CONSTITUTIONAL CHANGE AND CANADA ECONOMIC-PROSPECTS

In this essay we argue that the key to Canadian economic prosperity has been the development of an economic union of the diverse regions that make up the country. In our view, the central economic issue evoked by the potential for constitutional change involves the implications that alternative outcomes have for the Canadian Economic Union (CEU). The possible degrees of economic integration lie along a spectrum; at the "not integrated' end is autarky while at the 'highly integrated' end is a unitary state in which there are no jurisdictional or policy distinctions between the various regions. We examine the benefits (which include static and dynamic efficiency gains as well as insurance and 'option' gains) from economic integration and argue that these increase with a movement along the spectrum from less to more economic integration. Further, we argue that economic integration implies increased political integration. Thus, in this sense, there is a trade-off between political sovereignty and economic benefits from integration. We also examine how international factors place constraints on the design and operation of the CEU, or indeed on any other politically re-constituted Canada. We argue that preservation and enhancement of the CEU is the best option in terms of providing a framework within which Canadians can effectively respond to the emerging global challenge. We conclude that in order to ensure the continued prosperity of Canadians, the CEU should not only be preserved but enhanced, and that this requires maintaining a prime role for the central government.