Expanding the partnership?: State and provinces in U.S.-Canada relations.

Author:Anderson, Greg
Position::Essay
 
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  1. INTRODUCTION

    For aspiring junior associates in most law firms, one of the more important issues they will confront is whether they will ever be made partner. Indeed, a Google search of "how to make partner in a law firm" reveals more than 9.5 million hits full of advice and information on the merits and pitfalls of becoming partner. The challenges of becoming partner are multiple, and the measuring sticks used to evaluate potential partners are different for every firm; the quality of their work, how they relate to superiors and fellow staff, how they entertain clients, their choice of outside activities, and even the literature they read are sometimes considered. Some even refer to the "Cleveland Airport Rule" whereby potential partners are evaluated based upon whether you would want to spend the night stranded in the Cleveland Airport with them (Bloomberg Business-week, February 17, 2010).

    For the first seven to nine years of an associate's life in a law firm, they and their work are constantly being evaluated for its potential to translate into equity ownership in the firm. For many associates, it is a steep hill to climb. Only a small percentage of associates hired by most firms are still with, the firm a decade later, and an even smaller select group actually make partner. For a select few, partnership offers prestige, power, and influence on the direction of the firm. Some firms have moved toward a two-tiered form of partnership (junior partners) in which some associates are offered non-equity partnership--salaried employees rather than full equity shareholders. Some associates simply leave the firm upon reflection about their prospects for partnership, while others are quietly asked to seek alternative employment.

    The point is that equity partnership in law involves an assessment of one's broad contribution to the success of the firm--and with it considerable responsibility. As the plethora of factors considered before being made partner suggests, the size and importance of an associate's "book of clients" is a necessary, but not sufficient, factor in being made partner. One's success as an associate does not guarantee meaningful contribution as partner. Similarly, an associate's contribution to the firm might be valuable, but only as a junior partner, minus the prestige, power and influence on the firm's direction enjoyed by equity partners.

    This paper asks a simple question: Are U.S. states and Canadian provinces in line to make equity-partner, or will they be asked to leave the firm? The analogy of the law firm is obviously complicated by the evolution of both. the US.-Canada partnership itself and the differing trajectories of federalism in each country. Much as the hiring of associate lawyers precedes partnership, the Westphalian state predates the rise of either brand of federalism. As a legal partnership contemplates adapting to a changing legal environment by bringing in new associates who can contribute to the partnership, the Canadian and U.S. versions of the Westphalian state have evolved to incorporate federalism as part of the creative dynamism of each country's contribution to bilateral partnership. In assessing whether to ask states and provinces to become partners or leave the firm, more than just the size of the business they bring in, their importance within each federation, or their eagerness to be involved needs to be taken into consideration.

    This examination of the sub-federal contribution to partnership begins in part two with a brief exploration of what "partnership" actually is in the context of U.S.-Canada relations, followed in part three by an overview of many of the changes to the international system that have contributed to the growth in sub-federal influence on the U.S.-Canada partnership. Parts four and five will attempt to sketch, in necessarily broad strokes, the relative trajectories of federalism as they have evolved in both countries as they have adapted to internal and external challenges fueling both limitations and claims on equity-partnership. And finally, part six will try to assess how the growth of associates in the U.S.-Canada partnership has helped or hindered the success of the partnership itself.

    It is the broad conclusion of this paper that sub-federal activity has been broadly useful for the U.S.-Canada partnership, but full equity-partnership is not yet in the offing. This is particularly true for Canada's provinces that should probably be offered junior, non-equity partnerships more commensurate with their contribution to the relationship.

  2. WHAT IS "PARTNERSHIP?"

    The analogy of a legal or professional partnership as applied to relations between states might seem far-fetched. How can we possibly equate the lowly legal structures of profit-making business partnerships to the high-politics of international relations? To be clear, they are not the same. Moreover, there is a large and growing body of literature focused on "multi-level," "network," "intergovernmental," or "transgovernmental" governance that highlights the numerous levels at which the interdependence of regionalism functions (Hooghe and Marks 2003; Hettne and Soderbaum 2000; Mittelman 1996; Marks et. al. 1996; Slaughter 2000, 2004). This work has, in turn, dovetailed with scholarship in international political economy looking at the growing importance of non-state actors in relation to the "perforated state" and hierarchical sovereignty (See Anderson 2012a). This essay does not deny the growing importance of a range of non-state actors in international relations or in U.S.-Canada relations in particular. Yet the analogy of partnership in a law firm is useful for thinking about the role of sub-federal governments in U.S.-Canada relations. This is because unlike private non-state actors, such as firms, sub-federal governments are another layer of formal governance vying for direct influence on international relations. Historically this has been the exclusive prerogative of the nation state.

    A related objection to using the analogy of partnership in a law firm to describe developments in U.S.-Canada relations stems from doubts about which "partnership" sub-federal governments are actually trying to become a part of. In other words, if states and provinces "want in," where exactly are they hoping to insert themselves? Sub-federal activity is frequently about the multidimensionality of federalism and not about a genuine desire for full equity partnership in U.S.-Canada relations. Much as the partners to a law firm represent their clients within the structure of the partnership, states and provinces are similarly laying claim to representation for their "clients" in the context of bilateral relations, in this case stakeholders within their jurisdictions and areas of constitutional authority. Yet the real target of sub-federal agitation may be the established bilateral partners (Washington and Ottawa) rather than equity partnership itself.

    The similarities and differences in the character of "partnership" in each context highlight a number of challenges to U.S.-Canada relations brought about by each country's unique and evolving federal structure. At its most basic, a partnership entails a kind of collective intentionality among individuals that increases the likelihood of achieving a set of shared goals or interests by amplifying their reach. In the case of law firms, partnership requires a large, lucrative client list that augments the firm's prestige and financial prospects. In most firms, degrees of partnership denote the extent of that contribution. For example, full equity partner status entails an ownership stake in the firm and is entitled to a proportion of the firm's overall profits, whereas a junior, or salaried, partner may not yet be contributing enough to the firm's direction for full equity status.

    For U.S. states and Canadian provinces, partnership also entails a contribution to the collective intentionality of the nation and to the U.S.-Canada relationship writ large. Yet it might also mean something else.

    Commercial Partnership

    There have been several forms of commercial partnership historically, but the most pervasive modern variant of partnership is the "limited liability partnership," or LLP. Unlike older forms of partnership wherein partners had full liability for the actions of others, a 1991 Texas law began a global trend toward limiting the collective liability of a firm's partners to lawsuits flowing from the actions of individual partners (Hamilton 1995; Fortney 1998). The goal, in short, was to limit the personal liability of a partner for the errors, omissions, incompetence, or negligence of the partnership's employees or other agents. Hence, while the actions of any one partner or group of employees might have financial ramifications for the viability of the firm, the legal liability for those actions would be borne by the individuals responsible, and thus be unlikely to destroy the firm. Limited partnerships such as this protect the assets of all partners by limiting their legal and financial exposure to the actions of individuals. Partnerships of all varieties are inherently fraught with the basic collective action problems associated with group decision making; for example, free-rider problems, moral hazard (shirking), or adverse selection. If an adventuresome partner decides to engage in risky, unethical, or illegal practices, the impact on the long-term goals or viability of the firm will be minimal. If the offending partner's contribution to the collective objectives of the partnership declines, if negligent behavior jeopardizes that individual contribution, or if the partner's actions are detrimental to the firm's goals, they can simply be asked to leave the partnership.

    The argument below is that U.S. states and Canadian provinces have many characteristics of partners in a law firm. Each sub-federal entity has the potential to contribute greatly to the collective...

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