The Vancouver Sun’s most influential columnist, Barbara Yaffe, is telling her readers to read my new book (co-authored with my good friends Jason Clemens and Niels Veldhuis), The Canadian Century: Moving Out of America’s Shadow.
To protect and grow its economy, Canada will have to cosy up more aggressively to Uncle Sam — even as this country moves to overtake the American behemoth on economic competitiveness.
That’s the intriguing message from three public-policy gurus writing in a newly published book sponsored by the MacDonald-Laurier Institute, a non-partisan Ontario-based think-tank.
The Canadian Century: Moving out of America’s Shadow, by Brian Lee Crowley, Jason Clemens and Niels Veldhuis, spotlights a “Redemptive Decade” — from 1988 to 1998 — of smart fiscal policy by the Mulroney Conservatives and Chretien Liberals, years that saw the introduction of free trade and the GST, cuts to public spending and an overhaul of entitlement programs such as welfare and pensions.
The U.S. has done none of this work and, as a result, today Canada is poised to “find itself without peer in North America as a magnet for investment, for immigrants, for innovation and for growth.”
We’re in a position, the authors assert, to start offering lower tax rates than the U.S., a significant change from the past, when the U.S., with a smaller government and lower taxes, was always the more appealing place to invest.
But even if Canada takes advantage of this “enormous, historic opportunity,” and even if it manages to further diversify its trade, this country will remain overwhelmingly dependent on the Yanks for its continued well-being.
The reason? Canada does not function as a single economic entity: “We are a deeply integrated part of a continental economy and the border represents perhaps the single greatest threat to our ability to seize the opportunity” afforded by Canada’s fiscal standing.
And so, the three authors are recommending that Ottawa court the U.S. with a new offer of partnership that would feature:
– A jointly administered perimeter border around North America along with a Canada-U.S. customs union.
– A newly created governing body of MPs and members of Congress to manage binational issues, assisted by a tribunal to resolve cross-border disputes.
The pitch for closer integration — always controversial for Canadians, who fret about the destiny of mice who engage too closely with elephants — is not entirely new.
In the past, the notion has mostly gone nowhere because the U.S. government is so preoccupied elsewhere and the concept is likely to prove difficult politically in both countries.
Anyone who remembers the modest initiative Ottawa and Washington sponsored several years ago, the Security and Prosperity Partnership, understands how good intentions — in that case, an effort to harmonize business regulations and standards to expedite trade — can falter.
The SPP became so mired in politics, with nationalist lobbies on both sides of the border raising a stink, U.S. President Barack Obama killed it on coming to office.
The authors probably have a better chance of getting their ideas enacted on the book’s second major theme, Canada’s new-found ability to outmanoeuvre the U.S. when it comes to attracting North American investment.
The book praises Canada for efforts in the ’80s and ’90s that brought federal program spending from 21.7 per cent of GDP in 1994 down to 17.9 per cent by 1998.
But, worryingly, it notes that Ottawa lost its fiscal focus after 2000. Federal spending has jumped from 12.9 per cent in 2008 to 14.5 per cent today.
“There is substantial risk that current federal policy will undo the fiscal reforms of the Redemptive Decade. Indeed a great deal of the progress has already been undone,” the authors write.
The free-spending Harper Government clearly will need to stiffen its spine if it’s to preserve Canada’s hard-won fiscal advantage.