Heads-of-government summit institutionalization in Canada & Australia: Economic liberalization and the incentive to cooperate

This study asks why Australia institutionalized its intergovernmental relations at the strategic, head-of-government (HoG) level whereas Canada did not. In the early-1990s, both federations undertook intergovernmental negotiations to redesign their respective economic unions, which were increasingly exposed to world economic shifts. The economic reform process engages what is referred to as the mechanism of continuous negotiations (see Imbrogno, forthcoming). Subsequent to these negotiations, Australia founded the Council of Australian Governments (COAG), an institutionalized HoG meeting. In contrast, Canada's economic reform effort – referred to as the Agreement on Internal Trade (AIT) – did not yield institutionalized First Ministers' Conferences (FMCs). I argue that the political economy of each country, measured by their external market integration, impacted actors' behaviour and determined whether or not the mechanism of continuous negotiation was able to expand the economic reform process to include IGR institutional reform. The political economy is an understudied variable in the IGR literature. Through archival and interview evidence, the dissertation establishes the importance of the political economy variable in relation to alternative explanations, such as partisanship, party system, and vertical fiscal imbalance. In the 1980s and 1990s, Australia's external market integration shifted from concentrated to diffuse, i.e. its exports shifted from the West toward a multitude of Asian trading partners. The risk inherent in this shift was coupled with an economic crisis in Australian growth, debt, employment, and current account balance to produce an incentive for leaders to cooperate on economic reforms. The result was continuous negotiations on economic reform during a series of HoG summits that successfully concluded economic reforms. These negotiations eventually expanded to include IGR institutional reform in order to secure the reform effort, thus founding Australia's peak IGR institution, COAG. During the same time period, Canada also experienced an economic crisis in its growth, debt, employment, and productivity. The Canadian response was twofold: reform the domestic economy through constitutional reform and negotiate a free trade agreement with the United States. When the former process failed, leaders were forced into intergovernmental negotiations to achieve domestic reform in the face of the economic crisis and the added need to adjust to USA free trade. However, when the mechanism of continuous negotiations was engaged by HoG, economic reforms were not forthcoming nor did the negotiations expand to include IGR institutional reform. In the Canadian context, concentrated external market integration with the USA produced an incentive to compete between actors. Provinces sought to retain maximal economic policy autonomy by appealing to regional development policies, seeking exemptions to internal trade rules, and refusing to expand negotiations to include IGR institutional reform. FMCs thus remain weakly institutionalized.

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