Why the U.S. Should Merge With Canada

 

 

Why the U.S. Should Merge With Canada

 

Why the U.S. Should Merge With Canada By DIANE FRANCIS The United States and Canada are far more integrated than most people think. In fact, a merger between the two countries isn’t just desirable—it’s inevitable. We share more than just the world’s longest border. We share the same values, lifestyles and aspirations. Our societies and economies are becoming similar in significant ways. In 1966, I emigrated from the United States to Canada as a young woman. In the nearly 50 years since then, I’ve have seen Canada become more like America and America become more like Canada. Canada used to be controlled by a few families, banks and conglomerates. It’s now a more dynamic, multicultural country powered by free enterprise. At the same time, the United States has become more progressive on issues like civil rights, women’s rights, gay rights and, yes, universal health care. Canadians and Americans are so indistinguishable to the rest of the world that some Canadians put maple-leaf flags on their lapels or backpacks so as not to be mistaken for Americans. That’s easy enough to do, as we tend to marry, study, date, play, work, invest and travel alike. Put together, the United States and Canada would be a colossus, with an economy larger than the European Union’s—larger, in fact, than those ofChina, Taiwan, Japan and South Korea combined. We would control more oil, water, arable land and resources than any jurisdiction on Earth, all protected by the world’s most powerful military.   Far-fetched? Maybe. But consider this: Two Canadian prime ministers – one after the First World War and another after the Second World War – seriously considered proposing a merger with the United States. They did not proceed for political reasons. In the 1970s, Canadian tycoon E.P. Taylor, famed for his thoroughbred race horses, told a biographer: “If it weren’t for the racial issue in the U.S. and the political problems [Vietnam] they have, I would think that the two countries could come together … I’m against the trend of trying to reduce American ownership in Canadian companies. I think nature has to take its course.” Since then, “nature” has been taking its course, in both directions. Three million, out of 35 million, Canadians live full or part time in the United States. Most retire in Sunbelt states, but there are an estimated 250,000 Canadians working in Los Angeles, another 250,000 in Silicon Valley and an estimated 400,000 per day work in Manhattan. This doesn’t include the million or so Canadians who became U.S. citizens before 1976, before dual citizenship was allowed. This north-south brain drain has been constant throughout Canada’s history. In 1900, Canada’s population was only 5.37 million people, and by 2000 seven million had immigrated to the United States. Millions of Americans have Canadian roots – including well-known figures like Ellen DeGeneres, Alec Baldwin, Vince Vaughn, Madonna, Angelina Jolie, Hillary Clinton, Sarah Palin, Jack Kerouac, Walt Disney, Walter Chrysler and Thomas Edison. The flow of people has also drifted northward. More than 1 million Americans, like me, live in Canada, and our offspring, even if born in Canada, are entitled to U.S. citizenship. In addition, Canada’s 800,000 aboriginals, known as “First Nations,” are effectively American citizens by virtue of the 1794 Jay Treaty. Economically, the countries are one another’s biggest investors, customers and suppliers. Canada ships more oil to the United States than any other country, roughly 2.5 million barrels a day (out of the total consumed of 19.4 million barrels daily) and is an important source of electrical power, uranium, metals, minerals, natural gas and automobiles. In return, Canadians buy more U.S. products than does the entire EU. U.S. corporations own roughly 12 percent of Canada’s corporate assets, roughly half of its oil industry and most of its manufacturing. U.S. retail chains garner 60 percent of all retail dollars spent by Canadians at home. Canadian corporations are the third biggest investors in the United States, and Canadian foreign direct investment levels in the U.S. nearly match the amount invested by Americans in Canada. Since 2008, individual Canadians have been the largest buyers of real estate in the United States among foreign buyers, or 25 percent of the total. Given all this intermingling, why bother with a formal merger? If the United States and Canada were corporations, or European states, they would have merged a long time ago. Each has what the other needs: The United States has capital, manpower, technology and the world’s strongest military; Canada has enormous reserves of undeveloped resources and ownership of a vast and strategically important Arctic region. Countries are like modern businesses, and must constantly recalibrate their economic and political models. Unless winners adapt, they eventually lose out, in economic and political life as in nature. Today’s America or Canada could become tomorrow’s Portugal or Greece. In the competitive and interconnected world of the 21st century, standing still is losing ground. It’s been 26 years since the U.S.-Canada free trade deal. The border is worse, or thicker, than before. There are new regulations – due to U.S. concerns about security and drug smuggling out of Canada. The total cost of these barriers is unknown, but involves thousands of border guards, facilities, additional paperwork and regulatory requirements, inspectors and even drones in certain areas. Why have a border at all? It’s time to do what the Europeans have done, despite centuries of warfare, and eliminate this artificial boundary. Two options would be a currency union—both countries running on the U.S. dollar—or a customs union, which would further deepen our economic ties. More radically, the United States and Canada could merge into a single nation-state or an EU-style partnership, with certain powers allocated to a central governing body while others stay with each country’s own ruling structures. When I float this idea in Canada, I get a mixed and muted reaction. Canadians are very polite, and if they oppose the idea, they are rarely combative. If they approve, they won’t say much in deference to the feelings of their fellow Canadians who may oppose it. But south of the border, an increasing number of policymakers agree that deeper integration between the two countries makes sense. And for many, the strongest case may be geopolitical. Since the fall of the Iron Curtain, a new economic Cold War has emerged, pitting free economies like the United States against the state-directed capitalism of China, Japan, Russia, the Gulf Arab states, South Korea, Singapore and others. These countries control, or own outright, their corporations, and back their efforts with an arsenal of economic weaponry — from subsidies and protectionism to diplomacy to bullying and bribery — to capture markets and resources. In this new world, bigger is better. Big countries can push back or reciprocate with duties, protectionism or restrictions. Big countries can insist on fair treatment, can impose non-tariff barriers and, if treatment is nasty, can threaten military or diplomatic sanctions. Smaller countries, or those without military might, have to take it on the chin. Another benefit would be the development of Canada’s north, an area larger than Australia, and largely empty. Roads, airports, railways, seaports, military outposts, bridges, power generation facilities and other infrastructure are needed to tap its vast buried treasure. An estimated $17 trillionworth of metals and minerals — such as copper, gold, silver, nickel, uranium, diamonds, phosphates, potash, lead, zinc, iron ore, and rare materials used in hybrid cars, solar panels and electronics — are known to exist already, according to estimates by an expert with the Canadian Geological Survey, but there’s more. Much of the territory has not been mapped or even been trodden by human beings, let alone explored for resource development. Only American capital, know-how and military protection can do it right. Despite the powerful logic of a U.S.-Canada merger, the obstacles remain daunting. Both countries are politically divided and heavily regionalized. Getting a budget passed in Washington is tough enough, but coordinating the wishes of regions and politicians on both sides of the border would be impossible unless, of course, there’s a crisis. To execute so audacious a move would require a level of statesmanship now lacking in both countries. But remember: The Europeans pulled off something far more dramatic, uniting populations that shared no language and had slaughtered one another for centuries. Other recent, albeit less dramatic, examples of deeper integration include the Eastern Caribbean Economic and Monetary Union and the Economic Community of West African States. They all did it by opening their borders to trade and travel—while at the same time leaving governments intact. Opinion surveys about an outright merger are rare but in 1964, a poll showed support from 49 percent of Canadians. In 2007, the World Values Survey Association, a research network of thousands of social scientists, found that about 77 percent of Americans and 41 percent of Canadians said they would opt for political union if it meant a better quality of life. In 2011, another poll by Harris/Decima showed that 65 percent of Canadians backed greater integration with the United States and supported a plan to eliminate the border by blending U.S. and Canadian customs, immigration, security and law enforcement efforts. We don’t have to become one country—say, the United States of America and Canada. But there’s a lot we can do, short of a full-on merger, to join forces.   Diane Macdonald/Getty   THE BIG IDEA   The Big Idea: Why Canada and U.S. Should Merge How to prevent us heading for a world of scarce resources, unfair competition, and geopolitical battles? U.S. and Canada should join forces, says Diane Francis, author of the new book Merger of the Century. What is your big idea? The United States and Canada should merge. Unfortunately, the reverse is happening. They share geography, values, and a gigantic border, but the two countries are on a slow-motion collision course—with each other and with the rest of the world. Since they signed a free trade agreement in 1987, the U.S.-Canada border has become more clogged than ever, hurting trade and tourism. While both countries wrestle with their internal and border problems, emerging economies, using a state capitalism model of development, flourish. By 2018, China’s economy will be bigger than that of the United States, and Asian economies will be bigger than the U.S., Canada, Germany, Britain, Italy, France, and Russia. A merged United States and Canada would have an economy larger than the European Union’s. The two would be an economic superpower, bigger than South America in size, with more energy, metals, minerals, water, arable land, resource potential, and technology than any other jurisdiction, all under U.S. military protection.    Merger of the Century: Why Canada and America Should Become One Country’ by Diane Francis. 336 pp. Harper. $28. () How would a merger help? By joining forces, the U.S. would improve national security, guarantee energy and resource independence, and create millions of jobs in helping develop Canada’s North; and Canada would be able to defend and develop its huge landmass, overcoming lack of capital, workers, technology, and military might. Size matters. A merged, or more economically and politically integrated, U.S.-Canada would counterbalance the fact that state-owned or controlled companies are on their way to dominating trade and access to resources. In 2000, seven of the world’s 10 largest oil companies were American or European multinationals. By 2010, 28 of the 50 biggest were government-owned or controlled, led by gigantic Saudi Arabia’s Aramco. China has targeted Canada’s resources and Russia has declared that all of the Arctic is Russian. Water, oil, and metals shortages will become issues going forward in these regions. For instance, China has 20 percent of the world’s population and only 7 percent of its water. The Middle East has 5 percent of the world’s population and 1 percent of its water. The U.S. and Canada have 15.5 percent of the world’s population and more than 25 percent of its water. State capitalists tip the playing field in their favor. China is now the largest owner of farmland in Africa, and this fall bought 5 percent of Ukraine’s arable land. South Koreans unsuccessfully attempted to take over half of Madagascar’s food lands and Arab monarchies have been buying huge tracts of farmland and gaining political influence by doing so. State capitalists tip the playing field in their favor. They have access to subsidized capital, exploration opportunities, and oil fields because their governments are partners or owners. These countries are, in essence, gigantic holding companies with “soft” weapons—unavailable to private sector companies—such as diplomatic pressure, foreign aid, market tradeoffs, cheap customer loans, weapons, or bribes. They impose non-tariff barriers against exports and buy foreign companies while denying foreign ownership in their own economies. In September, a Chinese government company bought Smithfield Foods, the world’s biggest pork producer, but is protected from any foreign takeover. The World Trade Organization is toothless, unable to prevent China from hoarding rare earths, Russia from driving out western investors or China from manipulating its currency downward. The United Nations’ Security Council is held hostage by Russia and China, who protect dictators and thugs from sanctions or interventions. Securities laws are unable to force gigantic sovereign wealth funds to disclose their holdings, ownership or trading activity. How would a merger work? Any merger, as the Germans and Europeans discovered, can be difficult. The U.S. and Canada have unique cultures, governments, healthcare, taxes, gun laws, and legal systems. But there are many ways to merge. One model would be a full-on merger as Germany accomplished in 1990, or a European Union-style merger involving the elimination of borders but not of governments. There are also other ways to integrate to realize synergies and keep the state capitalist “wolves” away from the door. Some nations create customs and monetary unions to allow the free flow of workers, capital, goods, and services. These two nations could create a bi-national energy strategy or sign a joint venture to develop Canada’s staggering, neglected, and untapped resources in the North, an area three times bigger than Alaska. They could also adopt strategies like the state capitalists use such as blocking foreign buyouts or getting tough on non-tariff barriers or trade cheating. Arguably, the two launched a merger process in 1987, but there’s slippage and there are more compelling reasons to accelerate integration. Both need to host national conversations about the benefits and challenges of becoming full-fledged partners. Clearly, the status quo is not an option.