By Alex Newman
As early as January of 2005, high-ranking officials were discussing the best way to sell the idea of North American “integration” to the public and policymakers while getting around national constitutions. The prospect of creating a monetary unit to replace national currencies was a hot topic as well.
Some details of the schemes were exposed in a secret 2005 U.S. embassy cable from Ottawa signed by then-Ambassador Paul Cellucci. The document was released by WikiLeaks on April 28. But so far, it has barely attracted any attention in the United States, Canada, or Mexico beyond a few mentions in some liberty-minded Internet forums.
Numerous topics are discussed in the leaked document — borders, currency, labor, regulation, and more. How to push the integration agenda features particularly prominently.
Under the subject line “Placing a new North American Initiative in its economic policy context,” American diplomatic personnel in Canada said they believed an “incremental” path toward North American integration would probably gain the most support from policymakers. Apparently Canadian economists agreed.
The cable also touts the supposed benefits of merging the three countries and even mentions what elements to “stress” in future “efforts to promote further integration.” It lists what it claims is a summary of the “consensus” among Canadian economists about the issues, too.
Merging the United States, Canada, and Mexico
Integration is a little-used term employed mainly by policy wonks. But while it may sound relatively harmless, it generally describes a very serious phenomenon when used in a geopolitical context — the gradual merging of separate countries under a regional authority.
Similar processes are already well underway in Europe, Africa, and South America. And according to critics, the results — essentially abolishing national sovereignty in favor of supranational, unaccountable governance — have been an unmitigated disaster. But the U.S. government doesn’t think so.
In North America, integration has been proceeding rapidly for years. The New American magazine was among the first to report on the efforts to erect what critics have called a “North American Union,” encompassing Canada, the United States, and Mexico. But more recently, the topic has received more attention:
After the creation of the North American Free Trade Agreement (NAFTA) — similar in many ways to the European Common Market that preceded the political union in Europe — the integration scheme has only accelerated. And the bipartisan efforts have been going on for years.
Under President George W. Bush, integration occurred through the little-known “Security and Prosperity Partnership of North America.” And with the Obama administration, the process, now virtually out in the open, is only accelerating.
Back in 2005, the cable released recently by WikiLeaks explained how it would be done. And looking back, the document was right on the mark.
The best way forward, according to the cable, is via gradual steps. “An incremental and pragmatic package of tasks for a new North American Initiative (NAI) will likely gain the most support among Canadian policymakers,” the cable states in its summary.
“Our research leads us to conclude that such a package should tackle both ‘security’ and ‘prosperity’ goals,” the document claims, using the two key words that have been emphasized at every step along the way. “This fits the recommendations of Canadian economists who have assessed the options for continental integration.”
Toward the end, the cable offers more advice on how to advance the integration agenda by tailoring the narrative. “When advocating [the North American Initiative to integrate the three countries], it would be better to highlight specific gains to individual firms, industries or travelers, and especially consumers,” the cable states, noting that it’s harder to “estimate the benefits” on a national or continental scale.
In a section headlined “North American Integration: What We Know,” the cable offers nothing but praise for the merging of the continent’s once-sovereign nations that had already been achieved.
“Past integration (not just NAFTA but also many bilateral and unilateral steps) has increased trade, economic growth, and productivity,” it claims, despite the fact that countless economists disagree. Of course, true free-trade advocates also correctly point out that the thousands of pages of regulations making up the agreements should hardly be considered examples of genuine free trade.
So-called “security,” the other big integration selling point, is featured prominently in the document as well. “A stronger continental ‘security perimeter’ can strengthen economic performance,“ the cable states. “It could also facilitate future steps toward trilateral economic integration, such as a common external tariff or a customs union.”
And law enforcement “cooperation” is good too, the embassy and the U.S. ambassador claim matter-of-factly.
“Cooperative measures on the ‘security’ side, a critical focus of current bilateral efforts, can deliver substantial, early, and widespread economic benefits,” the cable alleges, offering no evidence to substantiate the assertions.
“Security and law enforcement within North America have evolved rapidly since 9/11,” it continues. “Collaboration to improve these processes could yield efficiency improvements which would automatically be spread widely across the economy, leading to general gains in trade, productivity, and incomes.”
The Alleged “Consensus”
According to the document, “many” economists agree with the scheme. The cable says they support the principle of “more ambitious integration goals” such as a customs union, a single market, and even a continental currency to replace the dollar. On top of that, they supposedly believe such a union should involve all three major North American countries — the United States, Mexico, and Canada.
The cable cautions, however, that “most” of the economists believe the gradual approach is “most appropriate” — for now, at least. And all of them apparently agree that such an approach “helps pave the way to these goals if and when North Americans choose to pursue them.”
The embassy cable also included a summary of what it calls the “professional consensus” among Canadian economists on various issues related to integration.
“At this time, an ‘incremental’ approach to integration is probably better than a ‘big deal’ approach,” the document states under the “process” subheading, supposedly referring to the economists’ opinions. “However, governments should focus on choosing their objectives, and not on choosing a process.”
Next in the cable is the question of “border vs. perimeter,” as the formerly secret document puts it. “Even with zero tariffs, our land borders have strong commercial effects,” the embassy said. However, “some” of the effects — such as law enforcement and “data gathering” — are described as “positive.”
“Canada and the United States already share a security perimeter to some degree; it is just a question of how strong we want to make it,” the 2005 document notes. Apparently Canadians’ main reason for seeking a perimeter approach to security and borders, as opposed to a border between the two nations, is to avoid the “risk” that “discretionary” U.S. decisions to stop terror or disease might impede commerce. And evidently, the nations’ rulers did decide to make the perimeter stronger.
As The New American reported in February, U.S. President Barack Obama and Canadian Prime Minister Stephen Harper met in Washington, D.C., to hammer out a deal on solidifying the common “perimeter” around the two countries. Also part of the agreement, which conspicuously bypassed both countries’ legislatures, was a diminished role for the nations’ shared border. The development of a biometric system to track North Americans was agreed to as well, as were numerous other controversial measures.
In terms of labor markets, the so-called “consensus” among the unidentified Canadian economists is also — surprise! — the pursuit of even more integration. “Many Canadian economists point to labor markets — both within and among countries — as the factor market [sic] where more liberalization would deliver the greatest economic benefits for all three countries,” the document states.
Next, the cable release by WikiLeaks highlights another startling proposition about how to achieve an end-run around the Canadian Constitution. “Inter-provincial differences [in regulation] are important here, since Canada’s federal government does not have the benefit of a U.S.-style ‘interstate commerce’ clause,” the document states. “While much of the problem is domestic in nature, an international initiative could help to catalyze change.”
Yes, the U.S. embassy referred to the wildly abused and misapplied “commerce clause” as a “benefit” that Canada lacks. And it actually suggested, hiding behind unnamed “economists,” that the constitutional “problem” could be minimized by foisting an “international initiative” on the Canadian people.
The cable also claims the “economists” support a customs union, a feature developed in the European Union once the integration process was well established. “A common external tariff, or a customs union which eliminated NAFTA’s rules of origin (ROO), is economically desirable,” it states.
And finally, the document summarizes the “consensus” on the subject of a currency union. It said the supposed economists were “split” on the issues of returning to fixed exchange rates or even abolishing Canada’s fiat dollar and replacing it with American Federal Reserve fiat currency.
The cable gives the final word on the topic of a currency union to the Canadian central bank boss. He is quoted as saying that “monetary union is an issue that should be considered once we have made more progress towards establishing a single market.”
The scheme to merge North America into a political unit with its own legislature and currency is largely the brainchild of the world government-promoting Council on Foreign Relations. But though documents leaked earlier this year revealed that governments were trying to keep the process under wraps, integration is now proceeding out in the open for the most part.
Where the campaign will eventually end remains to be seen. But if North American Union advocates get their way, the U.S. Constitution and its Mexican and Canadian counterparts could soon be rendered irrelevant. After that, plugging the regional units into a global system would be a relatively simple matter, critics and supporters both agree.
This record is a partial extract of the original cable. The full text of the original cable is not available.
281556Z Jan 05
UNCLAS SECTION 01 OF 03 OTTAWA 000268
STATE FOR WHA/CAN – BREESE AND HOLST
WHITE HOUSE/NSC – SHIRZAD
STATE PASS USTR FOR CHANDLER
USDOC FOR 4320/OFFICE OF NAFTA/GWORD/TFOX;
TREASURY FOR IMI
GENEVA FOR USTR
E.O. 12958: N/A
TAGS: ETRD EINV CA
SUBJECT: PLACING A NEW NORTH AMERICAN INITIATIVE
IN ITS ECONOMIC POLICY CONTEXT
REF: (A) 04 Ottawa 3431 (Regulatory agenda)
(B) 04 Ottawa 066 (Canadian trade policy)
¶1. THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED. NOT FOR
DISTRIBUTION OUTSIDE USG CHANNELS.
¶2. (SBU) An incremental and pragmatic package of tasks
for a new North American Initiative (NAI) will likely gain
the most support among Canadian policymakers. Our research
leads us to conclude that such a package should tackle both
“security” and “prosperity” goals. This fits the
recommendations of Canadian economists who have assessed the
options for continental integration. While in principle
many of them support more ambitious integration goals, like
a customs union/single market and/or single currency, most
believe the incremental approach is most appropriate at this
time, and all agree that it helps pave the way to these
goals if and when North Americans choose to pursue them.
¶3. (SBU) The economic payoff of the prospective North
American initiative – in terms of higher incomes and greater
competitiveness – is available, but its size and timing are
unpredictable, so it should not be oversold. Still, a
respectable economic case has been made for such an
initiative, and this message spells it out. We believe
that, given growing Canadian concern about “border risk” and
its effects on investment, a focus on the “security” side
could also produce the most substantial economic/trade
CANADIAN ECONOMIC PERSPECTIVE
¶4. (SBU) Canadian economists in business, academia and
government have given extensive thought to the possible
options for further North American integration. Nearly all
of this work assumes that each of the three countries is
pursuing standard economic policy goals – growth,
productivity and competitiveness (rather than more specific
concerns raised by Mexican analysts such as migration
management, regional development, or environmental
protection). Since 9/11, Canadian economists working in
this area have generally endorsed a comprehensive initiative
with the United States on security, trade, and immigration.
Following is our summary of the professional consensus:
PROCESS: At this time, an “incremental” approach to
integration is probably better than a “big deal”
approach. However, governments should focus on
choosing their objectives, and not on choosing a
BORDER VS. PERIMETER: Even with zero tariffs, our land
borders have strong commercial effects. Some of these
effects are positive (such as law enforcement and data
gathering), so our governments may always want to keep
some kind of land border in place. Canada and the
United States already share a security perimeter to
some degree; it is just a question of how strong we
want to make it.
BORDER RISK: The risk that business will be obstructed
at the border by discretionary U.S. actions, such as
measures to defend against terrorism or infectious
disease, in addition to growing congestion, have become
major risks to the economy, inhibiting investment in
Canada. For small businesses, the complexities of
navigating the border are apparently even more
intimidating than the actual costs. Reducing this risk
is Canada’s top motive for pursuing further
LABOR MARKETS: Many Canadian economists point to labor
markets – both within and among countries – as the
factor market where more liberalization would deliver
the greatest economic benefits for all three countries.
They advocate freeing up professional licensing laws,
and developing a quick, simple, low-cost work permit
system, at least for U.S. and Canadian citizens.
REGULATION: Canadian economists agree that Canadian
regulations (if not their standards, then their
complexity) are needlessly restricting foreign
investment and impeding food, communications and other
industries. (Inter-provincial differences are
important here, since Canada’s federal government does
not have the benefit of a U.S.-style “interstate
commerce” clause). While much of the problem is
domestic in nature, an international initiative could
help to catalyze change.
CUSTOMS UNION: A common external tariff, or a customs
union which eliminated NAFTA’s rules of origin (ROO),
is economically desirable. NAFTA’s ROO are so
restrictive that importers often prefer to pay the
tariff rather than try to prove North American origin.
However, economists differ on the size of the benefits
available and on whether these would justify the effort
of negotiation. One study estimated that a full
customs union which eliminated ROO would only raise
national income by about one percent.
CURRENCY UNION: Canadian economists are split on
whether a return to a fixed exchange rate, or adopting
the U.S. dollar, would benefit Canada in current
circumstances. (Canada last tied its dollar to the
U.S. dollar from 1962 to 1970). The central bank
governor has taken the position that “monetary union is
an issue that should be considered once we have made
more progress towards establishing a single market.”
NORTH AMERICAN INTEGRATION: WHAT WE KNOW
¶5. (SBU) Past integration (not just NAFTA but also many
bilateral and unilateral steps) has increased trade,
economic growth, and productivity. Studies suggest
that border efficiency and transportation improvements
(such as the lower cost and increased use of air
freight) have been a huge part of this picture.
Indeed, they may have been more important to our
growing prosperity over the past decade than NAFTA’s
tariff reductions. Freight and passenger aviation are
critically important to our continent’s
competitiveness, and businesses are very sensitive to
the timing, security, and reliability of deliveries –
hence the “border risk” which so concerns Canadian
¶6. (SBU) A stronger continental “security perimeter”
can strengthen economic performance, mainly by
improving efficiency at land borders and airports. It
could also facilitate future steps toward trilateral
economic integration, such as a common external tariff
or a customs union, if and when our three countries
chose to pursue them. Paradoxically, the security and
law enforcement aspects of the envisioned initiative
could hold as much – or more – potential for broad
economic benefits than the economic dimension.
WHERE’S THE UPSIDE?
¶7. (SBU) Some international economic initiatives (such
as FTAs) produce across-the-board measures that
generate broad benefits for a country’s industries and
consumers on a known time-line. This was true of NAFTA
but it is less likely to be true of the economic
aspects of the NAI. Non-tariff barriers such as
standards and regulations generally must be tackled one-
by-one. This is a piecemeal process and the ratio of
payoff to effort is likely to be lower than with across-
the-board measures. Governments naturally focus on
resolving the problems which their firms or citizens
bring to their attention. While this approach has
merits, it tends to deliver the payoffs toward
particular interests. If there are hidden costs, there
might be little impact on national performance. As we
move toward a list of barriers to tackle, it will
remain important to balance those interests. For
example, some Canadian economists have suggested that
NAFTA fell short of expectations with respect to
increasing consumer choice in Canada; that may be a
theme we should stress as efforts to promote further
integration take shape.
¶8. (SBU) In contrast, cooperative measures on the
“security” side, a critical focus of current bilateral
efforts, can deliver substantial, early, and
widespread economic benefits. Security and law
enforcement within North America have evolved rapidly
since 9/11, leading to many less-than-perfect processes
for handling legitimate international traffic.
Collaboration to improve these processes could yield
efficiency improvements which would automatically be
spread widely across the economy, leading to general
gains in trade, productivity, and incomes.
A NOTE OF CAUTION
¶9. (SBU) There is little basis on which to estimate the
size of the “upside” gains from an integration
initiative concentrating on non-tariff barriers of the
kind contained in NAI. For this reason, we cannot make
claims about how large the benefits might be on a
national or continental scale. When advocating NAI, it
would be better to highlight specific gains to
individual firms, industries or travelers, and