21 minute read
relationship of more than 100 years
Canada & Maine
AN INTERDEPENDENT RELATIONSHIP OF MORE THAN 100 YEARS
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Written by Stefano Tijerina, Lecturer in Management Maine Business School, University of Maine
MAINE’S ECONOMY HAS historically been interconnected with the Canadian economy, and more particularly with the provinces of Québec and New Brunswick. Before the borderland was carved out by the nation building process of the 18th century, the economic and social dynamics of the Wabanaki Confederacy had already revealed the interdependency of this unique geographical region that, through its rivers, linked the interior to the coast. From settlement and through colonialism, independence, nation building, and the ebbs and flows of the first era of globalization (1870-1914) and into this second era of globalization (1944-present), Maine’s economy has remained intertwined with Canada’s economy. The fact that in 2020 Maine’s exports1 to Canada represented 53% of the state’s total exports and imports2 from Canada represented 67% of the state’s total imports indicates that the regional interdependency will only continue to grow. A regional trade relationship that began with informality evolved, in less than 200 years, into a well-oiled regional trade dynamic that has incrementally integrated Maine’s economy into the Canadian market.
Informal trade across the Wabanaki Confederacy had existed before the colonialist era. That same pattern of informal trade continued to evolve across the newly absorbed French and British territories, slowly forming and integrating new emerging markets that resulted from the commodities-based design of colonial powers. By the early 1700s, what was known as British North America, was not only intertwined as a regional market but also interconnected to the British Caribbean. Through the Jamaican entrepôt, Maine and other parts of the British North American market were integrated into the broader
1 “Foreign Trade: State Exports from Maine,” Census. gov, accessed April 1, 2021, https://www.census.gov/ foreign-trade/statistics/state/data/me.html 2 “Foreign Trade: State Imports for Maine,” Census.gov, accessed April 1, 2021, https://www.census.gov/foreign-trade/statistics/state/data/imports/me.html.
British-controlled global market, further strengthening the links between Maine and our regional neighbours.
By the mid-1700s, Maritime schooners made their way into British-controlled ports around the world, returning fully loaded with commodities that would be filtered back into the Maritime markets via Boston, Falmouth, Casco Bay, Portland, and Penobscot Bay.3 This further integrated our regional market, connecting Maine and the Maritimes region to the global market system.
After the American Revolution, Maritime commodities began to be re-exported through Maine, New Hampshire,
3 Stefano Tijerina. Opportunism and Goodwill: Canadian
Business Expansion in Colombia 1867-1979. (Toronto:
University of Toronto Press, 2021): 13-18. and Massachusetts ports.4 Not only were the commodities re-exported but also relabelled at the new port of origin. Maritime vessel owners opted to move their merchandize through New England ports, in some instances because of lack of infrastructure and investment capital, and in other instances because they were not interested in assuming the risks of shipping to markets such as the Caribbean.5 Local and international trade would continue to intertwine the regional market, as the colonial economy of British North America adapted to the new social, economic, cultural, and political dynamics of the young American nation. The tightening of the border and the American pursuit of a self-sufficient market would force Maine’s relationship with the Maritimes to spiral into informality. Contraband and other dynamics of informal trade would define the regional market of the late 1700s and early 1800s, and more so after the War of 1812. Nevertheless, the ports and the traditional trade routes of the pre-colonial and colonial eras would continue to feed the local markets of Maine with value-added goods and commodities.
The expansion and sophistication of the American market would force the British Empire to revise their protectionist policies against the United States, slowly bringing new life to the regional markets of New England and the Maritimes. Ultimately, and as part of the British construction of the first era of
globalization, the British and Americans would sign the Canadian-American Reciprocity Treaty of 1854. This first attempt at a free trade agreement would lay down the foundations for the development of an integrated market, incrementally increasing the porousness of the border. Small business owners, farmers, early industrial manufacturers, exporters, importers, bankers, insurance brokers, together with cross-border families, and newly arriving immigrants would take the
laborious effort of intertwining a regional bilateral market to a new high.
Likeminded capitalists on both sides of the border began to see the advantages of a more porous border, juxtaposing the loyalists, nationalists, and protectionists that favored a hard border. This ideological confrontation would set the tone for the never-ending debates between nationalists and free traders.
The short-lived first attempt at a free trade zone that integrated two sovereign national markets (UK and the USA) came to an end in 1866 as a direct consequence of the American Civil War. Nevertheless, the 12 years of free trade experimentation brought economic growth and prosperity to the borderland region. The resulting increase in the size of the market convinced business leaders who benefited from the market expansion that free trade was good policy, and it served as confirmation to business sectors that were negatively impacted from the policy implementation that protectionism was necessary. This dynamic was replicated across Maine and its borderland region.
The trade agreement had revealed to Canadian capitalists the potential benefits of integrating their market to the American economy. It also had planted a seed of independence and autonomy across British North America (BNA), and eventually paved the road for Canada’s Confederation in 1867, a step closer to independence and sovereignty that would culminate with signing of the Statute of Westminster in 1931.6
Exports to the United States grew 365% between 1853 and 1866, setting the structure and technology that has now been going on for more than 160 years and that continues to change and move forward as new technologies and market integration demands surface. However, the boom of the first era of globalization did not last long.
The American Civil War and the abrogation of the Reciprocity Agreement of 1854 forced Maine’s borderland regional economy back into informality, taking advantage of the historical trading
stage for regional integration, including Maine’s initial interconnectivity to the Canadian market.7 The “hunger” by provincial interests “for a share of the traffic of the Mississippi basin” and the borderland region of the North East was enhanced by the construction of railway infrastructure, strengthening the region’s interconnectivity while laying down the foundations for future regional interdependence.8 Railway mileage in BNA increased from 66 miles to 2,065 miles between 1850 and 1860 — by then Montreal had been connected to Boston, New York, Portland, and Chicago.9 This marked the beginning of a process of regional market integration through infra-
6 For more on the 1854 Reciprocity Agreement see, for example, Stefano Tijerina. “Deja-vu From 1854: Free Trade,
Protectionism, and the Canadian-American Reciprocity
Treaty.” In Mark S. Bonham, ed. Trade-Offs: The History of Canada-U.S. Trade Negotiations. (Toronto: Canadian
Business History Association), 2019. 7 Lawrence H. Officer and Lawrence B. Smith, “’The Canadian-American Reciprocity Treaty of 1855-1866,” The
Journal of Economic History 28, no 4 (December 1968): 599. 8 William J. Wilgus. The Railway Interrrelations of the United
States and Canada (New Haven: Yale University Press, 1937), 38. 9 Wilgus, The Railway Interrrelations of the United States and Canada, 39-40. routes that, over pre-colonial and colonial times, had been carved out throughout the region’s geography. This shortlived period of instability and informality was then followed by the Reconstruction era, a period of nationalism and isolationism that resulted in the hardening of the border.
Hardened by tariffs and other protectionist measures, residents and businesses on both sides of the border distanced themselves from the trade dynamics of a regional market. This did not impede the flow of immigrant labor into the industrial magnet that was the New England economy. Thousands of Irish and French Canadian immigrants travelled south from the Maritimes and the Québec province, in search of jobs in the rising industrial markets across Maine and New England. This movement of people strengthened the regional links and further intertwined the regional economy as capital and labor moved back and forth between Maine and Canada.
The establishment of the Canadian Confederation in 1867 and the western expansion of the United States further strengthened the borders during the last
quarter of the 19th century, but this did not impede business leaders in New England and across the 49th parallel from considering the possibility of annexing what was then known as the Dominion of Canada. By the year 1900 the United States market represented 15% of the world’s total exports and it accounted for close to 5% of the world’s total population.10 The accelerated growth and increasing relevance of the American economy, within the global market system, resulted in an increasing inflow of foreign direct investment (mostly British) that lead American business leaders to the conclusion that a new reciprocity agreement with Canada would be possible, considering the trade advantages for both markets.
Canadian nationalism driven by the locally centered business and political elite that was benefitting for the privileges of the British Commonwealth trade dynamics and the imperial capabilities of the United Kingdom eventually blocked the signing of the 1911 Reciprocity Agreement, claiming the potential threat of Canada being annexed to the American market. This did not impede the borderland economies from further integration — it simply slowed down a process that was inevitable. By the year 1913, half of U.S. exports to the Americas went to Canada, and in many instances re-exported into the European market.11 Canada was well on its way to becoming a key trading partner for the United States.
In the absence of a trade agreement, Maine’s economy continued to intertwine itself with the Canadian economy via immigration of labor, remittances, informal borderland trade, and the expansion of industrial, fishing, and agricultural production. At the same time, it continued to phase the challenges of negative propaganda fueled by Canadian and American nationalists and protec-
10 Robert E. Lipsey. “U.S. Foreign Trade and the Balance of
Payments, 1800-1913.” (working paper no. 4710, National
Bureau of Economic Research, April 1994), 5. 11 Ibid., 40. tionists. This, together with party politics and British imperialism, became the pillars that obstructed the liberalization of the market during the first half of the 20th century.12
Nevertheless, the informal market thrived throughout the interwar period. During Prohibition, Maine’s thirst for alcohol was quenched by the illegal trafficking of booze across the border. Immigrant labor from Canada continued to flow into the Maine market as its manufacturing sector expanded. By then the fishing industry was intertwined, and so was the lumber industry and parts of the agricultural sector. Maine, and perhaps other borderland states, became the exceptions of American isolationism during the first half of the 20th century.
During the Second World War, the demands of the war economy resulted in the integration of the Canadian and the American military production systems, ultimately unleashing the market forces that would eventually pave the way for the integration of the two markets. The Ogdensburg Agreement of 1940 established the framework for closer continental security cooperation between Canada and the United States, and the Hyde Park Declaration of 1941 allowed American-produced war equipment to
12 H.S. Paton. “Reciprocity with Canada: The Canadian
Viewpoint.” The Quarterly Journal of Economics, 35, no. 4 (August 1921), 578. be manufactured in Canada. These bilateral initiatives would further intertwine Maine’s economy with the Canadian market.
Maine’s interconnectivity with the Canadian economy increased after the war, as the agreements of 1940 and 1941 transitioned into a non-war economy, keeping intact the possibilities of further integrating borderland markets, production, manufacturing, and supply chains. These possibilities were eroded by the Cold War dynamics of the 1950s and 1960s that deviated the agenda away from trade and toward national security issues. Nevertheless, the border between Maine, New Brunswick, and Québec became porous as cross-border families moved back and forth on a daily basis, and as commerce across the border became part of a modern cultural reality of border towns. Culture, and not trade, constructed the dynamics of the border during this period.
As the cultural forces were intertwining the region, the forces of globalization, spearheaded by our government on behalf of certain business sectors, began to take its toll on industrial and manufacturing operations across Maine. For example, starting in the 1950s, the cannery industry, once a thriving Maine industry employing thousands of workers, slowly died out as it became incrementally exposed to the challenges of
globalization. The value-added operations eventually left the state in search of lower labor costs, lower environmental and resource management standards, and less regulated markets. Provincial government intervention in Canada maintained the industry alive in the Maritimes region, in many cases subsidizing operations in order to maintain the local economy alive. Eventually, part of the cannery industry moved to Canada, and today Maine provides them with the raw commodity for their own value-added operations.
The lumber and fishing industries experienced a similar trajectory to the cannery industry, shifting manufacturing and other value-added structures to the Canadian market, while preserving the border dynamic that kept the commodity regionally integrated. Unfortunately, that was not the case for the shoes, apparel, and other industrial and manufacturing industries that had kept the regional economy thriving.
After the 1970s and into the 1980s, with the rise of neoliberalism, regional integration was no longer seen as a loose and unregulated cultural dynamic but as a policy-driven effort based on macroeconomic principles of costs benefit analysis. While some Mainers and other Americans were escaping the military draft by crossing the border into Canada, provincial-driven companies such as Hydro-Québec were figuring out ways to strategically integrate the region through the sale and distribution of electricity.
Furthermore, the Canada-United States Automotive Products Agreement of 1965 had allowed business leaders and policy makers on both sides of the border to imagine a bilateral world without tariffs. Bilateral integration aiming at business efficiency and efficacy was seen as a potential reality. Easy for Hydro-Québec to imagine an integrated region that could be serviced on both sides of the border or for Irving to imagine the expansion of its services into the Maine market, but more complicated for Maine communities that were being left behind by the industrial and manufacturing businesses that incrementally closed their operation in Maine in order to relocate to more advantageous markets across the United States, prior to leaving the United States in pursuit of greater global opportunities in the emerging markets of the world.
As globalization slowly unfolded, Maine, New Brunswick, and other Maritime economies began to feel the pain, adapting to the new realities of the global market system. Maine, as well as New Brunswick, lost their industrial and man-
ufacturing capabilities in the 1980s. The signing of the Canada-United States Free Trade Agreement (CUSFTA) in 1987 established new interconnections between new regions across Canada and the United States, while disenfranchising regions across the border that had been intertwined historically, as in the case of Maine and its Canadian borderland region.
The opening of the border for trade, the elimination of tariffs, and the inte-
gration of production systems across all sectors of the economy was strengthened even further with the signing of the North American Free Trade Agreement (NAFTA) in 1994, which further expanded the liberalization of the market into Mexico. States like Texas and California became intertwined with the Canadian and Mexican economies as a result of the free trade policies, while economies like Maine were left behind.
This did not impede the cultural and local business exchange from thriving. The regional tourist industry expanded, as Canadians turned Maine’s coastal region into their destination of preference. The introduction of the 21 and over drinking age policy in Maine resulted in a new cultural tradition of borderland kids travelling north in order to get a taste of beer and spirits. Meanwhile, the dynamics of cross-border families and the borderland cultural ties interconnected the regional economy even further, taking advantage of the business opportunities offered by the newly created free trade zone. Informal markets, of course, also thrived. This included cannabis, overthe-counter medicines, and even human trafficking.
The development of a complex regional economy, a new economic and social experiment, was well on its way when September 11 happened, forcing the rigidity of the border once again. In this historical ebb and flow of the porousness of the border, Maine’s economy was once again hampered but perhaps, more so in this case, because of the levels of dependency that it has reached with the Canadian economy. By the year 2001, Maine’s economy depended on Canadian tourists, the state received its energy from Hydro-Québec as it replaced its nuclear energy-based
grid with Canadian hydropower, capital had been injected into retail, hospitality, food, and entertainment in towns across Maine tailored for Canadian consumption, and even infrastructure investment had been risked in order to capitalize on the new borderland dynamics.
From that moment onward, Maine’s economy has struggled to get back on its feet, regaining its momentum during the first decade of the 2000s, only to find its dependency on the Canadian economy increase even further. Our lumber industry is now more intertwined with the Canadian market than ever before, and so is the lobster industry. We continue to depend on Canadian tourism, and the economic development of our border towns continues to heavily depend on the Canadian consumer. Moreover, cross-border traffic continues to be at the heart of the economic development of many towns.
The regional economy thrived and overcame the challenges of 2001 only to face another challenge under the financial crisis of 2008, and now under the 2020-2021 pandemic. Contrary to other borderland economies that were artificially connected through the surfacing of new supply chain routes and commodity exchanges, Maine’s regional interconnectivity with New Brunswick and Québec has created, over time, mechanisms, systems, and cultural dynamics that stand the test of time.
Overtime, the Maine-Canada borderland “has cemented an interdependent relationship that has overcome the dismantling of the 1854 Reciprocity Agreement, the failed 1911 Reciprocity Treaty, the nationalist-centered interwar years, the Great Depression, the neoliberal adjustments of the 1980s, the anti-free trade initiatives of the 1990s and early
2000s, and the global financial crisis of 2008. The most recent partial closure of the border crossings by the Canadian government, resulting from the threats of the COVID-19 pandemic, have once again revealed the critical interdependence of this particular borderland region. Maine, over time, has become somewhat isolated from the rest of the U.S. and thus more dependent on Canada.”13 In 2020, more than 50% of our bilateral trade depended on the Canadian market.14 Moreover, people-to-people ties and daily cultural exchange across the border remains and will continue to be essential “to the region’s wellbeing and long-term sustainability.”15 History continues to confirm that Maine remains and will continue to be part of three constructs — the First Nation’s construct, New England’s regional collective consciousness, and the cultural and business dynamics of the Maine-Canada borderland.
13 Stefano Tijerina. “Regional Analyses: Maine – Québec –
New Brunswick.” In Border Barometer, Border Barometer
Research Institute, Western Washington University, 2021.
Accessed April 25, 2021. https://cedar.wwu.edu/cgi/ viewcontent.cgi?article=1126&context=bpri_publications 14 Foreign Trade: State Imports for Maine,” Census.gov, accessed January 22, 2021, https://www.census.gov/ foreign-trade/statistics/state/data/imports/me.html 15 Stefano Tijerina. “Regional Analyses: Maine – Québec –
New Brunswick.” In Border Barometer, Border Barometer
Research Institute, Western Washington University, 2021.
Accessed April 25, 2021. https://cedar.wwu.edu/cgi/ viewcontent.cgi?article=1126&context=bpri_publications
As Doug Herling and David Flanagan walk through the lobby at Central Maine Power’s (CMP) Augusta headquarters each morning following COVID safety precautions, they are reminded of one thing: the company’s humble beginnings and just how far it has come. They pass by a 1933 Ford Model T CMP truck, which sits in front of a timeline documenting the company’s 121-year history.
Every day, CMP’s primary obligation is to provide safe and reliable power for all 646,000 customers across its 11,000-square-mile territory. CMP is also committed to giving back to the communities that it serves. Today, the company’s community giving is complemented by grants made by the Avangrid Foundation, housed in CMP’s parent company. Using shareholder dollars, the company carefully targets nonprofits that not only help with immediate community relief, but also focus on making investments in Maine’s future. At CMP, they are Mainers helping Mainers.
David Flanagan, CMP’s executive chairman, has a history with the company that started 26 years ago. “It has always been our tradition to make sure that everything we do, whether it is working to strengthen Maine’s energy infrastructure or investing directly into our communities, is done with an eye toward the future. Mainers depend on us and we take this responsibility very seriously.”
For example, CMP has been a strong supporter of workforce development efforts — ensuring young Mainers and adults have an opportunity to find a career in the state they know and love. Between the Avangrid Foundation1 and CMP, a long-term partnership has been established with the Kennebec Valley Community College’s Electrical Lineworker Technology Program through a $350,000 investment that has funded a training ground for future CMP employ-
ees and scholarships for students. The company and the Avangrid Foundation also have invested $550,000 over 25 years with Jobs for Maine’s Graduates (JMG), a proven development program to give young people a career direction and important life skills.
The Avangrid Foundation is also forging new approaches to workforce development and with CMP provided critical support for MaineSparks, a Maine Community Foundation program to connect adult learners with the education, information, coaching, and resources they need to secure meaningful, long-term employment, and boost their careers. The Foundation is also the lead funder in the new Working Cities Challenge, a Federal Reserve Bank of Boston program that supports eight Maine rural development programs addressing specific barriers to economic and career development that is just off the ground.
Herling credits these programs with both creating employment opportunities for Mainers and helping develop CMP’s workforce. “These partnerships are an important part of the critical effort to keep graduates in Maine by providing specific training needed for good paying jobs in our industry.”
CMP has also partnered with organizations such as the Olympia Snowe Women’s Leadership Institute, the Mitchell Institute, and the Maine Blue Collar Scholarship Foundation. Through these partnerships, CMP is funding initiatives that give young and motivated Mainers the tools they need to succeed, building a strong, resilient workforce for the state.
And of course, CMP always steps up to the plate to support Maine in its time of need.
In 2020, CMP donated to over 100 Maine charities, many of them in response to increased needs due to COVID-19. “We are accustomed to responding quickly to evolving situations, so it was seamless for us to pivot our giving priorities, allowing us to be as responsive as possible,” said Flanagan. “From donating masks early in the pandemic when they were in short supply, to contributing $200,000 to the United Ways of Maine for emergency food assistance, we were able to respond to our communities’ needs in a targeted and prompt way.”
1 The Avangrid Foundation is an independent 501(c) (3) organization and the primary charitable arm of the AVANGRID. CMP is a wholly owned subsidiary of AVANGRID.
Doug Herling, CMP President and CEO
David Flanagan, CMP Executive Chairman
