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
Monday, October 26, 2009
Wednesday, April 01, 2009
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!
Wednesday, March 18, 2009
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.
Tuesday, March 17, 2009
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.
Tuesday, March 03, 2009
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.
President Calderon may not be politically open to US intervention in the border regions, but an argument is there to permit it.
Monday, February 23, 2009
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.
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.
Friday, February 20, 2009
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.
Thursday, February 19, 2009
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.
Tuesday, February 03, 2009
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 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.
Friday, January 30, 2009
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.
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.
Friday, January 23, 2009
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.
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.
Tuesday, January 20, 2009
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.
Thursday, December 11, 2008
The security pinch grows
An article in the National Post today reports that the United States is deploying new surveillance technology along the U.S. borders with Canada and Mexico. This new technology includes the use of unmanned drones that will monitor the vast terrain from above.
It is understandable that America is moving to secure its borders. Given the threats of both terrorist activity and illegal immigration, the current North American framework gives the U.S. government little options. However, this is very damaging to the interests of both Canada and Mexico. It is also damaging to the long-term interests of the United States.
The costs of maintaining a security perimeter around the U.S. will only grow - both in terms of technology and personnel. But more importantly, the disruption of legitimate and productive cross border traffic will hamper economic growth in all three countries. Trade is an integral part of the North American economy. Few will argue this. It seems, though, that few are standing up to seriously address the competing forces at work here. Security and trade will only work efficiently if borders are eliminated.
The implementation of a broader security perimeter around North America is the only way to facilitate the contradicting agendas of increased trade and security. Here it is important that the governments of both Canada and Mexico show leadership and forethought in addressing specific needs of the U.S. Harmonization of security measures and trade issues should be a priority.
There are those that would chose not to make compromises that infringe on national autonomy. But these instincts are a dangerous impulse. The sooner North Americans work together to become a larger and more connected family, the better. The strains of global economy will be felt more acutely if Canada and Mexico do not proactively nip this unfortunate impulse in the bud. North Americans need each other.
Article rank
11 Dec 2008
National Post
BY MATTHEW COUTTS
National Post mcoutts@nationalpost.com
New eyes on border
A U.S. drone delivered to North Dakota will soon begin northern patrols
Sitting on the tarmac at a North Dakota Air Force Base is the future of U.S. northern border security: an unmanned patrol airplane similar to ready-to-fire aircraft used in Afghanistan, identical to drones scouting above the U.S. border with Mexico and the first of its kind ready to fly along the Canadian border, in search of drug runners, illegal immigrants and terrorists heading south.
The Predator B Unmanned Aircraft System, a plane with a thin, cylindrical body, three wheels and no cockpit, was delivered to Grand Forks by U.S. Customs and Border Protection authorities last weekend and will be launched on patrol missions above the western Prairie landscape early next year. The US$10million, remote-controlled craft is equipped with video equipment and heat sensors capable of spotting people crossing the border illegally by avoiding ports of entry.
Once heralded as t he world’s longest undefended border, the thin line of security between Canada and the United States is now viewed by many Americans as a sieve, capable of being exploited by terrorists, and a major concern for national defence in the post-9/11 world.
In recent years, U.S. Customs and Border Protection and the Department of Homeland Security have upgraded security measures making documents such as passports mandatory for visitors from Canada, increasing the number of agents and screening measures at border ports and installing extra cameras and motion detectors along undefended portions of the line.
The idea of a physical security fence running along the Canadian border, similar to one found along the Mexican border, is still an option being endorsed by some state governors.
The use of unmanned aerial vehicles were first proposed in the 2005 Secure Border Initiative as part of a “virtual fence” that also includes fixed towers and mobile radars. The aircraft went into action along the U.S.-Mexico border immediately, but this will be the first one will take flight along the United States’s northern border.
According to a statement from border protection’s air and marine assistant commissioner, the aerial patrol with help “identify and intercept potential terrorist or illegal cross-border activity” while supporting Canadian and U.S. law enforcement agencies.
Border patrol officials say they make about 4,000 arrests and intercept about 18,000 kilograms of illegal drugs each year along the Canadian border.
Juan Munoz-Torres,
a spokesman for border protection’s ai r and marine operations, said the CanadaU.S. border poses significant security concerns because of the distance between checkpoints and a geography which is often hard to reach by land. Aerial patrols will help close those gaps while answering questions about how many people are slipping into the country between checkpoints.
“We don’t know what we don’t know so I can’t tell you what we will find or what we won’t find. As we begin operations, we will see what type of activity is taking place and we will then start working in order to stop that activity,” he said.
Three mo r e Predators are expected to join the pa tro l along Canada’s nearly 9,000kilometre border. For now, Federal Aviation Administration authority will only allow the aerial patrol along a 480-kilometre stretch along North Dakota and Minnesota.
Senator Kent Conrad, a North Dakota Democrat who has been working for four years to shore up security along the Canada-U.S. border, said the Predator’s arrival is the beginning of a secure border.
“It is vital to America’s security that we protect our borders, particularly the northern border,” Sen. Conrad said.
“ The Grand Forks Air Branch plays an essential role in helping shut the door on terrorists who want to sneak across remote border points to strike on U.S. soil.”
Colonel John E. Michel, commander of Grand Forks Air Force Base, told the Grand Forks Herald the base will eventually house more than 20 unmanned aerial vehicles, at least six of which will be used for surveillance.
Similar aircraft have patrolled the country’s southwestern border since 2005, leading to the confiscation of more than 8,000 kilograms of marijuana and the arrest of 4,000 illegal immigrants flowing from Mexico.
Similar versions of the unmanned aircraft, equipped with missiles, are being used in reconnaissance missions in Afghanistan and Iraq. Those to fly along Canada’s border will be unarmed, equipped instead with Raytheon electro-optical sensors and a synthetic aperture radar that can help document natural changes to the area.
The Predator is 20 metres long and weighs more than 4,500 kilograms. It will patrol at an altitude of 15,000 metres. It can fly 418 kilometres per hour and stay aloft for 18 hours before landing to refuel. With its cameras and sensors, it can detect a moving person from 11 kilometres away.
Printed and distributed by NewpaperDirect www.newspaperdirect.com, US/Can: 1.877.980.4040, Intern: 800.6364.6364 Copyright and protected by applicable law.
It is understandable that America is moving to secure its borders. Given the threats of both terrorist activity and illegal immigration, the current North American framework gives the U.S. government little options. However, this is very damaging to the interests of both Canada and Mexico. It is also damaging to the long-term interests of the United States.
The costs of maintaining a security perimeter around the U.S. will only grow - both in terms of technology and personnel. But more importantly, the disruption of legitimate and productive cross border traffic will hamper economic growth in all three countries. Trade is an integral part of the North American economy. Few will argue this. It seems, though, that few are standing up to seriously address the competing forces at work here. Security and trade will only work efficiently if borders are eliminated.
The implementation of a broader security perimeter around North America is the only way to facilitate the contradicting agendas of increased trade and security. Here it is important that the governments of both Canada and Mexico show leadership and forethought in addressing specific needs of the U.S. Harmonization of security measures and trade issues should be a priority.
There are those that would chose not to make compromises that infringe on national autonomy. But these instincts are a dangerous impulse. The sooner North Americans work together to become a larger and more connected family, the better. The strains of global economy will be felt more acutely if Canada and Mexico do not proactively nip this unfortunate impulse in the bud. North Americans need each other.
Article rank
11 Dec 2008
National Post
BY MATTHEW COUTTS
National Post mcoutts@nationalpost.com
New eyes on border
A U.S. drone delivered to North Dakota will soon begin northern patrols
Sitting on the tarmac at a North Dakota Air Force Base is the future of U.S. northern border security: an unmanned patrol airplane similar to ready-to-fire aircraft used in Afghanistan, identical to drones scouting above the U.S. border with Mexico and the first of its kind ready to fly along the Canadian border, in search of drug runners, illegal immigrants and terrorists heading south.
The Predator B Unmanned Aircraft System, a plane with a thin, cylindrical body, three wheels and no cockpit, was delivered to Grand Forks by U.S. Customs and Border Protection authorities last weekend and will be launched on patrol missions above the western Prairie landscape early next year. The US$10million, remote-controlled craft is equipped with video equipment and heat sensors capable of spotting people crossing the border illegally by avoiding ports of entry.
Once heralded as t he world’s longest undefended border, the thin line of security between Canada and the United States is now viewed by many Americans as a sieve, capable of being exploited by terrorists, and a major concern for national defence in the post-9/11 world.
In recent years, U.S. Customs and Border Protection and the Department of Homeland Security have upgraded security measures making documents such as passports mandatory for visitors from Canada, increasing the number of agents and screening measures at border ports and installing extra cameras and motion detectors along undefended portions of the line.
The idea of a physical security fence running along the Canadian border, similar to one found along the Mexican border, is still an option being endorsed by some state governors.
The use of unmanned aerial vehicles were first proposed in the 2005 Secure Border Initiative as part of a “virtual fence” that also includes fixed towers and mobile radars. The aircraft went into action along the U.S.-Mexico border immediately, but this will be the first one will take flight along the United States’s northern border.
According to a statement from border protection’s air and marine assistant commissioner, the aerial patrol with help “identify and intercept potential terrorist or illegal cross-border activity” while supporting Canadian and U.S. law enforcement agencies.
Border patrol officials say they make about 4,000 arrests and intercept about 18,000 kilograms of illegal drugs each year along the Canadian border.
Juan Munoz-Torres,
a spokesman for border protection’s ai r and marine operations, said the CanadaU.S. border poses significant security concerns because of the distance between checkpoints and a geography which is often hard to reach by land. Aerial patrols will help close those gaps while answering questions about how many people are slipping into the country between checkpoints.
“We don’t know what we don’t know so I can’t tell you what we will find or what we won’t find. As we begin operations, we will see what type of activity is taking place and we will then start working in order to stop that activity,” he said.
Three mo r e Predators are expected to join the pa tro l along Canada’s nearly 9,000kilometre border. For now, Federal Aviation Administration authority will only allow the aerial patrol along a 480-kilometre stretch along North Dakota and Minnesota.
Senator Kent Conrad, a North Dakota Democrat who has been working for four years to shore up security along the Canada-U.S. border, said the Predator’s arrival is the beginning of a secure border.
“It is vital to America’s security that we protect our borders, particularly the northern border,” Sen. Conrad said.
“ The Grand Forks Air Branch plays an essential role in helping shut the door on terrorists who want to sneak across remote border points to strike on U.S. soil.”
Colonel John E. Michel, commander of Grand Forks Air Force Base, told the Grand Forks Herald the base will eventually house more than 20 unmanned aerial vehicles, at least six of which will be used for surveillance.
Similar aircraft have patrolled the country’s southwestern border since 2005, leading to the confiscation of more than 8,000 kilograms of marijuana and the arrest of 4,000 illegal immigrants flowing from Mexico.
Similar versions of the unmanned aircraft, equipped with missiles, are being used in reconnaissance missions in Afghanistan and Iraq. Those to fly along Canada’s border will be unarmed, equipped instead with Raytheon electro-optical sensors and a synthetic aperture radar that can help document natural changes to the area.
The Predator is 20 metres long and weighs more than 4,500 kilograms. It will patrol at an altitude of 15,000 metres. It can fly 418 kilometres per hour and stay aloft for 18 hours before landing to refuel. With its cameras and sensors, it can detect a moving person from 11 kilometres away.
Printed and distributed by NewpaperDirect www.newspaperdirect.com, US/Can: 1.877.980.4040, Intern: 800.6364.6364 Copyright and protected by applicable law.
Thursday, November 20, 2008
A less contrived North America
We live in a global economy that facilitates economic growth through trade and capital investment. Without either trade or capital there is no growth. There is no wealth creation. Whether we acknowledge this fact or not, our welfare is linked to the successful working of the global economy, and more importantly, the elimination of trade and capital barriers between our greatest and closest trading partners. The benefits extend well beyond large corporate interests. Workers, consumers and entrepreneurs all would benefit from lower costs and greater opportunities.
I was born and raised on the Canadian prairies. From there I saw the way Ontario and eastern Canada exercised great control over the regions. I saw how we paid more for goods manufactured in eastern Canada, when I wondered why we could not instead buy from American plants that were closer to Western Canada than Toronto or Montreal. I wondered why we had to watch the CBC and its central Canadian bias, and were either denied access or forced to pay more for media more reflective of the environment I lived. I learned early that Canada is what you make of it, but it is a contrived nation. My vote is for a less contrived political and economic framework - one that opens up potential for people to be their best. A North America Union offers that opportunity.
I was born and raised on the Canadian prairies. From there I saw the way Ontario and eastern Canada exercised great control over the regions. I saw how we paid more for goods manufactured in eastern Canada, when I wondered why we could not instead buy from American plants that were closer to Western Canada than Toronto or Montreal. I wondered why we had to watch the CBC and its central Canadian bias, and were either denied access or forced to pay more for media more reflective of the environment I lived. I learned early that Canada is what you make of it, but it is a contrived nation. My vote is for a less contrived political and economic framework - one that opens up potential for people to be their best. A North America Union offers that opportunity.
Wednesday, October 22, 2008
The "third option" refrain...again
In the news recently is a renewed call for a trade pact between Canada and Europe. See Canada and Europe ponder trade pact. When will Canadians dispense with nationalistic pretenses and whole-heartedly embrace the good fortune of being America's primary trading partner? Fears about having all your eggs in one basket are misplaced. While the glorious effects of globalization have lifted the economic clout of Europe and the Far East, America remains a powerful and dynamic market. Canadians would be better served to work toward an improved North American trade framework, freeing up labour mobility and capital constraints. Yes, there are expanding markets abroad, but unfettered trade will gravitate Canada toward trade among partners in this hemisphere. Better that Canada work with the U.S. to improve the economic vitality of Latin America than to play politics with Europe and China. There is tremendous potential that can be unleashed here in the Americas.
Wednesday, October 08, 2008
Free market solutions to the credit crisis
The credit crisis has threatened severe economic hardship on the global economy. Many politicans have turned toward stepped up regulation and socialization of the credit markets in searching for a solution to this very serious problem. The failure of the financial system has been equated by both liberal and some conservative voices as an indictment against the free market. This is a dangerous consequence of policy failure and threatens the economy with a new round of growth-killing liberal economic policies. Indeed, the U.S. election campaign is replete with a range of vilifying statements about both financial institutions and borrowers. But these market participants are not the root cause of this crisis. Instead, it is the institutionalized failures of The Federal Reserve Board and its dual mandate and the failed immigration policies of the United States.
The Federal Reserve's hand prints are all over the mortgage crisis that has crippled the financial system. Clarifying voices that direct blame toward this institution are starting to be heard, although the tremendous regulatory roar for banker's blood is still far too defeaning. The(WSJ opinion piece - Judy Shelton: Loose money and the roots of the crisis) , is a recent example that clearly states the source of the credit crisis. Instead of vilifying market participants and regulators, Ms. Shelton directs blame on the compromising dual mandate of the Federal Reserve - its monetary fine-tuning of economic output at the expense of its core responsibility of protecting the value of the currency. Such an incompatible mandate is untenable over the long-term. Cheap money is the fertile soil of credit abuse. We should not be surprised that both financial institutions and borrowers abused a fiat money system that makes it so easy to lose sight of fiduciary responsibility and financial discipline.
In addition, the demand failure of the mortgage markets to continue to fuel ballooning asset prices can be linked to an immigration shortage. Demographics are the foundation of the housing market - policies that inhibit the natural labour flows of the economy handicap its proper functioning. Restrictive immigration policies are the prime culprit. Here the U.S. has failed itself immeasurably by institutionalizing the boom and bust cycle of this critical asset class. They have brought collapsing house prices upon themselves.
Today's WJJ opinion piece by Lee Ohanian - Good policies can save the economy reveals how pivotal immigration is to achieving a solution to the housing crisis. Instead of taxpayer bailouts - as both Republican and Democratic Presidential candidates have espoused - this housing crisis has a free market solution: immigration.
In this respect it is important that Americans understand the importance of the integration of North American labour markets. Without a new vision toward the North American economy the failures of the institutions that create crisis will lead to continued breakdowns of the market economy. It is time for North Americans to rethink the national boundaries of its member states and work toward a partnership that ensures prosperity and energy security in the face of a complex and challenging global economy.
The Federal Reserve's hand prints are all over the mortgage crisis that has crippled the financial system. Clarifying voices that direct blame toward this institution are starting to be heard, although the tremendous regulatory roar for banker's blood is still far too defeaning. The(WSJ opinion piece - Judy Shelton: Loose money and the roots of the crisis) , is a recent example that clearly states the source of the credit crisis. Instead of vilifying market participants and regulators, Ms. Shelton directs blame on the compromising dual mandate of the Federal Reserve - its monetary fine-tuning of economic output at the expense of its core responsibility of protecting the value of the currency. Such an incompatible mandate is untenable over the long-term. Cheap money is the fertile soil of credit abuse. We should not be surprised that both financial institutions and borrowers abused a fiat money system that makes it so easy to lose sight of fiduciary responsibility and financial discipline.
In addition, the demand failure of the mortgage markets to continue to fuel ballooning asset prices can be linked to an immigration shortage. Demographics are the foundation of the housing market - policies that inhibit the natural labour flows of the economy handicap its proper functioning. Restrictive immigration policies are the prime culprit. Here the U.S. has failed itself immeasurably by institutionalizing the boom and bust cycle of this critical asset class. They have brought collapsing house prices upon themselves.
Today's WJJ opinion piece by Lee Ohanian - Good policies can save the economy reveals how pivotal immigration is to achieving a solution to the housing crisis. Instead of taxpayer bailouts - as both Republican and Democratic Presidential candidates have espoused - this housing crisis has a free market solution: immigration.
In this respect it is important that Americans understand the importance of the integration of North American labour markets. Without a new vision toward the North American economy the failures of the institutions that create crisis will lead to continued breakdowns of the market economy. It is time for North Americans to rethink the national boundaries of its member states and work toward a partnership that ensures prosperity and energy security in the face of a complex and challenging global economy.
Tuesday, February 12, 2008
The economic cost of the Canada-U.S border
Most Canadians do not realize the impact of the current leadership void in tackling cross border security issues with the United States. Without an integrated security perimeter commercial relations between the two countries will become increasingly strained. It is imperative that border issues be resolved and that Canadians recognize the importance of a joint security plan. In a recently published study by the Woodrow Wilson International Center Michael Hart details the trade costs of this failure. See Free Trade in Free Fall? Assessing the Impact of Nontariff Barriers on Canada-U.S. Trade accessible at http://www.wilsoncenter.org/index.cfm?topic_id=1420&fuseaction=topics.event_summary&event_id=372221
Friday, January 18, 2008
Dropping Canada's floating exchange rate
Whether Canadians want to admit it or not, the floating exchange regime of the loonie is fracturing mechanism that exposes the tenuous geographical and economic links of the Dominion. Exchange rate uncertainty will pit one region against another. A strong loonie reflects the comparative advantage of one region (oil producers) versus another (non-oil producers). The policy strains caused by this imbalance are becoming increasingly evident both in monetary and fiscal arenas. Exchange rate uncertainty is extremely detrimental to commerce, and has a crippling effect on productivity. For that reason there should be an increasing debate about changing the current currency regime with an alternate vision that more aptly reflects our U.S. centric trading relationship. Currency Union and dollarization, although highly desirable options, are political swamps for those brave enough to espouse these objectives. Another alternative is set forth by Professor Herbert Grubel of Simon Frazer University, whose commentary below was found in today's National Post. Although currency controls are highly debated, the special circumstances of the Canadian economy vis a vis its U.S. partner - and the political intractability of the population on both sides of the border - makes Grubel's position worth entertaining.
Fix the loonie
Cure Canada’s Dutch disease by setting the dollar at par
HERBERT GRUBEL Financial Post
David Laidler’s recent defence of Canada’s flexible exchange rate system misses completely the point made by Nobel Prize winning economist Robert Mundell in his famous article on optimum currency areas. Mundell’s article has been widely credited with providing the intellectual base for the European Monetary Union and merits attention.
Mundell’s point is simple and straightforward. If flexible exchange rates are best for Canada on the grounds presented by Laidler, why would flexible rates not be best also for Alberta, Ontario or New Brunswick? Like Canada, these jurisdictions encounter economic shocks the impact of which would be minimized by the exchange rate buffer.
Milton Friedman’s response to Mundell was that he would not advocate flexible rates for every possible region. He told me once that he did not think that Panama would benefit from flexible rates and that its hard currency fix, the use of U.S. dollars, served the country best.
Clearly, the standard FriedmanLaidler analysis misses essential ingredients needed to decide the case for Panama and, I would insist, Canada. The following analysis considers the costly burden suffered by Canadian manufacturing through the strong appreciation of the dollar during the recent boom in commodity exports, the short-comings of all suggested remedies, and the permanent cure to the problem by the adoption of a hard currency fix.
As Laidler notes, Canada has a bad case of the dreaded Dutch disease, which is named after the problems that developed in the 1960s when the Netherlands sold natural gas that had been discovered on its coast. The increases in Dutch exports of resources, like those of Canada in recent years, resulted in a strong appreciation of exchange rates, which was reinforced by interest rate policies of central banks and currency speculators.
The disease manifests itself through the loss of domestic manufacturers’ ability to compete abroad and with imports. In both countries many workers in these manufacturing firms lost their jobs. Some became unemployed but many undertook the desirable move into the booming export and steadily growing service sectors.
Less desirable was the move of some of the unemployed into public-sector employment, which was facilitated by fiscal surpluses due to the economic boom. During the year ending October 2007, Canadian public sector employment rose by 4.9% while private sector employment rose only .9%
This increase in public-sector employment reduces the growth in productivity because of the perverse incentives facing civil servants: punishment if innovations fail, no rewards if they succeed. Moreover, productivity growth in the private sector is slowed by the proclivity of civil servants to design and administer onerous private-sector regulations.
There are no simple remedies for Canada’s Dutch disease. Subsidies for manufacturers are complex to administer, inefficient and likely to become permanent.
The government can use fiscal surpluses to retire public debt, a large part of which is held by foreigners. While such foreign-debt retirement lowers the exchange rate and thus helps manufacturers, it comes at the expense of tax reductions.
The Bank of Canada can keep interest rates low to discourage capital inflows and thus exchange rate increases, but at the cost of fuelling inflationary pressures.
The most promising remedy for the Dutch disease is the increased importation of labour-saving capital by the private sector, taking advantage of the favourable exchange rate. The problem is that the resultant higher productivity and international competitiveness would grow only slowly.
While all of the opportunities for dealing with Canada’s Dutch disease have some merit as quasi palliatives, there is only one permanent cure: inoculation of the system by fixing the exchange rate at a level that allows manufacturers to be competitive, perhaps at the rate the Bank of Canada research identifies as the longrun equilibrium, around US90¢.
The Netherlands and Austria in the years before the introduction of the euro successfully operated such a system and enjoyed near perfectly stable exchange rates against the German currency. The essential ingredient in this success was the official commitment of the central banks of these two countries to maintain the same interest rate as that of the German central bank.
An analogous commitment by the Bank of Canada with respect to U.S. interest rates may not be credible, tested by speculators and therefore ultimately doomed to failure.
However, there is a solution to this lack of credibility. In Europe, it came through the creation of the euro and formal end of the ability of national central banks to set interest rates. The analogous creation of the amero is not possible without the unlikely co-operation of the United States.
This leaves the credibility issue to be solved by the unilateral adoption of a currency board, which would ensure that international payments imbalances automatically lead to changes in Canada’s money supply and interest rates until the imbalances are ended, all without any actions by the Bank of Canada or influence by politicians.
It would be desirable to create simultaneously the currency board and a New Canadian Dollar valued at par with the U.S. dollar. With longer-run competitiveness assured at US90¢ to the U.S. dollar, the creation of the new currency would reduce present incomes, prices, assets and liabilities from their current Canadian dollar value by the same 10%, leaving real incomes and wealth unchanged.
The public would readily use the new Canadian and the U.S. dollars interchangeably and enjoy savings in the conversion of one currency into the other. The present exchange risk premium on Canadian interest rates would be eliminated completely.
The creation of the New Canadian dollar and its credible fix against the U.S. dollar is not a panacea.
Fluctuations in global demand for natural resources will always result in competition for labour and capital among Canadian manufacturers and producers of resources. But, at least, the firms in these sectors would no longer have to concern themselves with exchange-rate fluctuations and policies of the Bank of Canada.
There will also always be changes in the U.S. (and Canadian) dollar exchange rate against the euro and other major currencies. But these changes would have minor effects on the Canadian economy because 80% of the country’s trade is with the United States.
Herbert Grubel is Professor of Economics Emeritus, Simon Fraser University.
Fix the loonie
Cure Canada’s Dutch disease by setting the dollar at par
HERBERT GRUBEL Financial Post
David Laidler’s recent defence of Canada’s flexible exchange rate system misses completely the point made by Nobel Prize winning economist Robert Mundell in his famous article on optimum currency areas. Mundell’s article has been widely credited with providing the intellectual base for the European Monetary Union and merits attention.
Mundell’s point is simple and straightforward. If flexible exchange rates are best for Canada on the grounds presented by Laidler, why would flexible rates not be best also for Alberta, Ontario or New Brunswick? Like Canada, these jurisdictions encounter economic shocks the impact of which would be minimized by the exchange rate buffer.
Milton Friedman’s response to Mundell was that he would not advocate flexible rates for every possible region. He told me once that he did not think that Panama would benefit from flexible rates and that its hard currency fix, the use of U.S. dollars, served the country best.
Clearly, the standard FriedmanLaidler analysis misses essential ingredients needed to decide the case for Panama and, I would insist, Canada. The following analysis considers the costly burden suffered by Canadian manufacturing through the strong appreciation of the dollar during the recent boom in commodity exports, the short-comings of all suggested remedies, and the permanent cure to the problem by the adoption of a hard currency fix.
As Laidler notes, Canada has a bad case of the dreaded Dutch disease, which is named after the problems that developed in the 1960s when the Netherlands sold natural gas that had been discovered on its coast. The increases in Dutch exports of resources, like those of Canada in recent years, resulted in a strong appreciation of exchange rates, which was reinforced by interest rate policies of central banks and currency speculators.
The disease manifests itself through the loss of domestic manufacturers’ ability to compete abroad and with imports. In both countries many workers in these manufacturing firms lost their jobs. Some became unemployed but many undertook the desirable move into the booming export and steadily growing service sectors.
Less desirable was the move of some of the unemployed into public-sector employment, which was facilitated by fiscal surpluses due to the economic boom. During the year ending October 2007, Canadian public sector employment rose by 4.9% while private sector employment rose only .9%
This increase in public-sector employment reduces the growth in productivity because of the perverse incentives facing civil servants: punishment if innovations fail, no rewards if they succeed. Moreover, productivity growth in the private sector is slowed by the proclivity of civil servants to design and administer onerous private-sector regulations.
There are no simple remedies for Canada’s Dutch disease. Subsidies for manufacturers are complex to administer, inefficient and likely to become permanent.
The government can use fiscal surpluses to retire public debt, a large part of which is held by foreigners. While such foreign-debt retirement lowers the exchange rate and thus helps manufacturers, it comes at the expense of tax reductions.
The Bank of Canada can keep interest rates low to discourage capital inflows and thus exchange rate increases, but at the cost of fuelling inflationary pressures.
The most promising remedy for the Dutch disease is the increased importation of labour-saving capital by the private sector, taking advantage of the favourable exchange rate. The problem is that the resultant higher productivity and international competitiveness would grow only slowly.
While all of the opportunities for dealing with Canada’s Dutch disease have some merit as quasi palliatives, there is only one permanent cure: inoculation of the system by fixing the exchange rate at a level that allows manufacturers to be competitive, perhaps at the rate the Bank of Canada research identifies as the longrun equilibrium, around US90¢.
The Netherlands and Austria in the years before the introduction of the euro successfully operated such a system and enjoyed near perfectly stable exchange rates against the German currency. The essential ingredient in this success was the official commitment of the central banks of these two countries to maintain the same interest rate as that of the German central bank.
An analogous commitment by the Bank of Canada with respect to U.S. interest rates may not be credible, tested by speculators and therefore ultimately doomed to failure.
However, there is a solution to this lack of credibility. In Europe, it came through the creation of the euro and formal end of the ability of national central banks to set interest rates. The analogous creation of the amero is not possible without the unlikely co-operation of the United States.
This leaves the credibility issue to be solved by the unilateral adoption of a currency board, which would ensure that international payments imbalances automatically lead to changes in Canada’s money supply and interest rates until the imbalances are ended, all without any actions by the Bank of Canada or influence by politicians.
It would be desirable to create simultaneously the currency board and a New Canadian Dollar valued at par with the U.S. dollar. With longer-run competitiveness assured at US90¢ to the U.S. dollar, the creation of the new currency would reduce present incomes, prices, assets and liabilities from their current Canadian dollar value by the same 10%, leaving real incomes and wealth unchanged.
The public would readily use the new Canadian and the U.S. dollars interchangeably and enjoy savings in the conversion of one currency into the other. The present exchange risk premium on Canadian interest rates would be eliminated completely.
The creation of the New Canadian dollar and its credible fix against the U.S. dollar is not a panacea.
Fluctuations in global demand for natural resources will always result in competition for labour and capital among Canadian manufacturers and producers of resources. But, at least, the firms in these sectors would no longer have to concern themselves with exchange-rate fluctuations and policies of the Bank of Canada.
There will also always be changes in the U.S. (and Canadian) dollar exchange rate against the euro and other major currencies. But these changes would have minor effects on the Canadian economy because 80% of the country’s trade is with the United States.
Herbert Grubel is Professor of Economics Emeritus, Simon Fraser University.
Wednesday, December 05, 2007
"Union-made" monetary policy
Surprise, surprise: the incoming Bank of Canada Governor disses currency pegging to the U.S dollar. Of course, such a union implies redundancy for the green governor, his job likely just ceremonial in a regime managed by the Federal Reserve. But really, for whom is the Bank of Canada looking out? Claims that we need a made in Canada monetary policy should be viewed sceptically if the vision of continental integration is to be realized. What Canada needs is currency stability, not a floating rate that encourages slack productivity and inefficient allocation of capital. A brave new central bank would embrace currency union and encourage policy initiatives to facilitate the move. Pegging the loonie to the dollar would be unpopular in some corners, but would allow our economy to move one step closer to proper integration with the United States. Protecting the fiefdom of the Bank of Canada is not the visionary leadership Canadians need.
Don't peg loonie to greenback, incoming Bank governor says
The Canadian Press
Wednesday, December 05, 2007
OTTAWA — Canada should resist the understandable appeal of pegging the loonie to the greenback or forming a currency union with the United States, the incoming governor of Bank of Canada said Wednesday at a Parliamentary hearing.
At an historic appearance by a governor-designate before the Commons finance committee, Mark Carney defended the Bank of Canada's management of monetary policy in the face of the recent surge — and just as sudden fall — of the loonie.
And while Mr. Carney said it was understandable that many would want exchange rate certainty to protect some industries, such as the manufacturing sector, he maintained that the cost would be too high.
“Although there is no target exchange rate for the Canadian dollar, the bank does care why the exchange rate is moving and what the potential impact will be on output and inflation,” Mr. Carney told the committee.
But it would be a mistake to peg the loonie to the greenback, he continued.
“It would mean that, de facto, Canada would adopt U.S. monetary policy, despite the reality that the structures of our economies are very different and, as a consequence, often require different types of adjustments in response to global developments.”
The Canadian dollar has been on a roller-coaster since it began it's steep climb in mid-August, peaking above $1.10 (U.S.) in mid-November, before beginning a steep decline to its current value of just over 98 cents.
The volatility has been difficult for Canadian manufacturers and exporters, Mr. Carney acknowledged, but he said the Bank of Canada should not interfere unless the repercussions are so severe as to seriously damage Canada's economic prospects.
The best action the bank can take, he said, was to keep inflation low, stable and predictable. He noted that Canada has experienced the second-longest expansion in its history beginning in 1991, when the bank and the government signed an agreement to set a 2 per cent inflation target.
“That's what we risk if we take our eye off the ball, and I assure you I will not take my eye off the ball,” Mr. Carney told the committee.
“Inflationary booms always end badly and they require Herculean efforts to put us back into the path we already have now.”
There had been suggestions before Mr. Carney's appearance — the first by a bank governor nominee — that he would face a respectful but pointed grilling from the MPs.
While the MPs cannot override the appointment that goes into effect on Feb. 1, they could at least dig into his past and delve into areas of potential philosophical differences between him and outgoing Governor David Dodge.
And some MPs tried, particularly Liberal Garth Turner, who repeatedly attempted to get Mr. Carney to admit he was behind the government's Halloween surprise last year to tax income trusts.
Aside from repeating the government's stated reasons for the decision, Mr. Carney would neither deny nor confirm he was the architect of the policy, saying his advice to Finance Minister Jim Flaherty is covered by cabinet privilege.
© Canadian Press
Don't peg loonie to greenback, incoming Bank governor says
The Canadian Press
Wednesday, December 05, 2007
OTTAWA — Canada should resist the understandable appeal of pegging the loonie to the greenback or forming a currency union with the United States, the incoming governor of Bank of Canada said Wednesday at a Parliamentary hearing.
At an historic appearance by a governor-designate before the Commons finance committee, Mark Carney defended the Bank of Canada's management of monetary policy in the face of the recent surge — and just as sudden fall — of the loonie.
And while Mr. Carney said it was understandable that many would want exchange rate certainty to protect some industries, such as the manufacturing sector, he maintained that the cost would be too high.
“Although there is no target exchange rate for the Canadian dollar, the bank does care why the exchange rate is moving and what the potential impact will be on output and inflation,” Mr. Carney told the committee.
But it would be a mistake to peg the loonie to the greenback, he continued.
“It would mean that, de facto, Canada would adopt U.S. monetary policy, despite the reality that the structures of our economies are very different and, as a consequence, often require different types of adjustments in response to global developments.”
The Canadian dollar has been on a roller-coaster since it began it's steep climb in mid-August, peaking above $1.10 (U.S.) in mid-November, before beginning a steep decline to its current value of just over 98 cents.
The volatility has been difficult for Canadian manufacturers and exporters, Mr. Carney acknowledged, but he said the Bank of Canada should not interfere unless the repercussions are so severe as to seriously damage Canada's economic prospects.
The best action the bank can take, he said, was to keep inflation low, stable and predictable. He noted that Canada has experienced the second-longest expansion in its history beginning in 1991, when the bank and the government signed an agreement to set a 2 per cent inflation target.
“That's what we risk if we take our eye off the ball, and I assure you I will not take my eye off the ball,” Mr. Carney told the committee.
“Inflationary booms always end badly and they require Herculean efforts to put us back into the path we already have now.”
There had been suggestions before Mr. Carney's appearance — the first by a bank governor nominee — that he would face a respectful but pointed grilling from the MPs.
While the MPs cannot override the appointment that goes into effect on Feb. 1, they could at least dig into his past and delve into areas of potential philosophical differences between him and outgoing Governor David Dodge.
And some MPs tried, particularly Liberal Garth Turner, who repeatedly attempted to get Mr. Carney to admit he was behind the government's Halloween surprise last year to tax income trusts.
Aside from repeating the government's stated reasons for the decision, Mr. Carney would neither deny nor confirm he was the architect of the policy, saying his advice to Finance Minister Jim Flaherty is covered by cabinet privilege.
© Canadian Press
Friday, October 19, 2007
Speaking the truth
Indeed!
Breaking News from The Globe and Mail
Some day we'll wish for a permeable U.S. border
Neil Reynolds
Friday, October 19, 2007
OTTAWA — Canada and Mexico do well, as nations, buying and selling things in the United States - as do Canadians and Mexicans who habitually cross national borders to play and to toil there. Canada and the U.S. traded more than $530-billion (U.S.) in goods and services last year, commerce at the rate of $1-million a minute. Canada's trade surplus with the U.S. last year was $73-billion. Mexico and the U.S. traded more than $330-billion in goods and services. Mexico's trade surplus with the U.S. was $66-billion.
For the two relatively small countries that live next door to the United States, you can round off the combined trade surplus at an invigorating - the fashionable word these days would be "robust" - $140-billion a year.
Canada now sells so much to the U.S. - $300-billion worth a year - that 37 states count Canada as their No. 1 foreign trading partner. (Take Texas. The two-way trade between Canada and Texas exceeds $20-billion a year. The Lone Star State hosts 886 Canadian-owned companies that directly employ 30,000 Texans and indirectly sustain another 500,000.) Mexico sells so much to the U.S. ($200-billion) that 22 states count it as either their No. 1 or No. 2 foreign trading partner.
And this merely measures the things that cross the two borders. The people who cross these borders are setting robust records, too.
In any given year, individual Canadians and Americans make as many as 200 million separate border crossings for business purposes, holidays, shopping, medical care or visits to friends and relatives - though some of them do so much more frequently than others. Sixteen million cars pass through the Windsor-Detroit border crossings each year; 10 million cars pass over the international bridges that connect Ontario with New York State.
In one U.S. study of foreign travellers, published this year, statisticians calculated that Canadians spent 120 million "person-nights" in the U.S. in 2006. They spent 2.8 million person-nights in the Capital Region (Virginia, Maryland and Washington, D.C.) alone. Although 70 per cent of Canadians who make casual cross-border excursions say they're in the States primarily for shopping, more than 40 per cent report that they also visit friends or relatives.
Forty per cent of Americans live in states that share a border either with Canada or Mexico.
Ninety per cent of Canadians live within a couple of hours of the border, where crossing - until 9/11 - has always been easy. No visa required. No paperwork either.
Mexicans have simply made themselves at home in the U.S. More than 42 million Mexicans (or Americans of Mexican descent) live and work in the United States, 12 million of them illegally. When you cross the Mexico-U.S. border - through the multiple traffic lanes, say, at San Diego - you could swear that all of them commute. More Mexicans live in the United States than Canadians live in Canada.
From a historical perspective, of course, proportionately more Canadians have crossed the border and stayed in the U.S. than Mexicans. Back then, though, the border was simply irrelevant. Canadians were free to live anywhere in North America that they wanted.
Call it an almost perfect example of labour-force mobility rights. Between 1860 and 1910, Canada's population grew from 3.5 million to 5.5 million. In these same years, by some estimates, 2.8 million Canadians migrated to the States - most of them without asking permission from anyone. More than 900,000 of these were French-speaking Canadians. Had these border-crossing migrants remained in Canada, we would now have almost twice the population that we have.
Canada's border with the U.S. acquired a mythic dimension - and deserved it.
Though often hampered by misguided tariffs, the economic integration of three North American neighbours proceeded apace in a natural way - however disorderly and, occasionally, illegally. (The undefended border worked perfectly through Prohibition.)
The word now used to describe this border phenomenon is "porous." A better term would be "permeable," which eliminates the pejorative implication of "porous."
It was 9/11, of course, that made an impermeable border inevitable. In the months after the terrorists struck, the U.S. proposed a North American security perimeter that would have gotten rid of the anachronistic border crossings. The choice for Canada was simple. Canada could position itself inside a North American security perimeter - or remain outside it. In one of his very worst mistakes, former prime minister Jean Chrétien decided that Canada would remain outside.
The Americans are now building an impermeable security fence around the United States. In years to come, Canadians will remember nostalgically the border that didn't work and will thoroughly curse the new one that does.
nreynolds@xplornet.com
© The Globe and Mail
Breaking News from The Globe and Mail
Some day we'll wish for a permeable U.S. border
Neil Reynolds
Friday, October 19, 2007
OTTAWA — Canada and Mexico do well, as nations, buying and selling things in the United States - as do Canadians and Mexicans who habitually cross national borders to play and to toil there. Canada and the U.S. traded more than $530-billion (U.S.) in goods and services last year, commerce at the rate of $1-million a minute. Canada's trade surplus with the U.S. last year was $73-billion. Mexico and the U.S. traded more than $330-billion in goods and services. Mexico's trade surplus with the U.S. was $66-billion.
For the two relatively small countries that live next door to the United States, you can round off the combined trade surplus at an invigorating - the fashionable word these days would be "robust" - $140-billion a year.
Canada now sells so much to the U.S. - $300-billion worth a year - that 37 states count Canada as their No. 1 foreign trading partner. (Take Texas. The two-way trade between Canada and Texas exceeds $20-billion a year. The Lone Star State hosts 886 Canadian-owned companies that directly employ 30,000 Texans and indirectly sustain another 500,000.) Mexico sells so much to the U.S. ($200-billion) that 22 states count it as either their No. 1 or No. 2 foreign trading partner.
And this merely measures the things that cross the two borders. The people who cross these borders are setting robust records, too.
In any given year, individual Canadians and Americans make as many as 200 million separate border crossings for business purposes, holidays, shopping, medical care or visits to friends and relatives - though some of them do so much more frequently than others. Sixteen million cars pass through the Windsor-Detroit border crossings each year; 10 million cars pass over the international bridges that connect Ontario with New York State.
In one U.S. study of foreign travellers, published this year, statisticians calculated that Canadians spent 120 million "person-nights" in the U.S. in 2006. They spent 2.8 million person-nights in the Capital Region (Virginia, Maryland and Washington, D.C.) alone. Although 70 per cent of Canadians who make casual cross-border excursions say they're in the States primarily for shopping, more than 40 per cent report that they also visit friends or relatives.
Forty per cent of Americans live in states that share a border either with Canada or Mexico.
Ninety per cent of Canadians live within a couple of hours of the border, where crossing - until 9/11 - has always been easy. No visa required. No paperwork either.
Mexicans have simply made themselves at home in the U.S. More than 42 million Mexicans (or Americans of Mexican descent) live and work in the United States, 12 million of them illegally. When you cross the Mexico-U.S. border - through the multiple traffic lanes, say, at San Diego - you could swear that all of them commute. More Mexicans live in the United States than Canadians live in Canada.
From a historical perspective, of course, proportionately more Canadians have crossed the border and stayed in the U.S. than Mexicans. Back then, though, the border was simply irrelevant. Canadians were free to live anywhere in North America that they wanted.
Call it an almost perfect example of labour-force mobility rights. Between 1860 and 1910, Canada's population grew from 3.5 million to 5.5 million. In these same years, by some estimates, 2.8 million Canadians migrated to the States - most of them without asking permission from anyone. More than 900,000 of these were French-speaking Canadians. Had these border-crossing migrants remained in Canada, we would now have almost twice the population that we have.
Canada's border with the U.S. acquired a mythic dimension - and deserved it.
Though often hampered by misguided tariffs, the economic integration of three North American neighbours proceeded apace in a natural way - however disorderly and, occasionally, illegally. (The undefended border worked perfectly through Prohibition.)
The word now used to describe this border phenomenon is "porous." A better term would be "permeable," which eliminates the pejorative implication of "porous."
It was 9/11, of course, that made an impermeable border inevitable. In the months after the terrorists struck, the U.S. proposed a North American security perimeter that would have gotten rid of the anachronistic border crossings. The choice for Canada was simple. Canada could position itself inside a North American security perimeter - or remain outside it. In one of his very worst mistakes, former prime minister Jean Chrétien decided that Canada would remain outside.
The Americans are now building an impermeable security fence around the United States. In years to come, Canadians will remember nostalgically the border that didn't work and will thoroughly curse the new one that does.
nreynolds@xplornet.com
© The Globe and Mail
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