51st state, open borders, or retrenchment
Atlantic Business Magazine has an OP-ED sure to provoke some strong views. It’s a guy making the case for ‘Nova Scexit’ - Nova Scotia joining the United States. The story is behind a paywall but as far as subscriptions go - if you are interested in economic development in Atlantic Canada - you should consider opening your wallet.
The author rolls out all the standard reasons - low GDP per capita, ignored by Ottawa, more exports, cheaper energy, etc.
I’m not going to debate this idea one way or the other. I hope some pollsters are in the field asking Canadians to weigh in. I am curious - particularly if the question includes Trump’s assertion that we would pay 60% less in taxes.
If the author wants to live in the U.S. he should probably try and move there and not try and drag the whole province with him.
Although there is an important point here about open borders. Maybe the solution isn’t a merger with the U.S. but maybe even more collaboration.
Canada and the U.S. have a fairly wide open border now. Investment flow is mostly unimpeded. Even small provinces like Nova Scotia do billions of dollars worth of trade each year. I don’t know if it still exists but there were a bunch of ‘NAFTA’ occupations for which people could easily move from one country to the other. In 2022, 126,340 people left Canada for the United States.
There are benefits to open borders. At least in theory, is should help places like Nova Scotia be more competitive. When people can easily pick up and leave (to elsewhere in Canada or even the U.S.) that should keep local politicians and bureaucrats on their toes working to ensure communities with a high quality of life. If you put up a border at the Chignecto Isthmus and didn’t let anyone out - would that help or hurt competitiveness? If the Nova Scotia government passed a law saying that all government pension monies must be invested in Nova Scotia would that help or hurt competitiveness (not to mention investment returns)? If the Nova Scotia government decided to be self-sufficient and not allow imports or exports, would that help or hurt competitiveness (not that it would matter)?
I have written many times of the benefits of open borders particularly to small places like New Brunswick and Nova Scotia. However, I have been strenuous in my view that we have to ensure the flow is two-way. If we are exporting people and capital and dollars to pay for imports, we need to be importing people, capital and dollars to pay for our exports. Ideally we would strive for some level of balance or even positive flows.
How do we ensure the flow is two-way? By striving to be an amazing place to live, developing export industries that create good paying careers and being an environment where businesses feel they can invest capital and make a great return on their investment over time.
Trump’s threats to layer on large tariffs to our exports will be harmful in a number of ways including impeding the flow of exports (and likely imports). It could accelerate outward investment as Nova Scotia or New Brunswick companies looking to tap the U.S. market by setting up there. I was in a session with a dozen or so New Brunswick business owners last year and most of them had already set up in the U.S. or were considering it.
The answer is not retrenchment. Putting the genie back in the bottle is wicked hard. A high tariff environment combined with potential deep cuts to the region’s talent pipeline (immigration/international student cuts) could seriously hurt the economy in Atlantic Canada.
We should be pushing for more openness and then embracing the challenge of competitiveness.
And not just export industries.
In 2021, New Brunswick companies in the advertising, public relations, and related services industries did $34 million worth of business in New Brunswick. Companies outside New Brunswick did $100 million worth of business in New Brunswick. In 2010, New Brunswick companies in the advertising, public relations, and related services industries did $49 million worth of business in New Brunswick. Companies outside New Brunswick did $79 million worth of business in New Brunswick.
This is a topic I intend to write about more in the future. It looks like in many services industries in New Brunswick we are losing evermore business to companies based elsewhere in Canada and beyond. That means hundreds of millions of dollars worth of GDP, taxes and employment income elsewhere paid for by New Brunswick dollars.
Why would anyone think that the U.S. would want Nova Scotia without New Brunswick? They would take Nova Scotia only if the offer were sweet for them. The only reorganization of the Atlantic Provinces that is practical is a merger and a free flow of people, investment and goods between the new entity, Canada, and the U.S. Unfortunately, there is no political will for such a grand change, so the discussion is mute.
Europe has united in every way but political, and even there, they have a European Parliament. Europe has a cacophony of languages and cultures but no internal borders. A work visa in one country is good for every country in the union, and there are no passport controls between countries. One could argue that trade is freer between EU countries than it is between Canadian provinces, and every country has benefited.
Money will flow where it's welcome, where opportunity exists, and where regulation is clear and predictable. Investment is rarely done emotionally, so all the hoopla the marketing companies can generate makes little difference if the practical opportunities to invest aren't there. Investors need security, a skilled, reliable workforce, and a reasonable chance at a profit. Tariffs and political bickering breed instability and lost opportunity, and recovery from lost opportunity is slow. Even the threat of trade restrictions erodes confidence in our economy.
I'd also add a couple of comments to David's commentary, but of a non economic variety.
I'd agree with the author that Canada is broken.
However the US is really broken, totally polarized. They have an incoming unhinged President who has no respect for the rule of law or the US constitution.
As for NS being better protected militarily I'd remind this guy, and Trump for that matter, that NORAD, or the North American Aerospace Defence Command is a binational agreement protecting both of us.
In addition Canada is a safer, cleaner country with a much better education system.
About the only advantage NS would have by joining the States is that its average annual national temperature would be higher.