Another good article by David Bond.
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lw1fd.hotmail.msn.com
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Economic Bulletin #99-029
Thinking the unthinkable
Written by David E. Bond,
Senior Consulting Economist to HSBC Bank Canada,
the Economic Bulletin is a weekly commentary on current economic issues.
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Thinking the unthinkable When word got out the federal Cabinet was planning to discuss all aspects of Canada's relationship with the United States, the usual suspects, including Maude Barlow of the Committee of Concerned Canadians, were rounded up by the CBC to denounce this as the first step on the road to the end of Canada's existence. Looking at all aspects of the Canada-US relationship makes sense. In the ten years since the signing of the Free Trade Agreement, our two economies have become increasingly intertwined. Now more than 85% of our exports go to the US and, since trade accounts for more than 40% of all our economic activity, it makes sense for a responsible government to give that relationship a "checkup." There are, however, problems in doing so. In Canada, even thinking about changes in this relationship cause some to want to man the barricades, fearing a wholesale capitulation to the dreaded Yankees. I consider these protests the equivalent of arguing that discussion of anything other than the accepted theology is forbidden. Nonsense. More realistically, the US , the other partner is this relationship, has numerous other fish to fry. True we are their most important trading partner, but in the world's real politk we are small potatoes. Europe is their major competition throughout the world and Japan is not far behind. In terms of national security, we hardly count and are saved from being totally excluded in policy discussions only by the fact that we share their border. In may ways, while we want to talk, they do not necessarily want to either hear us or think about our questions. That is the crux of the problem the Cabinet debated. This partner is huge, we have marginal influence on it, it has enormous influence upon us and is becoming increasing isolationist in its trade and foreign policy. What actions or goals are practical and achievable and how much effort will it take and at what cost? What are the alternatives available to Canada and what do they imply? All of these questions are highly complex yet they go to the very heart of government and thus require political decisions. So Cabinet should be debating them. Moreover, this is an ideal time for such forward thinking. The government is halfway through its mandate. Waiting till a later date will bring re-election concerns to the fore. Now is the time to take a realistic look at our longer term issues. That said, what are the important issues to think about? There is increasing discussion about some form of monetary union meaning a jurisdiction using a common monetary unit. Canada itself is a monetary union between the 10 provinces and the territories. Many believe, because our two economies are becoming increasingly intertwined, it is important to have external factors exert a similar impact on both sides of the border. A common monetary unit would go a long way towards achieving that. From Canada's point of view, elimination of the border formalities might make sense. But the two countries' approach to both immigration and the control of drugs and firearms differ substantially. While both nations would change under a "no borders" approach, it is reasonable to assume most of the adjusting would be done by Canada. Finally, the resolution of trade disputes is still far from smooth. True, more than 95% of our products cross the line without difficulty, but that remaining 5% is what gets all the press and we need to find ways to stop or lessen the rhetoric. Most importantly, Canadians need to realize that there are issues important to both sides. The salmon fishery disputes on the west coast are a clear example. How to get the US to move on this point is difficult to imagine. Accepting binding arbitration could be seen as going to the very heart of the US political structure. Every level of Canadian government will be forced to discuss our relationship with the US. Because it is such an important issue for all of us, there is no need to worry about policy shifts being done in secret. First, no government would be that dumb. Second, the US political system would make sure everybody knew about it. Maude Barlow should sleep easy. The world of Canada-US relations changes very slowly. ~ Economic Bulletin conomique, prepared by David E. Bond, Senior Consulting Economist to HSBC Bank Canada, reflects his personal observations and does not necessarily reflect the position of HSBC Bank Canada or its board of directors. The Economic Bulletin conomique is not intended to be a comprehensive review of all developments nor is it intended to provide financial advice. Readers should not act on information in Economic Bulletin conomique without seeking specific advice from qualified advisors on particular matters which are of concern to them. This publication may be reproduced in whole or in part as long as credit is acknowledged to the author and HSBC Bank Canada. ------------------------------------------------------------- ------------------------------------------------------------- If you'd like to know more, please visit: hkbc.com |
