There hasn’t been much public discourse about the possible merger of America with Canada and Mexico into a European Union-style North American Union (NAU) since 2007. But Diane Francis’ book Merger of the Century, Why Canada and America Should Become One Country, revives and modifies the original NAU idea into a Canadian-American merger, cutting Mexico out of the equation. Francis, a Canadian author, journalist, and broadcaster who often resides in the U.S., readily admits neither Canadians nor Americans would like the idea, but she tries to make the case that both nations are on the decline and in order for America to remain the world’s lone superpower and maintain a high standard of living, it must merge with Canada.
Francis points to threats from China and Russia and their aggressive takeover, and sometimes predatory takeover, of the world’s commodities – primarily oil, in particular, control of Arctic trade channels as the reason the two countries should join forces.
The year 2003 marked the “end of everything” when commodity prices shot up as emerging countries bought up remaining inventories of key resources. That’s when the standard of living in the U.S. and many other western countries started to take a dive because of the fight over the remaining “finite” resources.
The World Bank called it the “most marked boom in commodity prices in the past century” with oil prices jumping to 320% higher than they were in 2003, food 138% higher, and metal and minerals 296% higher. According to the Economist in August 2011, from the year 2000 to 2010 was the decade of decline for developed countries while emerging countries gained and eventually generated more than 50% of the world’s economic output. In 1990, the original 23 ‘rich’ countries that made up the Organization for Economic Co-operation and Development (OECD) represented 80% of the world’s GDP.
Francis insists the redistribution of wealth from rich countries to others is already well underway, calling the American version of Capitalism a “Wild West of unregulated brokers and bankers” that nearly took down the world’s financial system during the 2008 economic crisis.
“The conservative-preferred free market fundamentalist, shareholder-only model – so successful in the 20th century – is being thrown on the trash heap of history,” according to Andy Stern, former president of the Service Employee International Union, who believes countries need to be become ‘economic teams.’
Francis advocates regional governance in order to remain competitive and self-reliant amidst ruthless methods of oppressive regimes. The only solution now is a government-managed economy and forms of state capitalism. A grand game to capture guaranteed access to the necessities of life is being played. The Chinese characterize their government not as communism but as “socialism with Chinese characteristics” or what Francis describes as capitalism mixed with communism and statism.
Francis claims the battle isn’t about capitalism versus communism or ideology, but what works and what doesn’t. She likens the U.S. and ‘rich countries’ to ‘fat cats’ who need to slim down and “learn to live on fewer mice, and then figure out how to catch enough to survive.” According to her, America can no longer be competitive with China and Russia without Canada’s natural resources.
Most countries wish they could be more like America and have turned to what she dubs state capitalism in order to compete with the U.S. free market system. Free market economics has arguably been one of the key secrets to America’s prosperity – that coupled with the rule of law, self-government, and private property ownership – and being rooted in Judeo-Christian values. Picking and choosing only one or two of the above is what has largely failed other countries. Stealing American innovations, like the Chinese, and simply manufacturing American goods and technology to sell it back to them, isn’t a sustainable economic system.
She opines that Canada and the U.S. have stagnated at the ‘free trade’ level and have failed to achieve ‘economic integration’ even though the two countries began discussions of a common security perimeter in 2010, reached a deal in 2011 that was to be implemented by the end of 2013.
A common security perimeter can mean different things to different people. To Francis, she wants it to mean integrated customs, expediting travel and trade, and blocking ‘undesirables’ and illicit goods at the border. Since 9/11, America has increasingly militarized the U.S.-Canadian border and now requires a passport to enter the United States. She gripes that it’s hurt Canadian trade and tourism with needless border delays, especially at the Ambassador Bridge crossing where trade traffic was already backed-up prior to 9/11.
So Francis concludes the only way to fix the border is to erase it. I hope that sent shudders down your spine. If it didn’t, it should considering the threats coming from drug smugglers and terrorists that have infiltrated Canada to exploit the ‘friendly neighbor’ image of Canada in order to gain access to the U.S.
America is rightly concerned about border crossings from Canada after the attempted terrorist attack by an Algerian refugee living in Canada, Ahmed Ressam, in December 1999 on his way to blow up the Los Angeles Airport. Canada’s lax immigration system and law enforcement allowed him to allude deportation, and though he was arrested four times, he was never jailed, deported, or so much as fingerprinted. Ressam even received welfare payments! A 2010 GAO Report said the terror threat is greater from Canada than Mexico.
Since immigration laws are less stringent in Canada, many drug smugglers have set-up shop in Canada to avoid the crackdowns at the Mexico border. In 2002, Francis wrote a series of articles that uncovered British Columbia exports more marijuana to the United States than forest products. In 2004, the U.S. launched a border protection project deploying radar and predator drones to detect and crackdown on narcotics traffic. It revealed a massive volume of drugs are coming across the northern border: marijuana, ecstasy, and methamphetamine.
Francis admits the Canadian government’s refusal to develop its own resources is a major reason she’s pushing for a merger. But Americans should be asking, why should we do for you what you aren’t able or willing to get your own government to do for you? She also notes that the United States isn’t going to have the financial resources to keep providing Canada’s national security with our military indefinitely.
Together, the two countries could be energy independent by 2035. Getting access to develop Canada’s vast untapped resources could be done without a merger as companies like ExxonMobil are already doing. She claims a merger would help maintain our standard of living, reduce our high unemployment (due to the high cost of western labor compared to China), and improve the financial situation of both countries. Francis outlines U.S. runaway spending, our credit downgrade, trade deficits, and dependence on foreign oil, among our weaknesses, but those weaknesses can be solved internally without Canada.
I’d argue one of single-most damaging factors that has lead to U.S. decline in standard of living has been free trade agreements like NAFTA. So launching into a full blown merger would seemingly make an already bad situation even worse.
Yin and Yang
Our governments are polar opposites, despite our friendly relations. Though Francis never admits Canada is socialist, it certainly is. Canadians have a socialist healthcare system, higher tax burden, and liberal policies that don’t share our values of limited government, low taxes, and rugged individualism.
Though Francis cites many public opinion polls that show a systematic decline in moral values in America which she believes aligns America’s values with Canada’s, it doesn’t mean Americans are ready to accept big government (government-owned land and ownership of its industries/companies), government-regulated banking and sovereign wealth funds, socialized medicine (just look at the blowback to Obamacare), loss of property rights, gay marriage, legalized pot (despite a few liberal states choosing to legalize it), and higher taxes, nor is it willing to chuck the free market system.
Taking on Canadian entitlements in addition to our own would spell disaster, not be the healing tonic she makes it out to be, even with access to its oil and natural resources. Socialism eventually implodes as productive workers are increasingly financially punished to the point of opting out of the workforce and eventually other people’s money runs out.
The benefits to Canada, however, are clear: access to American capital, national security, innovation, and prosperity. It would also solve Canada’s brain drain. Many of its talented, educated academics and innovators take up residence at U.S. universities and corporations. One in ten Canadians already live in the United States. Francis says the two countries are dependent on one another, but really it’s Canada that’s dependent on America for its future success, which she admits later in the book.
Francis praises Canada’s socialized medicine, and claims medical outcomes are no better in the more expensive privatized U.S. health system compared to Canada’s socialist system, but subsequently concedes what’s ailing Canada is its bloated government and poor government-stewardship of its assets.
Francis outlines 5 different ways a merger could be accomplished. This is where the book goes completely off the rails. She claims in each scenario that Canada would be making an ‘over-contribution’ in terms of resources. Never mind that the U.S. brings more to the table by every other measure. Since Canada’s land mass is 98% unoccupied and sparsely populated with only 34.4 million people, she makes it appear Canada is bringing more to the table than the U.S. based on percentage of population, and therefore ought to be compensated for it accordingly.
The first option is an investment banking approach and would be handled similar to a corporate merger/acquisition – buying out the Canadians outright like the merger of East and West Germany. Americans would be expected to compensate Canadians to the tune of $17 trillion in Option 1, entitling each Canadian to $492,529!
In Option 2, a mining approach, would compensate Canadians for the estimated price of its resources and royalties on proceeds for future discoveries. Its price tag is $12 trillion plus free lifetime healthcare and royalties on the oil and other resources extracted from Canada’s undeveloped land. Remember, that to extract resources it would require doing so in extremely harsh conditions – in desolate arctic conditions. Just the infrastructure to gain access to or get any of the resources to market would cost billions.
Double the U.S. debt bomb for Canadian windfall
The other options would integrate the two countries in lesser fashion without full integration, and compensation would be a bit lower, but how she thinks the U.S. would pay for any of them is laughable. After slamming America for its high national debt earlier in the book, she suggests that Americans finance the $17 trillion, for instance, by issuing long-term bonds to Canadians as payment.
That would double our current national debt! She cautions against having foreigners or commercial banks finance it, so her solution is to bring the new entity’s debt from their current combined 79% debt-to-GDP ratio up to a whopping 179%. The bonds would be financed by $39 billion in increases in local property and sales taxes, and hold onto your hat – a $1.00 a gallon gas tax hike to raise another $134 billion a year!
But the financed pay-out would be in payments over time based on years of residency in Canada, so a person who’s lived in Canada 65 years would receive $803,400 in bonds. A Canadian-born family from grandparents to grandkids would be eligible for over $4 million! She says Canadians could pay-off their debts, retire, and re-locate to a sunny state in the U.S. What a deal! More like what an insult to Americans – indebt future generations to pay for difficult to extract resources that may never materialize or match the massive cost of such a proposal.
Of course, since the vast majority of Canadian land is government-owned, and in the U.S. the vast majority is privately owned, this would entitle all Canadians to share in the bounty of a Canadian-U.S. merger. Further, since America’s industries are privately-owned the development of Canada’s resources would be privatized, too, leaving the American taxpayer left with the tab of paying both for the merger and paying for the commodities extracted.
Another scenario would be a joint venture ratified by a treaty rather than be a full takeover where both countries would share the cost and bounty of developing Canadian resources. Yet another option would be a ‘carve out’ like selling a minority stake in Canada to Americans to be run by a series of public-private partnerships.
Francis also suggests using the European Union as a template for a gradual merger. She ackowledges the drawbacks of the EU (no debt and spending controls to prevent the situation in Greece) and NAFTA. She says membership of Mexico is a black eye on NAFTA and was premature due to its drug smuggling and systemic corruption, which has set back progress of a Canadian-U.S. merger. After all, there was the Canada-United States Free Trade Agreement before there was NAFTA.
In addition, since Canada would now be our biggest creditor, she says they’re also entitled to hold key positions in government including Chair of the Federal Reserve, the Vice Presidency, Treasury Secretary, Budget Director, Congressional Budget Office Director and more. Does this sound like a merger to you? Sounds much more like a hostile takeover to me.
As if the cost of the merger isn’t offensive enough, to pour salt in the wound, she brazenly suggests the new entity hire demobilized U.S. military to fill the jobs of extracting Canada’s resources because they’re “used to working in remote and difficult conditions.” Most military families hate being away from their loved ones, but they willingly sacrifice out of service to their country and to defend our freedom. This is a far cry from being away from one’s family to extract hard to access natural resources as a regular job for a for-profit company while owing every Canadian millions of dollars for a merger.
A merger with liberal Canada would ensure a Republican would never hold the White House again – a fact Francis readily admits. While we certainly share common enemies, the loss of sovereignty and the political and economic consequences of a merger would destroy what’s left of America’s free enterprise system and its unique and truly exceptional Republican form of government. Most Americans like their Constitution and want to preserve it, not create a new one with a socialist country that wants a free ride at the expense of the U.S. taxpayer.
Terri Hall is the founder of Texans Uniting for Reform and Freedom (TURF), which defends against eminent domain abuse and promotes non-toll transportation solutions. She’s a home school mother of nine turned citizen activist. Ms. Hall is also a contributor to SFPPR News & Analysis.