You will get little argument from me that government in Maritime Canada is too large a burden to bear, too inefficient, too parochial and downright too big. If I believed that Maritime union would deliver even a fraction of the savings and efficiencies its proponents claim, I would be chasing down their bandwagon and banging the biggest drum they have. Alas, the evidence gives little hope that a political union would deliver any of the savings and efficiencies promised. Municipal amalgamations, where we have considerably more real world evidence, have demonstrated that the “economies of scale” so sought after in the private sector largely do not apply in the public sector. In a politicized, public-sector, unionized, monopoly environment, bigger means bigger and more expensive, not bigger and more efficient.
Note that I have not even attempted to address the political feasibility of such a union. The spirited response of P.E.I. Premier Robert Ghiz speaks sufficiently to that point. But, what of an economic union? Perhaps we should be the next E.U. instead of the next U.S.? Surely, knocking down trade barriers, buying “local” in a larger economy and ceasing the wasteful bidding wars to bribe employers to locate in Edmundston instead of Souris (or Pugwash) would save us money and promote faster growth, greater labour mobility and enhance capital attraction.
The E.U. economy is, after all, booming, right? Well, no. Germany is booming, Sweden is doing well, Britain is hit or miss, Greece, Spain, Italy, even France have real trouble. Ok, but trade barriers are lower and movement of goods, people and services across the region have been enhanced, right? To some degree yes, but high cost providers are still high cost providers and low cost providers still win the majority of the bids, until buy local gets redefined to buy domestic. Of course that isn’t free and fair economic union is it? Widening the regional base from which we can draw cross regional subsidies means only that costs will keep going up, and high cost providers will be sustained through direct and indirect subsidy, meaning economic progress will be limited and benefits narrow.
Political feasibility, however, also rears its ugly head when discussing just economic union as well. In 1867, Confederation supposedly knocked down all interprovincial trade barriers. Almost 150 years later, they still exist. So about 20-odd years ago, we tried an “agreement on internal trade,” still under negotiation to this day. But others have done it, look at the Trade Investment and Labour Mobility Agreement between B.C. and Alberta, and how that led to the New West Partnership. Calls for our own agreement have gone unheeded these past five years.
On that score, note that I was not one of those calling for our own agreement. If you want free and open access to spur economic growth, which province would you prefer to have full and free trade with: a western province with above average incomes and solid growth potential, or an eastern one, with below national average incomes and serious economic challenges? I know where I would expend my limited interprovincial trade team’s efforts and I hold that view to this day. If New Brunswick wants to grow through enhanced economic union, sign a trade agreement, tomorrow. The invitation from the west was and remains open.
Ok, so forget union in the east, how about just some plain old co-operation? Common procurement has worked to grow regional businesses and lower government costs, universities are collaborating to sell our educational product to the world, a regional energy grid is slowly coming together, we are talking about common drug purchasing and we have made progress on synchronizing transportation regulations. Excellent, let’s keep it up.
But, as we call (rightly) for more cooperation, note carefully where we have achieved success in the past. We have made progress where, collectively, we have been cooperating to compete against others: our university marketing and transportation networks for example. We have also seen measurable enhancements when we have made efforts to collectively encourage more open competition across the region. Common procurement lowers government costs by expanding the pool of bidders, while simultaneously enhancing growth opportunities by widening the product market.
Where we have failed is in pursuing co-operation for co-operation’s sake, because it made sense “in theory.” A common Atlantic education curriculum was a bust because bureaucrats had little incentive to give up their power and indeed their positions. Who among us would enthusiastically work to put themselves out of work? Efforts to merge insurance regulation or the worker’s compensation structures face similar challenges. Incentives matter, so let’s find the areas where we can, cooperatively, enhance competition inside the region, or collectively, improve our competitive position outside it. That’s where we can and should make real progress.
Charles Cirtwill is President of the Atlantic Institute for Market Studies, an independent economic and social policy think tank based in Atlantic Canada.