Introduction
An arrangement similar to the EU and Euro is being envisioned for North America and preparatory actions are already underway. A union for North America is a highly contentious proposal. Understanding the upsides and downsides of being in the EU and adopting the Euro provides insights into the potential of having a similar union in North America.
What are the advantages of being in the EU and adopting the Euro?
A primary political advantage of membership in the EU is the prevention of war among neighboring member states. EU member states are discouraged from goring to war because the mechanisms of cooperation and integration are likely to result to drawbacks for all warring countries. Another political advantage of membership in the EU is collective influence in the global political arena. EU, as a regional union, holds stronger political clout than any one of the member countries. EU membership also establishes human rights standards since member states compelled to defend fundamental rights. (Mursa, 2014)
Economic advantages from being in the EU include lesser obstacles to trade among member states, mobility of citizens for finding work and travelling for leisure, convenience for citizens in availing assistance from embassies of any EU member state when they travel overseas, and collective economic strength of the EU in international trade (Mursa, 2014).
Adopting the Euro entails the political advantage of fostering political camaraderie among member states (Truichici and Neagu, 2015). Sharing a single currency provides a common factor that strengthens the identity of member states as part of the EU.
Economic benefits of adopting the Euro include lower transaction cost for consumers and business entities, investments due to lesser exchange rate volatility, predictability of prices, and stronger pressure to raise productivity and maintain low inflation rates (Mursa, 2014). Collective pressures target economic stability and growth for member states.
What are the chief drawbacks of being in the EU and adopting the Euro?
An encompassing political downside of being in the EU is compromised sovereignty. National governments lose the prerogative to make final decisions on certain issues, even if these affect their constituency. Member states are also enjoined from acting on their own in specific situations. Member states have limited control over the number of people from other member countries who chose to reside and find employment in their jurisdiction. Even with different priorities, EU membership compels members to adopt an international perspective of certain issues, such as global warming. EU goals may trump national interests. (Mursa, 2014)
Economic downsides of being in the EU include membership contributions, ripple effects of inefficient policies, pressures to reduce spending during recession, overcrowding due to migration of EU citizens to countries with greater employment opportunities, limited independence in developing fiscal and monetary policies, loss of regulatory power over interest rates, loss of the option to devalue currency, and lack of lender of last resort (Mursa, 2014).
The political downside of adopting the Euro is the greater concentration of decision-making over currency-related matters to a group of ministers so that the Euro can be used as a political apparatus (Bagus, 2012). Anticipated effects of currency intervention at the EU level can exert undue political pressures on some member states.
Economic disadvantages of adopting the Euro include loss of discretion over monetary and fiscal policies (Booth et al., 2013), limited freedom of citizens to choose the currency that best addresses their wellbeing, and indiscriminate flow of wealth from low-inflation countries to high-inflation countries through disproportionate importation (Bagus, 2012).
Why hasn’t England, Norway, Sweden or Switzerland adopted the Euro?
Advantages of being in the EU or adopting the Euro do not outweigh the disadvantages in all European countries. England, Norway, Sweden and Switzerland did not adopt the Euro because their strong economies are deemed better off without adopting the single currency for the EU. Adoption of the Euro is expected to expose these economies to the variability of Euro valuation, inflexibility of monetary policies, fluctuations of interest rates, and loss of a lender of last resort. In the aftermath of the global financial crisis, these countries have remained relatively strong. (Balcerowicz, 2014)
What would be the advantages and disadvantages to the US entering into a similar union with Mexico and Canada?
Even with some European countries opting out of the EU and Euro, a similar union and single currency is being pushed in North America. A North American union also has benefits and downsides.
A union in North America promises the political benefit of ensuring security for the entire region. In response to 9-11, the Security and Prosperity Partnership plan emerged. Securing North America from terrorist threats becomes a regional and joint effort. Better resource sharing, including information on persons of interest, can ease the fight against terrorist threats. A union also has the potential to foster regional consciousness and magnify the political influence of the region in global politics, similar to the case of the EU. (Corsi, 2007)
A union also offers the economic benefits of bringing about economic growth, lower consumer prices, and job creation. Adopting the Amero, the suggested currency for the union, can reduce the risks faced by banks, companies, and travelers over exchange rate fluctuations. (Corsi, 2007)
A political downside of the union, especially to the US and Canada, is the loss of their moral ascendancy to compel China to respect human rights, since North America is a recipient of Chinese investments and China-made commodities. China is a major trading partner of the member countries and primary investor in the infrastructure projects needed for implementing the union. In addition, the plan to execute the ‘Trusted Traveler’ and ‘Trusted Trader’ programs can be abused by criminals and terrorists. The drug cartel has a strong influence on the Mexican government. Corruption can create security risks. Invasion of privacy is also a risk in using electronic systems to track travelers and traders moving within the union. (Corsi, 2007)
A range of economic downsides may also occur. Migration could cause congestion in the United States and Canada. The social security burden would likely increase for the United States and Canada with more low-income immigrants. Inflow of Chinese products into the market increases the revenue of manufacturing companies and decreases price for consumers, but at the cost of jobs. Job creation for Americans and Canadians will be limited since companies are likely to prefer low-wage Mexican workers. It is likely that unemployment and loss of spending power, in the United States and Canada, cannot be fully offset by lower commodity prices. (Corsi, 2007)
Who are the principal beneficiaries of NATU, who can it hurt? Why?
A country that primarily benefits from a North American union is China. Import goods come from China and China is investing in plans for the formation of the union. Mexico also stands to benefit from the North American union, since a focus of the union is economic and employment growth in Mexico. The union would also benefit individual investors, investment firms and other companies that are positioned to gain from the infrastructures needed for implementing the union. Foreign firms, such as the Spanish construction firm Groupo Ferrovial, are bidding to become contractors in the Trans-Texas Corridor. Foreign firms gain control of these infrastructures. (Corsi, 2007)
Large agricultural lands and ranches in Kansas and Texas are likely to be ceased or divided by the building of the Trans-Texas Corridor, I-69 Corridor, and Kansas City SmartPort. Entry of cheaper food products are likely to shut down farms. American workers stand to lose their jobs through the entry of cheap labor from Mexico and the movement of manufacturing to China. Cheaper labor is also likely to be preferred relative to union labor at the trade ports and transportation. (Corsi, 2007)
In your opinion, would you like to see an agreement such as NATU reached between Mexico, Canada and the US? Why or why not?
The downsides to the US and Canada of being part of a union are significant, maybe even greater than the upside. Potential economic erosion through the reliance on cheaper imported goods from China, loss of employment, congestion due to over migration, increased welfare burden, and security risks from opening borders can have dire long-term effects. A union can benefit the US and Canada once Mexico has experienced significant economic growth and employment creation and corruption is addressed. Several strong economies in Europe opted out of the UE and Euro because their economies are expected to decline from membership in the Euro and adoption of the Euro. The adverse effects expected by these economies can potentially be experienced by the US and Canada in forming a union.
Conclusion
A political and economic union promises significant benefits to member countries. However, the benefits do not outweigh the downsides for all countries in the region. The EU and Euro works, albeit not perfectly, for many European countries. Serious downsides to the US and Canada of being in a union would likely lead to strong resistance.
Bibliography
Bagus, P. (2012) The Tragedy of the Euro. Auburn, AL: Mises Institute.
Balcerowicz, L. (2014) ‘Euro imbalances and adjustments: a comparative analysis.’ Cato Journal, 34(3) pp. 453-482.
Booth, P. (ed.) (2013) The Euro – the beginning, the middle and the end? London, England: Institute of Economic Affairs.
Corsi, J. (2007) The late great USA: the coming merger with Mexico and Canada. Los Angeles, CA: World Ahead Media, WND Books.
Mursa, G. (2014) ‘Euro – advantages and disadvantages.’ CES Working Papers, 6(3) pp. 60-67.
Truichici, A. and Neagu, L. (2015) ‘Economic, social, political benefits and effects of introducing the Euro.’ South-East European Journal of Political Science, 3(1) pp. 115-120.
