Perhaps an economic union with the U.S. is not a bad idea after all

[Brent]

Maybe now is the time to negotiate a North American common market.

Canadians younger than 55 do not have a deep emotional attachment to Canada, according to an Angus Reid survey, and their attachment is conditional on the country providing a good standard of living. Prime Minister Justin Trudeau (and Jean Chrétien before him) were maybe right to characterize Canada as a postnational state. Canadians may thus be willing to integrate with the U.S., as President Donald Trump has repeatedly mused, if they become convinced it would raise their quality of life.

Will it actually be a good idea? Maybe not political integration, but what about economic integration, including adopting the U.S. dollar as a common currency? According to Kevin O'Leary, this is what Mr. Trump really wants anyway – and no, it is not the same thing. This would mean creating an American economic union (with or without Mexico) similar to the European Union.

Goods, services and people would move more freely between countries. Trade barriers and transaction costs, such as those associated with exchange rate risks and rules of origin, would be pretty much eliminated. This would boost investment and make supply chains more efficient. Reducing market segmentation would increase competition and lead to lower prices, particularly for Canadians. This could create an economic bonanza. Studies show that the creation of the EU boosted member countries' GDP by an average of 9 per cent, with some smaller countries having seen gains up to 50 per cent.

There are cons and they are all associated with the loss of some socio-economic policy levers. This could make us less resilient, but the importance of that is not clear.

Adopting the U.S. dollar would mean not having an independent monetary policy. This would limit the ability to buffer shocks that disproportionately affect Canada because of a different economic structure. The typical example is a decline in oil price, in which case the larger effect on Canada is offset by a depreciating Canadian dollar. However, the soaring U.S. oil production has likely reduced the difference in this relative impact and, in general, the structure of the Canadian economy is not that different from that of the U.S. And we could still use countercyclical fiscal policies to mitigate effects in the relatively rare case that a specific shock hits Canada harder.

An economic union would not stop us from having our own social safety net, tax policies and regulatory standards, and from promoting our culture. Most studies find the potential "race to the bottom," where competition forces a reduction in our standards, to be more a myth than reality. Tax rates and standards differ across European countries, and across provinces and states, and economic regions with more stringent standards or higher taxes often perform better. While it is true that having similar rules and regulations (or mutual recognition) would facilitate trade, having different regulations would always be an option when it would be shown to lead to better outcomes for Canadians.

It's likely the main benefit is stronger economic growth, and the main cost is increased risk. We will have to consider what we value more. Creating an economic union should not be considered lightly, but neither should it be discarded out of hand. There could be merit.

Similar economic structure and the fact that the two countries share pretty much the same monetary policy objective (2-per-cent inflation target) means the value of maintaining separate currencies may not be large.

https://www.theglobeandmail.com/business/commentary/article-perhaps-an-economic-union-with-the-us-is-not-a-bad-idea-after-all/?utm_source=PaidSocial&utm_medium=FacebookAd&utm_campaign=traffic_mkt&utm_term=SCL_ROB&utm_content=keywee-loyaltyscore&utm_id=1&kwp_0=2448755&kwp_4=6824906&kwp_1=2902578&fbclid=IwY2xjawIN199leHRuA2FlbQEwAGFkaWQBqxiEx8jhbAEdYOmZrV2HlTZIjpryoOIhI-z4m3VuLP3fnsCYkT8PJQ1l0Q6psgZZgyIZ_aem_o8arUL__B0rMEsQq35WxFg

[Thiel]

The benefits of economic union would outweigh any costs.

[Prof Emeritus at Fawk U]

Nope, don't want you snowbacks.  Stay independent or else.

[Brent]

Nope, don't want you snowbacks.  Stay independent or else.

We would still be independent inside a common market.

[Prof Emeritus at Fawk U]

We would still be independent inside a common market.

Bud, I was kidding.  The snowbacks was a hint.

[Brent]

Bud, I was kidding.  The snowbacks was a hint.

I know you were kidding. My point is that it is time to start seriously looking at a North American common market.