North American monetary union

The North American Monetary Union is a hypothetical situation in which the main countries of North America, specifically Canada and the United States, possibly Mexico, would share a common currency.

Basis

Calls by corporate interests have been made for a North American monetary unit along similar lines. Such a currency could take the form of a new currency, not unlike the Euro. The amero would mix the two dollars, and possibly the peso, or it could also simply be dollarization. [1]

Arguments for - Canada

One argument is that it would save up to 3 billion dollars in currency transactions. (Robson and Laidler 2002) The same authors also stated that Canada's GDP could rise by up to 33% in a twenty year period given the adoption of a single currency.

Oddly enough, the idea of a common currency receives considerably more support in Quebec then in the rest of Canada, with over half of the population being in favour of it. [Leger Marketing Group. A Study of How Canadians Perceive Canada-US relations. 30 Aug. 2001.] However this can be seen in light of the Scottish national issue and the theme of "Independence in Europe."[Paul Hamilton. Converging Nationalisms. Nationalism and Ethnic Politics, Taylor and Francis Inc.]

Arguments for - United States

One argument for the United States to press for the adoptation of a North American currency is the fact that it would essentially make Canada and possibly Mexico a monetary dependency of the United States which could thus be exploited for political and economical gains.

Secondly, given the Euro's new prominence, a dollarization policy adopted by either Canada or Mexico, or even a change to the Amero, could help reassert the greenback's position as the natural international currency in the world. It is however unlikely that this would be sufficient enough to counter the 'threat' of another global currency if only Canada were to adopt it.

Criticisms

A University of California, Santa Barbara paper put forwards the idea that the United States simply has too many advantages from the status quo to move towards a single currency. The United States dollar already acts as a global currency, meaning any transition to a 'new' currency would risk compromising this position and could cause a shift towards the Euro or Yen. The Greenback was used in over half of all the worlds exports, double the total United States foreign trade. [2] The adoption of an Amero could threaten the seinorage that America currently gains off its American dollar. While seignorage would still be gained off the Amero, this would be shared between the Bank of Canada, the Federal Reserve and possibly the |Bank of Mexico. Therefore, even if the Amero was used just as much as the American dollar, the advantages would be shared among two or more countries, and not exclusively earned by the United States.

Secondly, several problems could arise in regards to macroeconomical management. By submitting to a common currency, both countries would lose considerable autonomy in the setting of interest rates among other issues. The mechanism to implement the NAU and the proposed common currency is the SPP (Strategic and Prosperity Partnership of North America), which was settled between President Bush, President Vicente Fox and Canadian Prime Minister Paul Martin during their March 2005 summit meeting in Waco, Texas. Sec. of State Condoleezza Rice has been instrumental in setting the SPP plans in motion. The North American Union will modeled after ultra-liberal European Union, and put in place by administrative regulations under the SPP umbrella.