Tuesday, March 29, 2005

Natural continental migration

By the end of the 19th century millions of European migrants had made their way to the New World. All were in search of opportunity and a better life. The great migratory patterns of the age created tremendous wealth, and the North American heritage was shaped by the human capital that flowed to this vast land. Indeed, the economies of Canada and the United States are still highly dependent on immigrant flows. Without immigrants our economies would be stagnant.

But in a world where increasing globalization is being fed by relatively unrestricted capital flows, our population is being handicapped by restrictions on labour mobility. Indeed, the national borders that cross the North American continent will be increasingly seen for what they are: fences that prevent human capital from maximizing value. The end result of is that North American economic development is being hindered and the human capital - that is in real terms our lives - is being misallocated and at times squandered.

The capacity for individuals to seek new or better opportuities is limited by the east-west flows enabled by the current national borders. But these flows are not the natural flows that would be the economic and cultural basis of a strong North America. Confederation, as our history tells us, is a construct of political will and engineering. It is a history of overcoming vast natural barriers to link disparate regions across a Dominion. It is a history of the CPR and commercial design on regional development. It is the history of creating an east-west axis across a continental divide.

But for those that know the regions of North America, those that know the sisterhood of the Maritimes and the Eastern seaboard, those that have traveled to the American midwest and seen the Canadian prairie too, and those that live in the Pacific Northwest, North America is a community the follows the geographic boundaries of the north-south barriers that sculpt the continent. As surely as Canada is divided by the the Precambrian Shield, the Great Plain, and the Rockies, the the pull of the communities along these divides is great. That is the nature of our shared continental history.

But what of our population now? What capacity have we to migrate as opportunity and self-interest allow? Unfortunately, only high value labour like Hollywood entertainers, rock stars, and professional athletes have true mobility in the North American divide. However, what of average Joe Canadian or average Joe American? Why cannot they enjoy the same labour mobility that allows Jim Carrey, Celine Dion, or Wayne Gretzky to maximize their human capital? It is ultimately the individual who suffers from the restrictions on labour movement but the drag on economic development in all regions commands a large, unseen opportunity cost. In what ways would our society benefit from increased labour mobility? In the most dynamic sense regional economies would be rejuvenated by inflows of human capital. Entrpreneurship and an efficient allocation of resources would enable even stagnant economies to renew economic development.

The United States faces a deep challenge in dealing with its relationship with Mexico, the border struggle representing a very real conflict of the issues spoken of here. But the resistance to migrant flows there, although charged by extreme fears in border states, is not so different from the fears and resistance that would develop when any two communities tear down walls between freedom and servitude. This would also be the case at the border of Canada and the United States. Fear of change, fear of the influx of new people has always made immigration a difficult policy for governments - despite the evidence that immigration is an extremely positive economic and cultural process. Nevertheless, Arizona fears the Mexican horde. The cultural protectionism at work in the nation state is anti-productive and violates the tenets of a free market economy. Better we embrace the community we live in, a community that should include all North Americans.

Why should we consider North American labour integration as an important and increasingly urgent policy? In a word: globalization. The net effects of globalization is a reallocation of resources to their most productive use. In our continental community we can facilitate a more fluid reallocation of labour if borders that prevented productive movement were eliminated. Labour mobility is the great missing component in our free market economies. We need to recreate the spirit of mobility that brought our parents and ancestors to the New World. This spirit will unleash new potential in the face of unfolding economic challenges. Canada would benefit from a more open border with migrants from the United States and Mexico just as surely as the United States would benefit from the same exchange. We need not depend on immigration from other continents to feed our economies. A reallocation of the current North American population would allow for greater optimization of the human capital already available.

Saturday, March 26, 2005

Man for all seasons

Canada is admirable on different levels. Indeed, Canadians are very proud of the country. Proud for what it is, and proud of what it isn't. But sitting on the edge of capitalism, uneasy with Canada's dependency on the American benefactor, many Canadians are content to stand pat on a pattern of self-righteousness. Culturally incomplete, the nation is an amalgam of historical political economy - the curious result of man conquering nature in commercial enterprise and social compromise - and the determined counterpoint to American Manifest Destiny. Indeed, for all the different forms of Canadian cultural expression, a common thread is a sense of non-Americanism. Often this expression is delivered in the most fervent anti-Americanism we could allow in a free society. It all seems very curious.

I , too, was raised in such an environment of tepid acceptance of the American cultural sway. Indeed, there was a time when Pierre Trudeau inspired the most from my Canadianism. There was a time when Canadian social democracy stood as a supreme ideal in my young political mind. To be a member of the Liberal Party on the prairies, was, as I remember, a statement of commitment to confederation amid a society perhaps not so committal to the federalist agenda. Alas, that fantasy started to unravel in the most unlikely way.

In my early years of studies at the University of Alberta, I spent many an evening in my study den listening to political reporting on the state of the nation. It was 1982, and we had been suffering through a recession. For a young student, the r-word is a gloomy but remote expression. Unemployment beckoned, and the world seemed far less promising. There was a lot to be fearful of, perhaps no more than at any time, but enough to jar my faith in the system I was raised in. The unleashed potential of my youth seemed paralyzed by an economic world in crisis. Interest rates were phenomenally high and what came easy before - money, jobs - now was indeterminably impossible. It is no wonder I found solace in only Dostoevsky. Another existentialist born.

Alas, there came a prophet. Some people would have called him a puppet, and at the time, I too, would have accepted this preconception. But the arrival of Ronald Reagan in Ottawa was a revelation to me. It was a cold evening in my basement apartment, but the TV signal brought a strange moment that shifted my sensibilities of self. Addressing a joint session of the House of Commons and the Senate, before what surely would have been a hostile audience were it not for parliamentarian decorum (if that is possible), President Reagan delivered words of grand vision and hope. Unlike any politician I had heard speak before, the President challenged us all to achieve something much better. His delivery, his masterful oration was an epiphany. He spoke of freedom and liberty like I had never heard before.

In fact, as a Canadian I was certain that these terms were never mentioned to me before, nothing beyond archaic sermons of remebrance for lost veterens. No, the very idea that freedom was something I should cherish was foreign to me. In fact, the political constellations of Canada seemed to be rooted in something entirely different. Canada seemed to be a compromise of political expediency, a confederation of disparate regions bound by a constitutional formulation of family law. There were no guiding principles at work here. Exploitation, yes. The fur trade, the timber trade, the fisheries, the prairie bread basket. And the National Energy Policy! Yes, there was an agenda at work for the Dominion of Canada - not to mention the dangerous bargain with French Canada. These forces were becoming increasingly clear to me.

But Reagen, yes the Hollywood actor, the man so many Canadians had contempt for, stood as a beacon even in our most sacred Canadian chamber. Whether he spoke of the "City on the Hill" that day, I do not remember, but he spoke in such grand terms, in such forceful and hopeful terms that I was dumbfounded. In a moment I knew that the human spirit was indomitable. I knew that the future would be full of prosperity...if only we held true to the ideals of liberty. And I knew at that time that Canada would some day face up to this challenge because of the courage of the society to our south. There is no escaping this spirit because it is in us all. It only need be unleashed.

Wednesday, March 23, 2005

Summit in Texas

When the leaders of NAFTA nations meet today we may begin to hear subtle changes in the public voice of economic integration. It is possible that in very "measured" language the political impetus for a concerted effort to harmonize trade on the continent will expose new vigour. It is possible that issues that would profoundly affect the relationship between Canada and the United States, as well as Mexico and the United States, will be given a new agenda. It is possible that issues that have caused tension - trade issues specifically - will be addressed in an urgent and constructive manner. That the United States might see the North American economic future as an important leverage in the face of dynamic changes in the the global economy should not be unexpected. It's just that it has seemed so shamefully ignored. Is it too much to hope that the leaders of the NAFTA nations will renew their commitments to economic integration?

Certainly, President Bush has a lot on his plate, but he has been a leader of indeterminable will. If there were a time to tame the U.S. protectionist voices that have threatened the relationships with Canada and Mexico, then it must be now. Softwood lumber? This is a trade issue that can stand as a symbol of the importance of trade, and the costs of protectionism. So too, for Mexican cement. It is time for the U.S. President to stand up for American consumers just as much as it is time for the U.S. to make an unequivocal commitment to free trade with its NAFTA partners. Now would be a good time to hear some words of commitment.

From Prime Minister Martin I would hope that he is able to garner some respect and trust from President Bush. Regardless of the Liberal government's tenuous minority position, it is important that Bush knows our two countries are on the same page. Security issues must be dealt with in a satisfactory manner - there will be no room for political grandstanding. The sooner we have a Canadian government that commits to a security arrangement with the United States the better our trade positions will evolve productively. Mr. Martin: assure President Bush of a Canadian commitment to U.S. security.

It is unreasonable to expect too much from the summit this week, but I hope the message that comes out is conciliatory and at the very least engages further talks on a regular basis. The global political economy will evolve, and certainly U.S. interests in shaping that political economy are in the forefront of policy makers, analysts, and the media. But one should always tend to one's own yard first. Economic prosperity in North America, and the Americas in general, should be a primary policy objective.

Wednesday, March 16, 2005

N.A. economic integration - the China antidote

Perceptions in the United States about the U.S. merchandise trade deficit are almost exclusively focused on the newly emergent Chinese economy and its trade balance with America. One would think that the Chinese trade is causing serious problems for the U.S. economy. In fact, the way trade issues are expressed by mainstream media, trade with China is a major component of U.S. trade. This is a gross misrepresentation.

Based on 2004 trading data, Chinese trade accounts for only 13% of U.S. imports. By comparison, 28% of U.S. imports come from its NAFTA partners, Canada and Mexico. In terms of export markets, NAFTA partners account for 37% of total U.S. exports. Of course, the issue for critics of trade with China is the anemic export totals to China – merely $37.4-billion or 4% of total U.S. exports. The end result is a trade deficit with China that reflects the immaturity of the Chinese market. However, the trade deficit with NAFTA partners, at $111.9-billion (compared to $162-billion trade deficit with China) reflects how important continental trade is to the U.S. picture.

The trade interdependency of the NAFTA nations is well established, but the monetary implications of these relationships does not seem to attract the same level of evaluation as other less significant trading relationships. Surely once a discussion of trade and monetary integration in the NAFTA framework seriously commences the important capital implications of union will motivate the political forces in the United States. The continental framework, and perhaps an Americas (North and South) framework would counteract the presumed ascendancy of China in world trade.

Currency Union should be on the table, too.

Trade is exchange, and the medium of exchange is generally currency. Foreign exchange is the currency of international trade, so the absence of this integral medium in the proposals to integrate the North American community presented by the Council on Foreign Relations seems a gross oversight. How can we manage harmonization effectively in a trinational agreement on trade and security if the costs and barriers of currency exchange remain in effect?

For a country like Canada exchange costs on merchandise trade with the United States and Mexico might amount to several billion dollars a year (see Fraser Institute's "Case for the Amero"). Add to that the considerable currency costs on capital flows and monetary policies and it is not an overstatement that the "static costs" of multiple North American currencies are a considerable drag on the economic integration of the continent. Indeed, a monetary union of North America would facilitate even greater economic growth by eliminating the inefficiency bias of exchange rate mechanisms, imposing discipline on industries that currently hide poor productivity under the cloak of currency depreciation.

There are many issues related to a currency union, and the process of adjustment would certainly change the scope of monetary and fiscal "sovereignty" currently exercised in Canada and Mexico. But the benefits of union and economic integration would catapult our economic well-being. The political obstacles of getting to that point remain considerable.

Tuesday, March 15, 2005

Alas, brave words...

Yesterday was a day to remember. A day in which a grand dare on the people of North America has been lodged. At a news conference in Washington, under the auspices of the Council for Foreign Relations, the Independent Task Force on the Future of North America presented a statement in anticipation of the March 23 trinational summit in Texas. (Visit the Council for Foreign Relations web site at www.cfr.org to view the full statement.)

The task force includes John Manley, Pedro Aspe, William Weld, Thomas d'Aquino, Andres Rozental, and Robert Pastor - all respected men of their respective nations, and all standing forth to boldly speak of embracing the future for North America. In simple terms they have presented an honest assessment of the challenges that Canada, Mexico, and the United States share. They include shared concerns for security, economic competitiveness, and development. They propose a trinational collaboration on six key recommendations:

1. Create institutions to monitor and implement strategic decisions made at annual trinational summits.

2. Create a unified North American Border Action Plan, harmonizing trade and creating a continental security perimeter while promoting the free flow of goods, services and nationals within the territory. Included in these measures would be expanded defense and law enforcement cooperation.

3. Adopt a common external tariff, effectively moving toward a Customs Union.

4. Stimulate economic growth in Mexico in order to improve the standard of living to bring it on par with the United States and Canada.

5. Develop and common energy strategy for North America.

6. Expand cross-border educational ties.

Indeed this plan, while curiously omitting a discussion of currency union, stands as a great challenge for politicians across the continent. It speaks of taking command of forces already at work. It stands as a plan to secure our borders in the face of global threats - threats like terrorism that can cripple our economies and the trade dependent relationships our counties have. It recognizes that without security for the United States, there is no economic security for Canada or Mexico. We must eliminate our common borders as security perimeters and establish a continental defense perimeter. Further, the harmonization that would accompany these efforts would result in great economic benefit.

Clearly, this task force is an independent body and has the freedom to posit such brave proposals because it is not politically accountable. But it is critical that business leaders and credible statesmen put the seeds of discussion before our politicians. More importantly, the establishment of grassroots forums for grappling with these issues must take the mantle of change and force political consensus. Politicians must yield to the will of the electorate and it is critical that the population becomes literate in the issues - economic, cultural, and political - that are jointly affecting the nations of North America.

Saturday, March 12, 2005

Help wanted - brave Canadian leader

North American economic integration is inevitable. No amount of political will can stop this flow. Unfortunately, the flow is more glacial at this time. Yes, NAFTA represented an important step for the national governments of Canada, Mexico, and the United States. But there has been far too little debate about the next steps beyond the smattering of papers that are published by the likes of the C.D. Howe Institute and other forward-minded think-tanks. The political consciousness is still divided by historical boundaries that separate our nations. There is no single voice that seeks to embody an new vision of North America. This must end.

Visionaries are brave and crazy people. This is their appearance to contemporaries rooted in past realities. Fear is the anchor that prevents the population from even thinking aloud about brave solutions, or even recognizing that there is a problem. Many prophets have had to risk their lives and their well-being to put forth honest self-criticism and bold new visions. Canada needs a prophet. It needs a political and cultural leader who will speak truthfully and convincingly about Canada's state. A leader who will stand up and say enough to sweeping under the carpet. Enough to the foundations of confederation that shackle Canadians and deny them a better life. Canada needs a leader who will carve out a future for Canadians before one is thrust upon us. Bring us this messiah who can spell out the costs of Confederation, and the benefits of Continentalism. Better that we grapple with the choices that are at hand while we have a credible bargaining position with our powerful neighbour.

Leaders in Mexico and Canada would best now deliberate a proper strategy toward negotiating a customs union with the United States. Issues of security and labour migration must be dealt with before the hurling forces of global demands create unfortunate circumstances for North Americans. Global terrorism and globalization will put these issues at the forefront soon enough. We need not wait for crisis. This is not simply about American security and economic interests. we are all intertwined in one community.

Friday, March 11, 2005

Sovereignty? I'll take economic liberty, please.

Nationalists aften couch their rhetoric with a healthy smattering of protestations about the pre-eminence of sovereignty. They hold tight to the the sacred notion that soverienty delivers liberty. But in truth, it is the opposite causal relationship. Our economic liberty enables true soverignty. When we have uninhibited economic vitality, our states serve citizen's best interests. When the state assumes directive control of individual rights to exercise consumer and productive interests we lose true sovereinty. In Canada, we have a state that has assumed this mantle without true regard for the real interests of its constituents. Are Canadian's economic interests, their economic liberty, served by marketing boards, restrictive cultural and trade policies, and a culture of government that stifles economic growth?

Tuesday, March 08, 2005

I saw Mexicans in Whistler

There is a wonder in travel. I should wish to be more familiar with it. But I have seen it near my home. My home is a place where many cultures come together in one community. Although it is not without its faults, the city is a miracle of diversity. I cannot deny that. And when visitors come here they see that this is a world where people of different race, culture and creed live side-by-side. Somehow it works.

I would expect that travellers have a better sense of community. They see the differences, yes, but it is the similarities that divine understanding. To see people move freely around the world is truly inspiring. Wipe away the fear. Wipe away the distrust. We are all together as one on this planet. These would be the sentiments of many of my nationalist foes, I am sure. But what of this community that lives beyond our bouders? Are we not sharing in experience, if not in culture, then economy? I must feed my family as surely as the Chinese factory worker. I must maneuver the rules of a complex society just like the citizens of Paris or London. Why is it that there can be such division of interest?

I am a libertarian. If not so in degree, I can at least claim to the belief in liberty. And in that belief I place my faith in the economic system that demands the most of our liberty. No, I do not come from privilege. What inspires this faith is sense of responsibility toward myself. That hope can spring from responsibility is a wonderous achievement of the capitalist system.

Unfortunately, capitalism suffers from great handicaps. Almost all of these come from one place: fear. Fear of trade, fear of migration, and fear of our neighbours. If anything, globalism will force us to confront these fears.

Sunday, March 06, 2005

Cross-border relations

It is inevitable that the seats of political power in Canada will hold steady to their command. The federal government has much to lose, for those politicians and bureauocrats with power in their hands. The seed of their dissolution, though, is already planted. The primarily economic interests of cross border states and provinces will bring to the forefront many issues of trade rationalization. These border states know that the flow of goods and people across their international borders is critical to their political fortunes. It is not surprising to see an era of cooperation and consultation taking place between some provincial and state governements.

We can expect that as issues of U.S. security affect trade issues, whether it be border traffic or health concerns affecting trade (cattle industry, for example), the politics of the nation state as represented by governments in Ottawa and Washington will become increasingly beholden to the important realtionships that make our border communities codependent. This, ultimately, will force the Canadian national interests to confront its destiny. Surely, there will be a time when the forces of commerce, of mutual self-interest and common cultural formations will direct our political wills toward an open border. Labour free to move as capital and goods. This will unleash powerful economic forces that will benefit all North Americans. Most importantly, it will deliver a more prosperous reality for Canadians.

Wednesday, March 02, 2005

Security trumps trade - always

Canadians baulking at today's U.S. Court decision to block the border again to Canadian cattle should think hard about this matter - not just because it has such a devastating effect on the Canadian beef industry. They should take note of the truth of Ambassador Cellucci's dictum "security trumps trade", as this will always be the guiding principle of any society. Without security any economy is threatened. We must create an environment of security to enable economic growth and trade. Canadians, heavily dependent on U.S. trade access, should be extremely wary of issues that affect U.S. security interests. Health security cannot be excepted, regardless of the political lobby pushing the U.S. beef industry's case. The best intentions of the Canadian cattle industry to push the trade issues at stake stand little chance against opposing U.S. trade interests that can play the security trump.

The solution for Canada's exporters? Elimination of the bifurcation of security at the 49th parallel. Without the border there is no trump card. The problems of the cattle industry in Alberta are the problems of the cattle industry in Montana. The politics of security cannot cannabalize industry under common jurisdiction. The billions of dollars of lost income that the Canadian cattle indutry has endured is an unfortunate consequence of the Canadian political reality. Our livelihoods need not be so threatened in a world where Canadians and Americans are united in politics and security.