Singing birds for currency union

Finally, a new call for currency union with the U.S. dollar. The article in the Globe and Mail sings of promise, although there is always a tremendous political headwind. Still, I must link to this welcome essay:

Putting to rest a too vigorous bird

The misguided foible of U.S. energy security

The call for “energy security” emanating from the United States is dripping with unseemly protectionism. Never mind the predictable union soothers in the left - there is an extremely troubling fissure between supposed “market economy” politicians and their energy policy rhetoric. Wrapped in the hysteria of global terrorism and environmentalism, calls for energy security are a bold rebuke of free trade. Worse, they are a call for the most dangerous form of taxation – high energy costs. Economic growth, in the context of the energy policies being paraded in America, will be handicapped severely.

Americans intuitively understand the importance of cheap energy. They are the first to wave a flag of protest when the price of gasoline rises enough to impinge on their driving habits. However, they are not fully aware of the way in which cheap energy lubricates the wealth creation wheel. Just as under-developed economies are crippled by high energy costs, industrial and service economies depend and thrive on access to cheap energy. Many American jobs will disappear long before any alternative “eco-friendly” energy sources reach the necessary economy of scale. Current cap-and-trade proposals will undoubtedly prove this if they are enacted.

Even more damaging for energy consumers is the inflationary consequences of the profligate monetary policy debasing the U.S. dollar. If we look at the Gold/Oil Ratio since 1971 the average is 15. Currently, the ratio is 19, rising considerably from a low of 7 last summer. This tells us clearly that something is rotten in the state of the dollar.

So what about energy security? Americans should consider where they actually get most – almost all - of their energy imports. Look no further than next door – in Canada, Mexico, and Venezuela. Leaving the Marxist state of Venezuela aside for now, the resources in North America are considerable, and fuel billions of dollars of trade in energy products for Canada and Mexico.

The governments of North America should strive for an integrated energy policy that maximizes the plentiful reserves in situ. Yes, the price of crude oil is determined by global demand, but the North American energy market can be self sufficient with coordinated action. Look to energy states and provinces like Alaska, Alberta, Saskatchewan, and Newfoundland to lead the way. It is in everyone's interest to bring reliable and secure supplies to America. And these supplies are in North America. Let’s work together!

Border zealots seize on protectionist sentiment

The economic downturn has brought the usual protectionist currents. Unfortunately, border crossings become even more entangled with these sentiments. The CBC reports of one such ugly occurrence. The US administration must take the firehose to this anti-growth protectionist pandering and douse it before the wheels of trade grind down. This is not good news for the prospect of recovery.

The ugly head of protectionism

Not surprisingly, the Mexican government has not taken kindly to the U.S. administration's decision to violate the terms of NAFTA. It has retaliated with new trade tariffs. President Obama is lacking the necessary spine to ward off the protectionist lobby in his party. This is not surprising. It is also a harbinger of fractured trade relations. The headwinds are going to be great.

Mexico needs US might

The war on drugs in Mexico should be an important policy focus of the US administration. Bret Stephens of the Wall Street Journal dismisses the argument that the battle against drug cartels cannot be won unless there is a change in social and political acceptance of drug use in the United States. That shift in policy is highly unlikely. He posits the only real world solution is to outspend the adversaries - to make the might of justice and order far greater than that of lawlessness and chaos. That is what the U.S. has done to succeed when it engages in war. North Americans have a stake in the political stability of Mexico. A failed state there would be disastrous. For that reason, the US and Mexico should work together to provide a military solution to the drug war. The might of the military is needed to defeat the entrenched drug lords with vast sums of money at their disposal.

President Calderon may not be politically open to US intervention in the border regions, but an argument is there to permit it.

Drugs and security in Mexico

The war on drugs is a failure. Nobody can refute that. Not surprisingly, the desperate political class of the victimized Latin countries can only make a plea for America to take a new approach. Worse news is that organized crime threatens to destabilize Mexico and hampers its relationship with the United States. Drug thugs are too much for the local authorities - running them out of town with violent threats and intimidation. This is not a good situation for Mexico or the United States.

While the coalition forces gear up for an overdue offensive against the Taliban in Afghanistan, the Mexican drug cartel should be another human rights initiative that demands a swift and decisive military action. U.S. and Mexican authorities should co-ordinate a return to lawfulness in districts where peace and security are lost to criminals. We need a war on drugs military surge.

Of course, there should be a real debate about the alternative approaches put forward by the former presidents of Mexico, Columbia, and Brazil, among others; but until there is security in Latin America there can be no substantial political progress toward tapping the economic potential of North America. The forces of globalization could have our hemisphere relying increasingly on each other - especially if relations with China falter. It's best we take care of our own family here on this continent. An answer to the drug problem is needed in Mexico. And it is needed in America.

Harbinger of border control

The U.S. is now monitoring the Canadian border with unmanned drones. This is a symptom of the very concerning approach our national governments have to North American security. It is faulty, wasteful, and reveals an underlying fracture that could disrupt trade. Better that technologies be used to guard the North American perimeter. However, it is important that Canada, in particular, do everything possible to appease American security concerns by harmonizing its security policies with the U.S. Failure to do so leads to this kind of initiative - one that only foreshadows even more stringent border control. This can only harm both economies.

Obama tries to say the right thing

... but it is what he does that is worrisome. On his first presidential visit to Canada he says he wants to "grow trade". That, indeed, is the real question. Canadians have to be concerned about a U.S. administration that seems to be more interested in command and control. It's piecemeal socialistic answers to every problem, making the guise of crisis the impetus for increasing regulatory and confiscatory policy, is sure to dampen economic prospects for America's greatest trading partner. How can trade really grow if the U.S. government drives toward economic policies that render the dynamism of the American people crippled by an increasingly overbearing state? Not too sure that Canadians should be all that excited about this visit. Canadians need America to be strong and prosperous.

Stand on guard for thee, free trade

The trade tensions inherent in the U.S. move toward protectionist measures has one good result: it brings to the foreground the highly integrated North American economy. Canada, in particular, is a key U.S. trading partner that accounts for about 80% of total Canadian exports. It takes about 20% of U.S. total exports, and imports more U.S. goods and services than the entire European Union, an economy 10-times Canada's size. Last year trade between the two nations reached $700-billion. That trade accounts for much prosperity - and many jobs.

The more politicians own up to these facts with their constituents, the more policy will move toward greater integration. Canadians should take the first step forward to be sure that they don't, in trade retaliation, bite the hand that feeds them. It is important that the Canadian government take the high road and work toward unilateral removal of trade barriers should the U.S. regress toward an unfortunate period of protectionism. Self-interest and common sense will prevail.

The darkness approaches

Socialist approaches to economic challenges always have an ugly nationalist side to its agenda. Some Canadians celebrating Obamafest are in for a nasty awakening. Indeed, the global economy is in for a chill if the protectionist measures built into the U.S. Congress' protectionist-laden stimulus bill pass into law. We are in for another bout of policy failure echoing the abuses of the market system espoused by FDR's New Deal. Did not America learn then?

This is an opportunity for the new U.S. administration to show its commitment to free trade. It is also an opportunity to recognize the inextricable trade relationships Canada and Mexico have with America. Of course, its failure to do so will only make the economic lesson that much more difficult. This could turn into a trade war if proper leadership does not direct these issues. Let's see what kind of vision President Obama has. Regrettably, he has given free-traders and free-marketers little reason to be optimistic.

One union to stand for: currency union

The Canadian dollar rode the commodity boom from 2002 to its peak above par with the greenback in October 2007. Since then it has ridden the the brutal commodity slide. Whether the oil market regains some of the lost ground - it has been a correction from $140 a barrel to the sub $40 now floating crude oil - remains highly debatable. What we do know is that the loonie has settled back to the sad position it had been in for decades. This is as damaging for the Canadian economy as the "high" Canadian dollar was to the industrial complex of Eastern Canada. Once again Canadian industry will revert to the patterns of industrial production born not out of true competitive efficiencies and comparative advantage, but out of devaluation and handicapped productivity. Worse, the shock the revalued loonie had on markets will not necessarily right the ship for many industries that previously enjoyed growth on the back of weak Canadian dollar. Will the Canadian film industry bounce back? Will tourism increase substantially? Will other Canadian firms forced to scramble to become more efficient in 2007/08 be able to regain some lost market share in their export business? How will Canadian-based NHL teams deal with the increased labour costs associated with a depressed Canadian dollar? The disruption this revaluation of the loonie causes is significant.




Industry needs stability of exchange rates. The North American economy - if it is to achieve higher levels of integration - needs currency stability. Working on currency issues in the current economic climate may not seem politically feasible, but it may be more palatable now than at the top of a business cycle. There are solutions to the current economic challenges facing the United States and Canada (and Mexico) that are institutional. These are solutions that are "outside the box", and have immense potential to reshape the economies of the nations of North America. The challenge from the global economy will force us to turn to our neighbours. Now would be a good time to sound a bell. Let's hear more about currency union.

Time to tackle the border problem

Another voice for a proactive Canadian approach toward an expanded U.S. security perimeter: economist Patrick Grady shares today in his National Post op-ed piece, "Mr. Obama, tear down that border". The substantial economic challenges the North American economy faces will not be met by grand speeches and colossal public expenditure. A concerted effort to frame the politics of an integrated North American economy should be a top priority. A good starting point is the Canada-U.S. border. There is much at stake for both economies if trans-border inefficiencies continue to hamper trade. Many politicians recognize this - but few are committed and forceful enough to take on this issue. It is time an inspired voice come to the fore.