An end to marketing boards...please

There is a chicken glut that has sent prices down 50% over the past year. But that news seems foreign to my Canadian ears. And it is. The prices the USDA publishes for poultry prices are a quite a bit different from the prices posted north of the border. Indeed, the wholesale price of skinless/boneless chicken in Canada is about CDN $14/kg (CDN $6.37/lb) - nothing close to the CDN $2.58/kg (CDN $1.17/lb) posted in the United States. If this is just one example of the consumer cost of agricultural marketing boards, then it is time Canadians wake up and push for policy change.

Too often the interests of consumers are ceremoniously tossed to the wayside, all in the ill-advised defence of producers. The livelihoods of certain sectors of our population depend on the protectionism that brings forth all manner of consumer taxes. This is indisputable. But it is imperative that policy makers understand the crippling effect of protectionism. Far better to deal with global trade head-on by dismantling protectionist institutions like marketing boards and help redirect producing assets toward industries with some level of comparative advantage. The economic rewards for the nation would be substantial. My family's annual chicken savings alone could be over $1,000 at the current prices. That is the kind of tax cut Canadians could use.

Time for Canada to be proactive on regulatory co-operation

The CD Howe Institute published an important article on the need for regulatory convergence in Canadian - American trade relations. Michael Hart's article "Steer or Drift: Taking Charge of Canada - U.S. Regulatory Convergence" (see http://www.cdhowe.org/pdf/commentary_229.pdf ) correctly puts the weight on Canadians shoulders to effectively face up to its fears regarding North American integration and tackle the regulatory framework head-on. Our economy would benefit greatly with regulatory convergence - or reducing the "tyranny of small differences". The more Canadians wrestle with the inevitable integration that must take place, the more we penalize our nation. As Mr. Hart concludes, Prime Minister Harper would do well to turn the focus of the upcoming meetings in Mexico with President Bush toward positive efforts that promote regulatory convergence.

 

I would add that it is critical to move on the security front as well. The commercial regulatory environment is highly dependent upon the shared security goals of the member nations. On this matter, too, it is imperative that Canadians maturely address the nations dependence on America and its shared economic interests. It is time to put aside nationalistic pride and work toward an integrated security perimeter, with shared or co-operating institutions that ensure that the security of North Americans are effectively and efficiently administered. Only then will the commercial interests of the two nations flourish.

 

The Canada - U.S. border should allow for free movement of goods and people. This implies much: shared immigration and refugee policies, regulatory and legal convergence or co-operation. All this may seem like a brave leap for Canadians, but it is far better to embrace the common values and interests we share as North Americans than to foolishly hang on to institutions that prevent the regional flowering that is so evidently nascent.

 

Yes, small steps are the political prescription, but what we need now is a voice - a strong voice - that bravely confronts the people of Canada with a plan for integration. There is no need for barriers to be drawn. No need for costly bottlenecks at the border. This may be far too much to ask of a minority government. For now, chipping away at "small differences" is the expedient option. But really...its time for the Canadian people to address the future maturely - and bravely. 

North American security

The Canadian tourism industry is starting to let its concerns be known about the effects of the proposed U.S. identity documentation required of travelers from America. It worries that Americans will forgo travel to Canada for business and pleasure because of these restrictions. Indeed, we can expect that this obstacle will result in reduced flows of money into this important part of our economy. This will affect many businesses and employees in the Canadian travel and tourism industry.

Understandably, the United States must take responsibility for the security of its citizens. They have every reason to make their border with Canada as secure as feasible. Unfortunately, until Canada embarks upon a harmonization of security and moves toward the ideal of a North American security perimeter, it will be forced to deal with unfortunate consequences for trade. It is important that the Canadian government tackle this vulnerability head on. That means clearly establishing a shared commitment to security and integrating North American security measures and forces. There is too much at stake to leave the U.S. government forced to invoke the documentation requirements. Better that Canada help offer alternative solutions. We are, irrevocably, partners in our own security. Canadians should take this relationship seriously.

Labour mobility

Recent newspaper articles about the surge in Maritime labour movements to Alberta and its high paying jobs reminds us of the importance of free movement of labour. Of course, Canadians are entitled and privileged to travel interprovincially to secure employment and to maximize their well being. We would not think of our Dominion in any other way. Certainly, the opportunities for labour to maximize earnings is an important cornerstone of open markets. Economic development is adversely affected by labour shortages. But more importantly, human resources are squandered when they cannot be put to their best use. While some people find it near impossible to pick up roots and look for a better life if their home region denies them that opportunity, we know that the New World was built on the very spirit of self preservation that guided our ancestors to this distant continent. Indeed, immigration is still a driving force of our economy. Inter-provincial labour mobility is an important conduit to economic growth.

This should remind us that such efficiencies are prevented from blossoming completely in North America. The border that separates Canada from the United States (and indeed the U.S. Mexican border that creates such fear in America) prevents individuals from maximizing their capacity to earn income and contribute to a more dynamic North American economy. One of the failings of the market system is that while capital moves relatively freely across borders, people do not. This puts individuals without capital at a disadvantage. Surely labour should be free to move to its best advantage. The U.S. - Canada border forces most human capital to take up opportunities that may be secondary in advantage - taking people even farther from their native regions than would be the case in a borderless North America. Would not an unemployed/underemployed native of Halifax prefer to relocate in Boston than in Toronto? The political boundaries give individuals poor choices sometimes. The result is often continued unemployment/underemployment. For others, it is a life far from where they were raised.

On a personal level, I know this well. I am celebrating my 20th anniversary of arriving in Toronto this month. When I first made the long trip from the prairies to begin a career in Canada's financial heartland I knew that Toronto was the place for a Canadian to find work in the financial services industry. And yet, my western roots were pure. I had never been east of Winnipeg previously. Indeed, my urban experiences were largely American as a young person. Cities like San Francisco and Los Angeles seemed to have more of a geographic affinity to my prairie homeland than Ontario's capital. I might well have made my way west to other financial centers, if only to be closer to my family. Instead I am in Ontario. It is a wonderful place, this place I call home now. But sometimes I wonder...

Energy exports to U.S. will shift balance of power in Canadian politics

The ascendancy of the west in the Canadian political economy is heavily weighted toward the development of oil & gas reserves. Energy exports to the United States will dictate a common interest between oil producing provinces and the American market. The value of energy exports is rapidly increasing, and the relative importance of energy in our balance of trade is growing. In 2001, energy products accounted for 13% of Canadian exports. Last year energy accounted for over 19% of exports. Indeed, the 16% gain in total exports to the United States recorded in December 2005 (vs December 2004) has much to do with the improved picture for the Canadian petro-economy.

This growing U.S. energy dependence on Canadian resources will eventually bring the interests of the oil-producing provinces into conflict with the political powers in the east. Federalist voices will be called upon to compromise the competing claims. This is a recurring battle in Canadian history, but the shear economic clout of the petro-economy of the west will force the federal government to accommodate the economic interests of the west. And those interests are tied to the United States.

Strong Canadian dollar - time to negotiate currency union

The irony of the moment for Canadians is likely lost on all but the most ardent advocates for currency union. But for those that see the ultimate forces toward union inevitably at work, the current commodity cycle is both beauty and bane. Yes, the heightened demand for commodities has elevated the loonie back toward respectability as the balance of trade clearly indicates the ascendancy of our resources. And the prospect for continuation of this bullish trend in energy and mineral markets is notably positive. But as the loonie now approaches 90 U.S. cents Canadian nationalist sentiment swaggers. Thoughts of weakness are long lost. No fear of depreciation here, not like a short few years ago when a 50 cent dollar seemed imminent.

 

Unfortunately, it is lost upon policy makers now that the time to negotiate is in times of strength. When businesses seek merger opportunities they do so when their stocks are strong. It makes for a much better deal for the shareholders. So too for the Canadian shareholders. Far better that Canada parlay the current business cycle into a favourable currency union agreement now. The terms of the merger, likely dollarization, are favourable enough now to enable a smoother transition for the regional economies of Canada. Ontario, specifically, would benefit from the timing of a currency agreement now. Unfortunately, the political vision, the political will, is no where to be found. Too bad.