due to weaker mechanisms of intergovernmental coordination.

KEYWORDS:

• Federalism
• trade
• internal markets
• Canada
• US

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Maria Helena Guimarães http://orcid.org/0000-0003-1432-4113

Notes

1 See US Constitution Article I, Section 10 clause 2, and Tenth Amendment and Canadian Constitution Act, 1867, Section 121.

2 The 1969 Vienna Convention on the Law of Treaties, in its article 27 on Internal Law and Observance of Treaties establishes that a party may not invoke the provisions of its domestic law as justification for its failure to comply with their international treaties obligations.

3 In line with the Vienna Convention, Article XXIV Paragraph 12 of the GATT 1994 as well as the WTO Understanding on the Interpretation of Article XXIV, each WTO member is responsible for the observance by regional and local governments of GATT provisions.

Additional information

Funding

This work was supported by Council on Foreign Relations: [grant number IAF Fellowship 2018-2019]; Fundação para a Ciência e a Tecnologia: [grant number SFRH/BSAB/135439/2017].