I. INTRODUCTION

A WORLD ON THE MOVE: THE EVOLVING CONTEXT FOR FOREIGN POLICY

The dangerous but predictable post-war system is gone.

· The international community must increasingly navigate in uncharted waters. The peaceful triumph of democracy destroyed the Soviet bloc and with it, the bipolar world. Many of the old certainties that guided foreign policy through the Cold War have collapsed, but now, more than five years after the fall of the Berlin Wall, construction on a new order is only at its beginning. It may not be fully shaped for decades, although some of its outlines, including the emergence of centres of influence in Europe, Asia and the Americas to replace the old superpower-centred world, are appearing. This is therefore a time of great uncertainty, but also of great opportunity.

Authority is dispersing.

· Some of the prerogatives and functions of the state, still the main actor in the international system, are passing to sub-national and supra-national actors; others to NGOs and multinational corporations. In the case of some particularly vulnerable states, armies and even criminal networks have gained excessive influence.

Power, however, is also moving into the hands of electorates, where it belongs.

· South Africa is an excellent example of this. Its hopeful message may spur renewed development regionally. As wealth is created and middle classes grow, democracy is also taking root in Latin America and Asia. This trend will likely continue, in particular, wherever the power to make economic decisions rests in an ever greater number of hands, as in South-East Asia. In Latin America, a transformation over the past 15 years has introduced democracy, human rights and market orientation as the norm towards which the region strives. Consequently, economic growth is now taking hold there. However, democracy and free markets are still fresh and fragile in many places and cannot be taken for granted. In this decade, we have already witnessed assaults on fledgling democracy - in Russia, for instance - and reversals, as in Nigeria.

Success increasingly derives from economic wealth rather than from military might.

· The collapse of the former Soviet bloc resulted not just from its inability to compete with the West militarily, but also from the inability of the Soviet economic system to generate an acceptable standard of living for its people. The new powers among developing countries are generally those whose influence derives from striking economic success.

While military capacities and might will remain important factors in the international system of the future, international affairs will be rooted increasingly in economic and trade relations between countries and regions. As well, in the knowledge-based societies of the future, technological ingenuity will displace some other, more traditional, sources of influence.

Poverty, inequality and lack of human rights still burden too many people and create new tensions.

· There has been an immense increase in the world's collective wealth. Some developing countries, formerly among the poorest, have emerged as dynamic economies and important trading partners for Canada. Other countries, however, and many people within better-off societies, have failed to share in these gains. In the last 30 years, per capita GDP in East Asia has increased nearly five-fold and that of South Asia has doubled. By contrast, that of sub-Saharan Africa has stagnated and, in some countries there, has declined. More than a billion of the world's people still live in abject poverty. Economic disparities within and among countries, if left unchecked, will continue to be a powerful source of political, security and humanitarian crises. Human rights abuses in some countries compound economic problems as does environmental degradation. Sustainable development remains an elusive objective.

Ethnic and religious divisions have also emerged, and weapons are spreading.

· Ethnic and religious divisions reflect, in some cases, tensions only temporarily suppressed by totalitarian states and the pressures of the Cold War. In others, they represent the anxiety of those opposed to what they perceive as the intrusion of global trends. These factors are creating the potential for a "new violence" of a more complex and changing character than our international institutions were designed to manage. Conflict resolution, as a result, will become even more difficult than in the past. The conflict in the former Yugoslavia is just one example of this broad challenge.

International terrorism continues. In a few countries, power has simply fractured into anarchy, while in others, the authority of government is increasingly challenged.

Although the demise of Cold War rivalry has reduced the likelihood of global nuclear war, looser control over fissile weapons material in the former Soviet world and a wider diffusion of weapons technology raises the spectre of destabilizing threats from new forces set loose by local conflicts and international criminality.

Security means freedom from a wide array of challenges.

· The new international context also imposes "non-traditional" threats, in particular, threats that transcend political borders and affect whole regions or even the globe. International crime and disease, global warming and mass involuntary migration are examples of the more negative aspects of greater global integration.

· We now recognize the danger posed to this and future generations by environmental degradation, social inequity, lack of economic opportunity and overpopulation. More and more, the concept of security is focussing on the economic, social and political needs of the individual. In tackling these issues, we will require clarity in our thinking about the sources of each threat and problem, and about which combination of instruments - including development cooperation, trade liberalization and, if needs be, preventive diplomacy and peacemaking - is best able to address them.

Globalization has dramatic economic effects.

· All societies are having to respond to the pressures of economic globalization: the increasing capacity of industries to distribute production, the power of financial markets to influence the value of currencies without regard to political geography, and the enormous volume of investment capital which flows daily across borders at the push of a button. International capital markets have the strength to affect the independent capacity of governments to guide economies. Globalization means that economies respond less to political control than before. Societies look to their governments to foster economies that succeed in the global system but produce benefits locally.

Globalization also affects culture.

· Globalization also has a powerful impact on culture. Carried on the information highway and tied by growing transborder links among groups and individuals, culture now has assumed a global character.

This has given greater scope for vibrant cultures to flourish across borders; it has raised, however, concerns about global homogeneity stifling distinctive local expression and identity. Countries are looking for the appropriate balance between openness to international culture and support of their own cultures to protect and enhance local identity and diversity.

This evolving context changes the nature of state sovereignty.

· Thanks to technological innovations, the adoption of outward-looking political and economic policies, and the other changes described above, borders Have become more porous to the flow of ideas, people and capital. This has diminished the ability of states to act independently since they can no longer isolate themselves from the world without unacceptable domestic consequences. However, especially for smaller and medium-sized countries, sovereignty has also been enhanced since the growing number of international rules on security, trade and other matters better protects states from arbitrary and unilateral action by other international actors.

States differ in their international approach.

· In some parts of the world, the state is struggling to maintain or reassert legitimacy and order. The "tiger" states of Asia, by contrast, are newly strong and are projecting their interests more than ever.

The developed western countries are in a different position. The political consensus that sustained the welfare state and internationalism is under stress from fiscal pressures and globalization. Maintaining employment has become the dominant social challenge.

Room for government action in developed countries is constrained by debt loads. Doing a better, more innovative, more focussed job with less will characterize foreign as well as domestic policy making for the foreseeable future in all these countries. Choices --many difficult and painful -- will have to be made.

Only states with clear objectives, acting on a strong domestic consensus, will be able to deploy significant influence and play an effective role in this new world.

Foreign Policy Making Will Change in the New Context

Domestic and foreign economic policy will be increasingly linked and mutually supportive.

· As stated by the Special Joint Committee, "Domestic policy is foreign policy...foreign policy is domestic policy." For example, international trade rules now directly impact on labour, environmental and other domestic framework policies, previously regarded as the full prerogative of individual states. The implementation of international environmental obligations, for instance, could have major domestic implications for producers and consumers and impact on both federal and provincial governments. At the same time, in a world where prosperity is increasingly a function of expanding trade, foreign policy will be driven more than ever by the domestic demand for a better, freer and fairer international environment for trade.

States will cooperate with each other even more.

· One reaction among states to these changes has been to emphasize cooperation for mutual advantage. States have been increasingly willing to enter into International Agreements that voluntarily cede aspects of economic sovereignty. They do this, through regional trade arrangements for example, so that their societies can in turn receive benefits that are unattainable when acting alone. Advanced, trade-reliant countries, such as Canada, lead in the creation of a system of international rules to govern the collective behaviour of states because they see binding rules as providing the best basis for the widest cooperation and for protection against unilateralism.

Economic integration is moving forward more broadly as a result.

· At the global and regional level, there are an increasing number of rules-based regimes that are further facilitating integration. These have spurred private sector economic activity, stimulating trans-border flows of investment and trade to increase at an accelerating rate. However, as regional organizations develop, there is the worrying possibility that they may turn inward and that the world will evolve into competing economic blocs. Multilateral economic and trade institutions, as well as relations among regions, must evolve To contain this risk and be mutually reinforcing.

International roles are evolving.

· As the international system changes, so too do the traditional roles of the major players. The United States is the world's remaining superpower, economic and military. It is still adapting to this role. The European Union (EU) is becoming a political actor in its own right as well as an ever-more integrated economic entity. The transatlantic partnership continues to lead in defining the rules of the emerging international system, but its relative power is being shared increasingly with other regions.

More economic power is moving to the states of Asia, now led by Japan, and political influence will follow it. In particular, China will continue to emerge, not only as a regional but also as a global power in every respect. The Asia-Pacific Economic Cooperation (APEC) forum is becoming an important focus for cooperation around the Pacific Rim. Latin America and Central and Eastern Europe are also becoming centres of gravity as their economies and political cultures modernize. The potential of Russia as a major partner in the world system must also be factored into the picture.

International relationships - bilateral and multilateral - must also change.

· In the new international system of shifting political and economic power, countries cannot rely on rigid adherence to only traditional relationships with old partners. Bilaterally, good relations with old friends will remain very important, but, increasingly, partners will choose each other to attain specific objectives or to reflect diversity in pursuing new long-term prospects. Variable alliances will increasingly become a pattern in international relations.

Similarly, countries are reassessing their approach to multilateralism, becoming much more tough-minded. Many, including Canada, are dedicated to strengthening the system. However, none can take for granted that institutions will respond effectively to the challenges before the world community unless the political will of their members is fully engaged. Moreover, in a tight international fiscal climate, no institution will be immune to pressures to demonstrate the value that it adds to the affairs of its members. Some institutions, like the United Nations (UN), need reform to bring them in line with new realities. Others, like the World Trade Organization (WTO), are already oriented in dynamic new directions.

The new regionalism is both an opportunity and a challenge.

· The rise of regional organizations provides new fora for countries to pursue their foreign policy objectives. Historically, Canada's emphasis on multilateralism has rested, among other reasons, on an understanding that this approach would help limit the scope for major powers to act unilaterally. Multilateralism, in its evolving forms, remains a priority for Canada, but now we can also capitalize on our own identification and partnership with several regions to achieve our objectives.

Each major regional grouping has its own characteristics. The EU is deeply engaged in building political and security co-operation as well as in the continuing process of economic integration. The countries of the Asia-Pacific region are only beginning to discuss security collectively, but they are making significant progress towards greater economic cooperation through APEC. The North American Free Trade Agreement (NAFTA) remains a trade area without plans for closer political integration, although Canada, which already works productively on a wide range of international issues with the United States, intends to work more closely with Mexico on many issues in the future. The Organization of American States (OAS) offers much potential in a variety of fields, which we will be working hard to develop. Recent evidence demonstrates that regional cooperation in Africa, through the Organization of African Unity (OAU) and otherwise, is also possible. This is a welcome and important development.

We have influence and allies in all of these regions. The continuing challenge will be to use our assets and multilateral engagement prudently and effectively as the regional systems themselves evolve.

Other groups reflecting shared interests will also be influential.

· Institutions such as the Commonwealth and the Francophonie, to which Canada belongs, will be an important complement to regional arrangements. They are valuable fora for countries that have diverse national interests but also shared values and objectives in addressing global challenges. Most critical, because of the power concentrated there, is the role of the Group of Seven (G-7) leading industrialized democracies (Canada, US, Italy, Japan, Britain, Germany, France). The Halifax Summit, which Canada chairs, will be a key opportunity for Canada to exercise world leadership on issues on the international agenda.

Common Values for Consistent Direction

· New approaches are clearly needed for the management of international relations. They will, however, ultimately lack consistency and effectiveness in the absence of basic values. The foundation that supported foreign policy in the past has eroded: the old external military threat posed by the confrontation of superpowers has all but gone; ideologies and religion do not unify; nor, in many countries, is ethnic identity held in common.

· In countries like Canada, unity springs from pride in the civic nationality - based on shared values and tolerance, respect for rule of law and thoughtful compromise - that its citizens share. Unity around these values permits the identification of a new compass for the development of foreign policy in a world where sweeping certainties have been replaced by doubts about what is ahead and where the surest path lies.

There is a Strong Consensus for an Active Canadian Foreign Policy

· The Government has listened carefully to Canadians over the past year for their views on the directions we should collectively pursue. Their views and priorities, in all their diversity, inform the directions outlined in this Statement.

The first major message from Canadians is that they want to remain actively involved in the world. They understand that our vital interests are engaged in the highly competitive global economic system. They are clear that our security and sovereignty must continue to be assured in a world under stress.

The second is that Canadians are confident in their values and in the contribution these values make to the international community. As the Special Joint Committee noted: "Foreign policy matters to Canadians. They have deep-rooted values that they carry over into the role they want Canada to play." Our principles and values - our culture - are rooted in a commitment to tolerance; to democracy, equity and human rights; to the peaceful resolution of differences; to the opportunities And challenges of the marketplace; to social justice; to sustainable development; and to easing poverty. Canadians wish these values reflected and advanced internationally. They also understand that culture helps to bind societies together at a time of rapid change and of the emergence of new threats to security such as ethnic strife rooted in exclusionary visions of civic life.

The third is that they understand the importance in their daily life of our success in the world. It is a success that relies on our shared values, but is only possible because we are an influential nation, asserting our interests directly around the world, including at the highest tables reserved for the few, such as the Quadrilateral Group of the world's leading traders and the G-7.

They understand, in short, that only a strong, united Canada can pursue our objectives effectively in this new international environment.

Canadians also understand the constraints.

· While Canadians strongly support an active foreign policy, they also have a realistic view about the challenges ahead and the constraints - especially financial constraints - that we face. In particular, they understand that until we get our own financial house in order, we will be seriously limited in our ability to act abroad to further Canadian objectives. Canadians recognize that we cannot do everything that we would like and that we must be selective. The Government, therefore, will continue to pursue the foreign policy objectives that Canadians demand, but will have to do so in a manner that reflects the need for even more financial prudence: "more effective and less costly" will have to be the watchwords guiding our approach to international relations, as it is to domestic programs. We will not do everything we have done in the past, nor shall we do things as we have done before.

Canada's Place in the World.

· Canada occupies a position of leadership among the open, advanced societies which are becoming increasingly influential as world power is dispersing and becoming more defined in economic terms.

· Canada's geographic location gives it an important advantage as new poles of political and economic power emerge in the Pacific and Latin America.

· Canada's cultural heritage gives it privileged access to the anglophone and francophone worlds as well as to the homelands of Canadians drawn from every part of the globe who make up its multicultural personality.

· Canada can further its global interests better than any other country through its active membership in key international groupings, for example, hosting the G-7 Summit this year and the APEC Summit in 1997.

· Canada's history as a non-colonizing power, champion of constructive multilateralism and effective international mediator, underpins an important and distinctive role among nations as they seek to build a new and better order.

Canada, thus, is in a privileged position to influence change and to benefit from opportunities as we move toward the end of the twentieth century. The Government will exercise that influence responsibly to protect and promote Canada's values and interests in the world.