Landmark Case on Prostitution in Canada: Ontario Court of Appeal Legalizes Brothels But Not On-Street Solicitations

by Keith Edmund White
Editor-in-Chief

While prostitution is legal in Canada, the federal Criminal Code had outlawed brothels--meaning that sex-workers would have to let clients in their homes, or go to their clients' homes.

But in an sweeping decision, the Court of Appeal for Ontario knocked down this brothel-restriction, finding that it violated Canada's constitution. Critically, while the decision deals with federal law, the Court of Appeal for Ontario decision currently only applies to that province. Thus, assuming the federal government appeals the decision, the Canadian Supreme Court will likely have to step in to settle this constitutionality issue, and that decision could lead to uniform sex-worker regulation through Canada. Also, the Court found that a ban on third parties profiting from prostitution could not extend to bodyguards or drivers, another big victory for Canadian sex-workers.

For the 130 + page decision, from a case lasting nine months and generating 25,000 pages of evidence, click here. I would recommend reading the dissent that hits on a fundamental tension in the decision: constitutional rights trumped federal law from banning brothels, but not allow sex-workers from on-street solicitations.

Here are some links I found particularly helpful in understanding the decision without needing to read the decision:

-A good summary from the Chicago Sun-Times
-The Globe and Mail supports the decision as a "wise compromise"
-The LFPress casts a more critical eye on the decision, noting that it "seems to walk both sides of the road"
-Global Toronto offers a good 'Q & A' with Assistant Dean Bruce Ryder of Osgoode Law School.

Naturally, he decision shows a big difference between the content of the U.S. Bill of Rights and Canada's Charter of Freedoms that was signed into law in 1982.

CUSLI 2012 Conference Closes Out

by Keith Edmund White


CUSLI Executive Committee Co-Chair Hon. James S. Peterson, P.C. delivered the conference's concluding remarks.  Among his many insights, Peterson emphasized that this conference has shown a critical role the Canada United States Law Institute can play:  we both nations working to secure their border and continually enhance their trade in the face of an ever-more competitive world market, CUSLI can be the bridge to bring all stakeholders--the policy makers, the government officials who interpret new guidelines and regulations, and private sector and independent viewpoints on the U.S.-Canada trade and security relationship--to ensure the goals of the Beyond the Border Initiative are achieved.


For all the readers who have been following, thank you for your readership.  Any errors are mine, and mine alone.  I hope this has proven itself a valuable resource for those following the conference from afar, or those who stop by after the conference and want to see work CUSLI is doing to foster one of the world's most important trading and security partnerships.

CUSLI 2012 Conference: Concluding Remarks

by Keith Edmund White

Rear Admiral Michael N. Parks:  “Everything we do in the U.S. Coast Guard is Water-Marked By Canada.”

Rear Admiral Michael N. Parks spoke on the importance of the Beyond the Border Initiative (BTB Initiative) builds on Canada and the United State’s strong relationship, and is necessary for the future security and economic development of both countries.  Noting that the robust Canadian-U.S. relationship, dating back to the Ogdensburg Declaration that Prime Minster King and President Franklin Roosevelt announced in 1940, he heralded the BTB Imitative as “exactly the right approach.”

Addressing if, indeed, security will trump trade along the Canada-U.S. border, his answer was:  “it depends.”  The critical question will be whether we balance the security and trade interests correctly.  And to do this there are three principles:  shared priorities, seamless operations, and synchronized priorities.     Starting with synchronized priorities, Rear Admiral Parks noted that the standards Canada and the United States need to have predictable standards to ensure their industries stay competitive.  Furthermore, since our trading relationship depends shared critical infrastructure and environmental concerns, we have already worked together to synchronize priorities.  Parks touted one such example, the agreement on ballast water agreement between Canada and the United States which has stopped new species from endangering the Great Lakes waters.

Then speaking on shared awareness, Parks touted current programs underway that show both countries are sharing information.  His key example:  Marine security operations centers.  But, to build on this success, Parks stated that stakeholders must be incorporated, legal frameworks

And looking at seamless operations, Rear Admiral pointed to Shiprider Program that shows Canada and the United States willing to bring their law enforcement and security personnel together in performing their services on the border.  Parks then went over that the next step is to bring this on the land:  with customs and inspections. 

But we must admit, Parks continued, that security and trade are competing principles.  The trucking community’s number one concern is wait times, not risk management.  But this doesn’t mean that current interests aren’t there:  a security threat can dispute trade.

Hence, the question becomes how we balance “these two imperative principles.”  And this is done by finding common interests to transform differences into commonalities.    Parks then gave examples of what has been done and what can be done.  Parks stressed that the Coast Guard Ninth District’s lawyers are delving through both countries regulations to harmonize regulations which both improve security and enhance trade.  A key example to works towards for the future:  a one-stop shop for security inspections in Montreal for U.S.-Canada merchant fleets.  There’s also a proposal to have a Canadian representative in the 9^th district to foster cross-border cooperation.  And the Coast Guard is pursuing a binational risk assessment approach so that Canada and the United States can focus on high-risk ships, therefore cutting down on shipping delays for low-risk vessels.   

Parks concluded that the BTB Initiative is “a call for action” from Prime Minster Harper and President Barack Obama to make the smart security regulations that both protect each nation and enhance trade.  And when it comes to the Great Lakes region, booming with trade and one of the world’s greatest bodies of fresh water, he made clear that he will continue to work towards a prosperous and secure U.S.-Canada relationship.

CUSLI 2012 Conference: Afternoon Panel 2 -- Cyber Security and Infrastructure

by Keith Edmund White


This panel discussed Canada and the United States’ plans to reform cybersecurity and critical infrastructure and some of the secondary impacts that will have on privacy rights and trade.  Critical discussion resolved around (1) what role the government should play in these areas (and can it keep up with breakneck changes in cybersecurity) and (2) the risk that even if like-minded countries come together for critical infrastructure and cyber-security, will this just push the leading industries to put them serves in non-member countries?  In any case, one thing is clear:  while nations have seen first hand, re: the 2003 power grid failure that rocked both nations, little--if anything--has happened when it comes to Canada and the United States to adopting a joint risk assessment approach and response plan.

Chaired by Eric Miller, Canadian Embassy

Paul Rosenzweig, Private Practitioner focusing in Cyber Security Law

Michael McDaniel, Professor of Law at Cooley

William de Laat, de Laat Global

Paul Rosenzweig:  What Cyber-Security Law Applied When Servers Are All World?  Short Answer—No One Knows.

Paul Rosenzweig opened his remarks pointing out that viruses can do physical damage—just look at the Stutnet virus that set back the Iranian program back.  So, this means America has to make sure other Stutnet’s don’t disable our transportation grids, agricultural grids, and manufacturing grids are run on a cyber-infrastructure on both sides of the border.  And what does this mean?  No matter what America does, Rosenzweig continued, that Canada has to work en tandem.

What’s next?  We need to get the basic level of risk.  But in discussing this, we need to have a joint services approach to cyber security.  But are we moving forward the right way?  Rosenzweig pointed out two bills moving through Congress now that are now written “with a complete U.S.-centric viewpoint because no one has looked at and said” that a vulnerability in Niagara power facility will want to know what’s happening on the other side.  If we don’t do this, the U.S. efforts will be “substantially diminished.”

And the Canadian side?  Just like with day-light saving time, Canada has raised its hand and said “hey, what about us?”  And this is particularly important since it involved important civil liberalities, and Canada shouldn’t just avoid this discussion by following wherever America may lead it regarding cyber security.

But Rosenzweig is “deeply skeptical” of the government leading the way on cyber-security.  The National Energy Regulatory Commission) to set standards for standards for energy grids.  But the average time for the production of rules like those is about 24 months, Rosenzweig.  But in that time, Rosenzweig, the mutation in threats is vast and the processing power doubled every 18 months.  So, Rosenzweig concluded, government can’t keep up with this in terms of specific rules.  But government can create a web to enable private industry to address these concerns in the private sector.

The U.S. and Canadian government cannot respond to these cyber security threats comes at our own peril.  In short, it “can’t be the be all and end all.”  He need “as close to a joint operating model as we can come given the limits of legal and policy models.”  One such example is that the NSA has a wide swath of cyber security information that only select individuals are aware of, but it is “essential” that it is shared with CSIS and the Five Eyes Organization, and from that those groups share that as much as possible with U.S. and Canadian private actors who may be subject to the attack, Paul Rosenzweig stated.  Also, we have Lockheed Martin plants in Canada and the United States, there’s no reason to make it harder for one of them to get information.

And countering against McDaniel’s push for greater government involvement, while there are areas that the government must take the lead, this can’t be the model.  In one study, the NSA only identified 5% of the risk that the private industry did regarding cyber-security.  Also, 82% of government alerts on cyber-security come after the private sector alerts occurred.  So the government needs to play a role and bring players together, “the structure is moving too fast” when it comes to cyber-security.  Thus, what is right for a Ford factory will not be a cure-all for cyber security.

“This is a problem of diplomacy, not technology,” Rosenzweig stated.  Like-minded countries have to come together and set standards and then grade ourselves.  And once we do that, those countries can then call out other countries, whether its China or Russia, for failing these standards that liberal, western anti-criminality norms regarding cyber-security and critical infrastructure can then call-out those nations who are failing to meet the board.

And when it comes to dealing with choice of law disputes when it comes to cyber-security standards:  no one knows what the answer to choice of law disputes yet.  And what about privacy standards?  When it comes to Canada’s efforts for privacy in cyberspace, the efforts are based on out-dated 1970s notions of privacy.  The answer?  We need a new conception of privacy.

Michael McDaniel:  We need to have a joint approach to responding to threats to critical infrastructure, and we get there by building on regional agreements.

While an optimist, McDaniel cast a critical eye on the one recommendation relating to critical infrastructure that says cyber security will be brought together and working through RRAP (Regional Resilience Assessment Program).  But, he cautioned, RWRAP is just a pilot program,  that may or may not actually happen.

“The plan doesn’t even talk about planning for a response at all.”

 When recommending what to do over the next year, McDaniel stated that we need something like the Emergency Management Assessment Compact (EMAC) —which involved Ontario and the Great Lakes States.  Second, we have to have that down at the county level as well for dealing with the effects of a damage to America’s critical infrastructure.  Third, we need to “define our taxonomy” when it comes to how we assess risk to our critical infrastructure.  And this requires information sharing among governments, different sizes businesses, and within agencies that connect the regulators to the operators to the first-responders. 

Is it underwhelming because of lack of internet or its just “too big to get our arms around at this point.”  But there are other agreements that show that we can move forward on this topic. 

When you look at Michigan, with the just in time automobile system, businesses and States are ready to take on the problem themselves. 

McDaniel pointed out that USNORTHCOM should have authority over the countries responses to cybersecurity and critical infrastructure challenges.  But we don’t have agreement on that.  And the chief hold-out, McDaniel argued, is at the state-level.  He stressed that this shows the value of taking an EMAC approach to coordinating Canada and America’s critical infrastructure.

William de Laat:  “..the specifics aren’t there.”

DE Laat focused on the link on physical infrastructure, trade, and cyber security in the Action Plan.  He emphasized that the BTB Action Plan’s comprehensive view of these matters is critical, whether its power, stock trading, or transportation.  But what the plan doesn’t do, and this is not different from past efforts, is “to link cyber security and critical infrastructure.”  Both Canada and America divide critical infrastructure and cyber-security, and while de Laat admitted these groups say they talk to each other all the time, but we need formal ties to protect critical infrastructure.  But “I’m underwhelmed” by the results we have so far…the specifics aren’t there.”  We need a comprehensive plan that “combines the really good, high value information sharing that really…allows us to come up with a clear protocol…and joint operational capacity that says in a crisis or non-crisis this is how we [Canada and the United States] will work together.

And why is this important?  Because, de Laat pointed out, one prominent Canadian expert has stated that “the interconnection of CI [critical infrastructure] systems is developing an overlay of what might be called the meta-CI system…”  If we don’t protect this emerging meta-system, it appears from this author’s quick read on the topic, it seems that America and Canada are leaving themselves open to natural disasters or computer attacks reaping havoc on their economic and trading relationship.

 A number of regional groups are “working really effectively.”  But these are treaty level agreements if taken on the bilateral level, and getting these through the national level are much more difficult.

De Laat sees the the path forward on critical infrastructure is working with a few countries who share the same values.  But this brings up a difference between Canada and the United States:  Canada tends to push more for multinational engagement.

Addressing if industry can take care of itself, he pointed out that industries may not take a strategic view.  “Governments will not save the day, but if governments do not make this a priority we will have problems on our hands…they have to work with the private sector.  Unfortunately, “we’re all sitting on our hands right now.”

CUSLI 2012 Conference: Afternoon Panel #1 -- 'Trade and Jobs'

by Keith Edmund White


Chaired by Juscelino Colares, Prof. CWRU Law. This panel will discuss the proposed Trade and Jobs section of the Action Plan and determine how it addresses problems the U.S. and Canada face with trade and jobs. The discussion will then turn to other legal agreements that will influence trade and jobs in the future.

• Paul Vandevert, In House Counsel, Ford Motor Co.
• Birgit Matthiesen, Canadian Manufacturers & Exporters
• Dick Cunningham, Int’l Trade Atty at Steptoe and Johnson LLP

Below are (rough) summaries of the panelists' remarks.

Paul Vandevert:  "...I have some practical concerns" about the Beyond the Border Initiative, Namely Why Can't Our Regulations Deal With Global Supply Chains?

“To be blunt,” Vandevert stated, “I have some practical concerns [about the BTB Initiative].”  If there’s trade facilitation, the private sector will take care the jobs part.  Thus, Vandevert focused on the trade side of the Canada-US border relationship, and about the need of actually putting trade and security together—something that it appears has not happened yet. 

The job of government is to secure and keep the channels of trade often, the private sector will take care of the trade.  But, Vandevert stated, mostly from the American side we talk facilitation and trade, but “We continue to put security first…”  And when we’re done with that, “we’ll get to trade facilization.”

He noted that the plan states that a “fundamental” responsibility is to identity every shipment of ocean cargo.  For goods coming into the United States from across the oceans,Information of each shipment must be filed within 24 hours of the cargo being loaded.  From his personnel experiences in dealing with this, that every shipper and importer to fill out who shipped, who the consignee is, and description of goods.  And in a number of industries, including the auto industry, we do a number of high-volume, highly repetitive trade interactions.  So, we have continuous and routinizied goods coming in.  But when we went to customs to put that into their system ahead of time, we—Vandevert stated—were refused.

The implication I draw  from the action plan that the intention from at least the US costums side, they will apply—for security purposes..—they will apply the same transactional approach over the border.  “I don’t see how it will work.”  “They are doing a complete do-over,” he stated, “and every day is  going to be a new day…even though the same traders are doing the same thing, every day…it’s the extreme version of Groundhog’s Day.”  Is such a transactional approach really going to foster trade, and does it secure the border?  Also, as Vandevert pointed out, how will costumes build up the knowledge base to know what trade flows are normal and not.

What’s the other way?  Vandevert shared that we could give information earlier, and there is already information out there that is collected through NAFTA and other programs, “in which there have been enforcement mechanisms…that the customs authority have learned about about the trading community and should be relying on that.”

               

Birgit Matthiesen:  “I go around Washington telling people we’re not China…you know us." And  Why Aren't We Requiring All Border-Related Regulatory Changes to Be Evaluated on How They Impact Canada-U.S. Manufacturing, and Haven't We Heard All This Positive Crossborder Talk for the last 25 years?

Matthiesen noted that, beside the positive words shared earlier, that there is skepticism about whether BTB initiative will work.  We need to look at why we’re doing all these efforts, and what has changed to make this agreement so important? 

Twenty-five years ago these same plans we’re talked about, and the regulatory issues talked about today were talked about today.  And since 9/11, we’ve seen a surge of manufactured goods from Asia.  But this means that North American manufacturing has a huge challenge in our own backyard.

And this challenge, Matthiesen continued, will only grow with both nations are continuing FTAs.  And, to top things off, we’re adding fees to the Canada-US trade relationship to pay for the increased goods coming into the nations from other countries. 

We’re way past cost-shaving.  But a lot of companies are sitting on a lot of money because they don’t know where to invest to grow their production.   And we need to get these two agreements, the border and regulation, are so important.  We’re all about North American manufacturing.

Matthisen concluded with two challenges:  (1) to the government officials, I know the border has two pieces—the perimeter and the land border.  I will be looking for, at the end of the day, if the land border portion makes and supports North American manufacturing, and closer sharing along the perimeter to a competitive edge to the imported goods from aboard?  We have to do both together.  And (2), to the law students, she wants to know that if there’s one rule that practically reflects the integration of North America and supports the manufacturing of North America.  Before we do final rules, can we review regulatory rules to add another criteria:  does this support or not support North American manufacturing?  Answering these questions, Matthiesen concluded, is critical to understand the reasoning for what we’re hoping to accomplish with our security and regulatory relationship and if legal changes we’re planning to do actually do this.

Richard O. Cunningham:  How Do We Deal with the Job Problem—And Can We?

Cunningham went over the choices U.S. policy makers have to create jobs, and revealed that all the choices present downsides that can actually lead to their own job loss.  In doing so, he showed how there are not simple levers to pull when it comes to created jobs in a liberalized trading system.  And he sees this tension as perhaps coming to a head soon should the Trans-Pacific Partnership discussions yield a agreement.  If such an event occurs, the U.S. political class and general public will have to deal with the fact that the interests of multi-national, U.S. firms and the interests of the general public in quick job-growth do not align.  The outcome?  Only time will tell.

Simulate demand.  But, as Cunningham points out, such policies will lead to imports and national goods being consumed.  So, it’s a double-edged sword.

Education.  The education to simulate jobs is not academic, but rather more on the German model, Cunningham cautioned.  We need high-skilled, but not brain-powered jobs.  That is a long-term solution.

Trade—Increase Exports.  Now here its clear the administration is on the ball with goals, but how do we increase exports?  Well, the “dirty secret” Cunningham stated, is making our currency cheaper.  But, in the long-term, this may have people say this is “getting us in binds we don’t want to get into.”  And then there’s export bank initiatives, but with when Air India buys the American jets Delta announces they can’t compete and has to cut flights.  And, on top of this, it requires government funding, which Cunningham stated, is very difficult in this climate.

“The most dramatic change in trade I’ve seen in forty years of doing this," is that trade priorities are changing for U.S. businesses because businesses are changing what they want.  They don’t want to export goods from the U.S., but rather they want global supply changes to get lower labor costs and favorable regulatory changes.  One key example, Cunningham stated, was the exchange between Obama and Jobs:  Jobs made clear that Apple jobs in China aren’t coming back to America.  Why?  Mobilizing financing, workers and regulatory conditions to facilitate Apple productions.

Growth Markets in the Emerging Countries of South Asia, China, and India, but these are the countries where the trade barriers remain.  How do we fix this?  Get the developing countries to reduce their barriers, and they don’t want to play this game without major concessions on agriculture and other matters the developed countries don’t want to budge on.  And how are we trying to deal with this?  The Trans-Pacific  Partnership is focusing on the behind the border issues.  Private industry holds more hope in the TPP than Doha is resolving trade policy differences between developed countries and the emerging economies.  And, if the TPP comes up with a agreement, the body politic will have to face the difference between (1) promoting jobs and (2) promoting growth for multinational firms.

CUSLI 2012 Conference: Henry T. King Award Presentation to Sidney I. Picker

by Keith Edmund White

The 2012 Henry T. King award was presented to Sidney I. Picker, Professor Emeritus of Case Western Reserve University and founder of the Canada-United States Law Institute (CUSLI).  Professor Lewis Katz, Case Western Reserve University's LLM in U.S. and Global Legal Studies Program Director, accepted the award on behalf of Picker and delivered remarks on his behalf.

"How nice to get an award from one's own imagination, years later."

Professor Lewis Katz delivered warm words of congratulations, shared the history of CUSLI to a new generations, and pushes CUSLI to remain as meaningful in the 21st century as the 20th century as we accepted the Henry T. King Award on behalf of Sidney Picker.  The award 

Among some of the many highlights of Katz's speech, was reminding the audience of Sidney Picker's numerous accomplishments:

• Picker founded CUSLI after being asked to set up two presentations for the American Society of International Law in 1973 and 1974.  Picker focused both events on the Canadian-American relationship, and from that saw the need for a organization dedicated to exploring this relationship.
• Picker guided Case Western's highly regarded international law journal during its infancy. 
• Picker was instrumental to bringing former Nuremberg prosecutor, international trade lawyer, chief counsel for the Marshall Plan, and leader in bringing Canada and the United States closer together to Case Western Reserve University, first as an adjunct professor and then full professor.
•  Most importantly, during his 30 plus years as a professor, Picker would spend 20 minutes to 12 hours with his students to help them both understand materials and guide them in their future careers.

In conclusion, Professor Katz brought a message from Sidney:  

He [Picker] does not think CUSLI should replicate what he did when he was its director.  It was created in 1975 to add. Issues as seen then, he is happy to pass the torch to a new generation of CUSLI to develop any programs that are appropriate for more modern times.  He prods the two law schools and the advisory board to serve as that new new generation of caretakers [to keep CUSLI as relevant today as it was throughout the 20th century]. 

All in all, an excellent speech--especially for someone "who doesn't, and still doesn't, believe in international law."

Finally, for those who wish to further support Henry T. King's vision of strengthened ties between Canada and the United States, please email cusli@case.edu about supporting the Henry T. King Endowment that is currently providing financial support for American law students in work in Canadian legal positions.

CUSLI 2012 Conference: Lunchtime Address by Ambassador John D. Negroponte

by Keith Edmund White


Negroponte Address – Question & Answer Period 

[Note: Ambassador Negroponte spoke on the Canada-United States relationship, and his speech will be available via webcast on cusli.org in the coming weeks, and a copy of his transcript will likely appear on CUSLI-Nexus, the CUSLI Journal, or other CUSLI-forum in the coming months.]

[Additional Note: The below are my quickly composed transcript of the conference. The quotes are representative of the comments but may not represent the precise language used; again refer to culsi.org for webcasts of the presentation]

Q: What does it say that for an entire generation of Canadians and Americans, the two countries have not concluded a bilateral treaty?

Negroponte: My instinct, my intuition, I don’t think this is something to be lamented. It is a demonstration that we are able to work things out at a level less than the level of formal agreements, if you will. Sometimes you might have executive agreements or implement agreements. So I don’t think this is something to be regretted. But on the other hand…if you don’t raise things to a certain level, I would pose the following question: does that mean you don’t obligate yourself to think of the relationship as a whole…does the relationship get the direction that it should receive?

But let’s face it, it is easy for Canadians and Americans and government officials to deal with one another. I remember when I was dealing with NAFTA…I made a query about [getting a Mexican area code for the American market], and was told that it would be harder than anything.

There was one area of cooperation because I think it is very important. Intelligence. There is an incredibly important group in our international group, it’s called the five eyes. The 5 eyes in the intelligence are the United States, Canada, the United Kingdom, New Zealand and Australia. It’s a group of intelligence chiefs who might once a year in informal and not highly publicized meetings. And we go over everything, there’s nothing we don’t talk about…the level of work we do is very impressive indeed.

Q: Who are your historical heroes and book recommendations? (Former Michigan governor James J. Blanchard)

Negroponte: Books, well, I am trying to keep up with the books I assign to my students all the time. John Gaddis just published a biography on George Kennan…it is so carefully written. And one of the reasons it’s so carefully written is that Gaddis worked out an agreement with Kennan he’d be his biographer in 1980, and Kennan then told him he couldn’t publish the work until after his death, giving him many more years then we may have expected to prepare the work. It really is a masterpiece, the biography. And if you’re interested in the post-independence of American foreign policy, Robert Kagan’s book Dangerous Nation. While admittedly there’s some discussion of Theodore Roosevelt’s designs on Canada, which I urge you to read with a high degree of appreciation of historical appreciation.

My hero? Franklin Roosevelt. And just for what he accomplished in World War II.

Q: The role of the traditional nation-state with social media, fast-moving strategic interests, how do you see the traditional role for the diplomatic corps in any country?

Negroponte: “The answer to this question really depends what part of the world you’re talking about. Because Europe is so much further ahead than anyone else in terms of integration, and melding sovereignty, and then getting it back in a different form. That integration creates a asymmetry between Europe and all other nations. North America is different…in North America the nation states, I don’t think, the nation states of North America look to that kind of integration or devolution of sovereignty to a North American Brussels…

And then if you go to Asia, that’s one of the frequent complaints of Asia, it doesn’t even have the international institutions and structures to deal with the international issues they may face. Obviously, there is OASAN, APEC, and the Asia Summit, but none have decision-making powers. Yet, you do see Asia slowly moving to some international structures from which they can manage the relationships. But, today, Asian relationships are dominated by very strong-minded nation-states, China, Japan, and India, not international organizations. Therefore, the answer depends on what region of the world you are talking about.

Q: How should we view the fallout from wiki-leaks?

Negroponte: In seriousness, it’s a serious problem you count on that confidentiality of a conversation with a national leader or with a political opponent of the regime, for a reasonable period of time. Most of us are accustomed to a 20-25 year confidentiality period.

…

It has been harmful, it will take us a while to recover, but I don’t think the damage is permanent. Yet, it is certainly not been a highlight of American diplomacy.

2012 CUSLI Conference: Morning Panel 2 -- Harmonizing the Border: Increase Jobs by Harmonizing Regulations

by Keith Edmund White

This panel was a round-table discussing regulatory harmonization efforts between the two countries. 

• Moderator/Questioner:  David R. Kocan, Managing Director, Canada-U.S. Law Institute
• Laura Dawson, PhD, Dawson Strategic
• Kelly Johnston, In House Counsel, Campbell’s Soup
• Chris Sands, Senior Fellow, Hudson Institute

Key Themes:

(1)  Regulatory differences matter.  There are clear regulatory differences between our countries that impend cooperation.  Laura Dawson, by showing her Canadian phone and American phone, show that each countries' different standards lead to different types of phones being common in each country.  And with the impressive roaming charges that apply from a call from Detroit to Windsor, but not L.A. to D.C., we're dealing with a regulatory system that keeping false barriers between us.  Another example, that a worker had to have a separate boot requirements on each side of the border (and this was a private sector regulation).

(2)  Regulators aren't the problem.  Kelly Johnston, admittedly some listeners might be surprised, that regulators are actually working to push cooperation.

(3)  There are bad regulations we'll have to deal with.  We need to (a) implement risk management in both countries' regulatory systems and (b) have this operate in a time of small, leaner government.  Chris Sands pointed out that, particularly in America, many of our regulations are built on unrealistic expectations of safety.

(4)  Will the U.S. keep focusing on the few outstanding issues, and what about Mexico?  Regulatory alignment with the United States is something Canada has to do.  Most of our exports still go to Canada, and therefore Canada is definitely.  90% of our standards are aligned.  But how long will the United States focus on Canada on the remaining issues, especially since other trade-relationships aren't as attention-grabbing.  And Chris Sands points out that America needs to ensure Canada has a voice in the harmonizing regulatory systems.  And, as Dawson added, the U.S.-Mexico regulatory harmonization effort and the U.S.-Canada regulatory harmonization are now on separate tracks.  This raises an important question:  is doing a bilateral harmonization efforts really the best way forward?  And even if it isn't, are we stuck with it?

(5)  Canada and the United States need to scrap bad regulations.  With U.S. and Canada already hosting some of the world's highest labor costs, Johnston and Dawnson emphasized the need for duplicative and excessive regulations to be change.  If not, the United States and Canada will continue to see lower-cost manufacturers (re: China, India, etc.) "eating our lunch", and that isn't going to help either country economic welfare.

(6)  Is self-regulation the way forward?  Johnston pointed out that often the government often comes to the private sector to figure out standards on their own.  But Dawson pointed out that if we want to lean on the private sector--which in an area of budget cuts and wanting to get the most knowledgeable people making smart regulations--we need to work on creating U.S.-Canada forums to do self-regulations across the border.  And Chris Sands pointed out that the private sector is incentived to push for global standards that help them sell their goods quickly, and--often--will work faster to get theses standards finalized and operationalized.

And one last issue:  environmental sustainability?  The government isn't doing virtually anything on this issue in the United States.  But guess what, Johnston asked, Walmart is doing more for sustainability by asking questions of the manufacturers who wish to sell their goods in Walmart.

(7)  What's needed:  Common framework for regulators to communicate, which then should bring in interested parties.  The problem, Johnston pointed out, is that Canada and the United States regulators rely to much on ad  hoc cooperation, which by its nature can only bring limited success.  But Chris Sands pointed out that formalizing such a process requires bringing in the courts and Congress.  But regarding Congress, more so than Parliament, there's always the risk of interest groups hijacking the process.  And we also need to change the administrative procedure act to allow Canadian companies to have a voice through regulations so that their voice is heard, and the Courts are defending the 'fairness' interests of both Canadian and American businesses impacted by regulations.

(8)  What's the impact of the emerging EU-Canadian free trade deal?  Johnston pointed out that there are important impacts, such as location markers that for example would not allow Kraft cheese to have 'Parmesan' cheese.  But as Johnston added, what does this matter if America can't compete with European goods in Canada?

2012 CUSLI Conference: Watch the Webcast Now!

While a bit out of order, all readers should know that the can watch the conference--and John Negroponte's lunchtime address--please watch the webcast here.  I imagine the video of the conference will be available in the coming weeks at cusli.org.

2012 CUSLI Conference Panel 1: Managing the Perimeter -- Joint Law Enforcement & Detecting Threats Early

by Keith Edmund White

This panel discussed the joint law enfrocement efforts and other regulatory programs, and touted the growing coordination between Canada and the United States and how the Beyond the Border Imitative can build upon these accomplishments.

Chaired by David Crane, Toronto Star
Theresa Brown, Sentinel HS
Anne McLellan, PC, QC, Bennett Jones
Andrew Sugimoto, U.S. Coast Guard

David Crane Introduction: Shared Interests, But Still Important National Differences

David Crane opened the session pointing a an important theme in understanding cross-border law enforcement between Canada and the United States: the two countries both recognize the same security interests, but that the nations do have different values and institutions. This leads to an interesting outcome: shared interests between two seemingly similar countries still face challenges when dealing with one of the world's largest borders, especially in the aftermath of 9/11 that (a) showed the need of collaboration but (b) showed differences in how nations wanted to treat the border.

In closing, Crane brought up two key points. First, that this panel succeeded in bringing together three key parts of border issues: (1) policy makers, (2) bureaucratic implementers, and (3) the individuals actually engaged with law enforcement on the ground. Second, he noted that integration between Canada and the United States is being pulled not from above--on the policy-makers end--but rather from the officers on the ground who, working together, and now pushing policy-makers to push cross-border integration further.

Hon. A. Anne McLellan: BTB Initiative Is The Right Direction, But We Need to Focus on How to Build Support Among Both Countries' Citizens

While nothing that the cross-border law enforcement section of the BTB Initiative Former Parliamentarian and Deputy Prime Minster Anne McLellan touted the Beyond the Border Initiative, heralding it as "absolutely the right direction" and seeing it as a evolutionary step.

Among McLellan's many thoughtful comments, three bear particular mention.

First, McLellan made clear that the Initiative shows that the countries are moving past cooperation and collaboration, but now to integration. The poster-child of integration: the Shiprider Program that has U.S. Coast Guard personnel and RCMP working together on the same boats on the Great Lakes to enforce each nation's laws.

She also pointed out that for the operators on the ground doing cross-border law enforcement, the primary issue is not terrorism but rather the "bread and butter" issues of counterfeiting, human smuggling, contraband goods, and firearms. Stemming from this, McLellan believes that the additional work that is needed to see these regulatory reforms to stick is one of salesmanship: while in the U.S. such reforms may only be sold as anti-terrorism measures, the Canadian public is much more amendable to cross-border legal integration.

Third, one of the key breakthroughs of the BB Initiative is the clear incorporation of risk management into the document. McLellan pointed out that the 'zero risk' goal of the United States after 9/11 posed challenges to cross-border integration, but now that the joint framework has countries now engaged in managing risks and making the tough decisions, is the key to securing both countries. What has yet to be seen? That this approach will be operationalized in ways that make ways in both countries, that is essential the the BTB Initiative's success.

Question Updates:

(1) One issue that needs to be addressed, the exit-entry political debate in Canada.
(2) McLellan also shows the Canadian frustration with U.S. policymaker statements that seek to treat America's northern and southern border the same. The answer: we need to deal with these borders separately. Quick sidenote: And the U.S. Ambassador made clear that the United States don't view the two borders the same.
(3) BTB needs political support to complete, and must be seen in view of the Canadian public that doesn't see in pursuing these changes--especially with 9/11 now occurring over a decade ago.

Theresa C. Brown: The BTB Initiative Represents a Big Step Forward

Former DHS Attache of the United Stats in Ottawa (2008-11) and now Director of The Sentinel HS Group, LLC, Theresa C. Brown brought the viewpoint of the bureaucrat who has to implement cross border regulations. She gave six lessons from her work implementing cross-border regulations. Central to her insights was her work in ensuring that law enforcement officers can do there jobs; but to do so, we must make sure they are operating under proper legal authority and know the scope of their duties. If joint border efforts don't put emphasis on the middle-level bureaucrats who must interpret policy-shifts into clear law and regulations so that (1) law enforcement officers can do there work with (2) going beyond their legal mandate which can cause headaches in both countries, and cause integration to backslide.

First, both countries--after 9/11--needed to work together in identifying how they judged risk. And what the BTB Initiative now brings both countries together in how they formulate risk.

Second, BTB Initiative has taken both nations' cooperation agreements beyond 'vague statements of intent.' While such language might be a political necessity, it simply pushes tough decision to the bureaucratic who have to make figure out how to interpret broad language. This then pushes disputes downward, away from policy makers who have the authority to bridge these differences. The great breakthrough of the BTB Initiative is to put down in clear language the steps these countries plan to make.

Third, the BTB Initiative puts responsibility for making crossborder law enforcement decisions in the hands of those political officers who have authority over the multiple departments who play a law in U.S.- Canada border issues.

Fourth, Theresa pointed out the need for the countries to address the differences between them openly and honestly. And she revealed a straight-forward but significant insight: that when it comes to large projects, the middle-level operators on both countries don't want to bring up 'bad news' to policymakers. Hence, for BTB Initiative to succeed we must keep pressing on the remaining challenges.

Some examples: (1) While the Shipriders Program, we're still waiting for the Canadian Parliament to pass legislation, also we haven't address this if this program goes off the water ot the land, how far should it extend--10, 20 miles? (And McLellan pointed out difficult with getting Cross-Border PILOTS program through.)

Fifth, we still have to deal with technical matters of customs law. For example, arms can't pass over the border, even if these are law enforcement officers doing their jobs. And there are other issues; therefore, we must put energy on this technical work which while not the most attention-grabbing often is the key to make joint border plans work.

Finally, Brown pointed out that all this work requires both nations to ensure they have the middle level bureaucrats to work through these issues. These are the actors that connect policy to the people on the ground that enforce the laws on the book. Unfortunately, in an era of budget cuts, will nations put the money in the behind-the-scenes actors that will be critical to ensuring that the BTB Initiative succeeds.

Cpt. Andrew Sugimoto, U.S. Coast Guard, Ninth District: Great Strides in U.S.-Canadian Security Cooperation Have Taken Place, But More Issues Remain

Sugimoto pointed out that the Coast Guard is a critical player in border enforcement, with $1.5 billion of goods crossing the Great Lakes every day and ships crossing back and forth seven times in a day. And that the two countries have cooperated with the Coast on a number of issues. But he noted that there are remaining areas where more work is needed to (1) ensure smooth trade between the nations and (2) protect both nations' security and sovereignty.

The successes: (1) 96-hour notice for Canadian cargo ships coming in each nation's waters, (2) bi-national ballast water inspections that have now stopped the introduction of new species into the Great Lakes, (3) the shiprider program, and (4) reducing regulatory overlap in how we manage the Canadian-U.S. waterways.


But there are remaining challenges: (1) both nations still have different ID cards for their shippers. Why not have pre-clearance, multi-modal ID cards, which would allow U.S. and Canadian shippers (whether by truck or ship) to clearly get over the border. And (2) both countries have to still work on intelligence sharing, which does face difficulties with each nation's different legal and political realities.

Canada's Affections: Goodbye U.S., Hello China?

by Keith Edmund White

Editor-in-Chief

Macleans reports on a recent Donner Foundation poll that finds a polarized Canadian public, split on Canada's place in the world and Canada's growing military and energy development. But the two thing most Canadian agree on: (1) they're over free trade with their southern neighbor, and (2) look to China, the EU and India as their preferred trading partners in the future.

From Macleans:

The U.S., eh?

A stunning 72 per cent of respondents agree that “American dominance peaked in the last century.” On the rise are China and Southeast Asia, in the opinion of the 64 per cent who picked them as the next decade’s economic winners. Though Canada and the U.S. are the world’s largest trading partners, Canadians favour tying trade to China, followed by the European Union and India. The U.S. is the fourth choice. Declining faith in North America’s future seems to have eroded enthusiasm for continental free trade. Support plunged from near 80 per cent a decade ago to 54 per cent today. “It’s sort of bye-bye Yankees, hello China.” said Graves. “It’s almost shocking, this kind of promiscuous break, a whiplash-like defection from our pals down south.”

But, before sounding the alarm too soon, I thought I'd share two other recent items of news.

First, in 2011, Canada exported 2.09 million barrels a day of oil to the United States (up from 1.79 million barrels a day of oil in 2007).

Second, Canada's economic performance is still closely tied to the United States, as this Reuters report on Canada's January .9 percent slide in manufacturing sales makes clear:

With most exports destined for the United States, Canada's manufacturing fortunes are closely tied to that of its neighbor.

"With economic news out of the U.S. coming in better than expected recently, we expect firmer U.S. growth to be supportive for Canada's manufacturing sector exports," Preston said.

Canada's status as one of the best performing economies in the G7 club of rich countries after the global financial crisis has faded this year while more upbeat data continues to roll in from the United States, its top trade partner.

Finally, an interesting thing to note about the poll.  Canadians appear not to favor free trade as much, but still support expanding trade relationships with other countries.  So, two questions.  First, is Canada pro-diversified trade or recoiling from free trade?  And, two, if its the former, will Canadian public attitudes really have anything to do with where Canadian businesses export their goods (as opposed to, let's say, bottom lines)?

So while there's no doubt of China's growing importance, perhaps Canadians shouldn't be so fast to bid farewell to the U.S.-Canadian economic partnership.  Though, one wonders, how much of this poll is just a snap shot of Canadian frustrations with the the Keystone XL project?  If so, it will probably pass:  Obama is going to Oklahoma this week to tour--what else but--part of the Keystone XL project.  From CBC News:

But Obama also assured Prime Minister Stephen Harper that the decision was not a reflection of the pipeline's merits, but was merely necessitated by Republican pressure tactics. He welcomed TransCanada to propose another route.

The White House says the goal of Obama's travels this week is to promote the president's multi-tiered, "all-of-the-above" approach to energy policy that involves advocating for the development of new sources of energy, domestic oil and gas production and rigorous new fuel efficiency standards.

Legal Ties That Bind: Calgary and Houston Law Announce Joint J.D. Program Starting Fall 2012

by Keith Edmund White
Editor-in-Chief

Calgary-Houston Launch Energy & Environmental Joint Law Degree Program

A quick glance at the price at the pump tells you the energy—and from that, environmental— relationship between Canada and the United States is only becoming more important. In fact, CUSLI just last year dedicated our annual conference to energy security and climate change. And the 2011 Niagara International competition was dedicated to the legal status of the emerging Northwest Passage. And now two of the leading energy and environmental law schools in Canada and the United States have just launched The International Energy Lawyers Program.

From The National Jurist:

The University of Houston Law Center and The University of Calgary announced the formation of the International Energy Lawyers Program, an initiative that will allow students to earn both Canadian and American law degrees in four years.

Starting this fall, students can spend two years at each school and take courses that will enable them to apply for admission to bars in the United States and Canada.

“Our two countries’ futures are intertwined economically, and one of the most important issues facing both countries is energy security,” said Ian Holloway, dean of The University of Calgary Law School. “Training the next generation of lawyers who are leaders in energy and natural resources law will help us in our quest for sustainable, rational, continental energy policy.”

And from Law.com which gives some more details on the program:

The International Energy Lawyers Program, as the initiative is called, will focus on preparing students to practice natural resources, energy and environmental law. Students will not have to study energy law specifically, but administrators expect that many participants will want to, given that Houston and Calgary are hubs of the energy industry. Intellectual property is another area that might appeal to students considering a cross-border practice, said Houston Dean Raymond Nimmer.

Students will spend two years at each law school and will be eligible to receive American and Canadian juris doctor degrees. They then will be eligible to sit for bar examinations in both countries. The program will shave two years off the time it typically would take to obtain separate law degrees in the United States and Canada. The program will kick off in the fall.

...

To participate, students will have to win admission to both law schools separately, Nimmer said. They may choose to split their time between the campuses however they choose. He expects to enroll between five and 10 students per year; they will pay the same annual tuition as their counterparts in the schools' regular J.D. programs.

Calgary-Houston Become 5th Joint Canada-U.S. Law Program

The joint law program between Calgary and Houston will—according to my research—become the fifth joint- JD program.

As someone who didn’t plan to have a large part of his law school career devoted to the Canada-U.S. law and foreign policy relationship, I have always envied those students who in four years can earn a J.D. from both a Canadian and American law school. As such, for anyone who wishes to learn more about these program, check out the list before:

The University of Alberta Faculty of Law and the University of Colorado at Boulder (find more info. here)

York University and New York University (find more info. here)

The University of Windsor and the University of Detroit Mercy (find more info. here)

University of Ottawa and Michigan State University (find more info. here)

Note: I have to give kudos to the Michigan State University website for having both the easiest to find and most detailed on-line resource. In the coming weeks, I hope to contact the point-persons for each joint program and get their input on their programs; discuss the value of a joint degree both for employment and as a reflection of the evolving US-Canada relationship; and, perhaps most importantly for potential law students, what some of their graduates are up to now (of course, besides sending articles to the Canada-United States Law Journal here at CUSLI).

Just Why This Program Has Some Much Potential

Why should potential U.S. or Canadian law students interested in environmental law or energy law be so excited about this program? Well check out what each of these institutions offer:

University of Calgary Law

Canadian Institute of Natural Resources Law (learn more here)

University Research Group on Natural Resources, Energy & Environmental Law (learn more here)

Just check out the institution’s latest research (things that caught my eye right off the bat: (1) Breda Kenny, Harrie Vredenburg and Alastair Lucas’ article The New Role of Law in Stimulating Industrial Innovation and Regional Development: the Canadian Experience with Reflexive Law in Reconciling Economic Development, Environmental Protection and Entrepreneurship, (2) Nickie Vlavianos’ project A Single Regulator for Energy Project Approvals? The Pros, the Cons, and Recommendations for Legislative Reform”, and (3) Professor Allan Ingelson and LLM graduate Lincoln Mitchell’s article NAFTA, the Mining Law of 1872, and Environmental Protection (note: for this, the link gives you access to the full article).

University of Houston Law

The Environment, Energy & Natural Resource Center (which includes courses in the Clean Air and Water Acts, International Arbitration, and Petroleum Transactions, among others; for more, just check out their newsletter here)

The biannual Environmental & Energy Law & Policy Journal (check out their latest edition’s TOC here)

I wish this new joint-degree program success. And urge them to share developments and their research into the energy and environmental relationship between Canada and the United States with CUSLI and other similar organizations.

Iceland’s Loving the Looney: Macro-Economics, Monetary Policy, Canada's Dutch Disease and the Story Behind Iceland’s Flirtation with the Canadian Currency

by Keith Edmund White
Editor-in-Chief


So, the news-feeds are abuzz with the idea that Iceland may Loonie-ize its currency. CNN even has a story asking, ‘Is Canada the World’s Next Superpower?’

Well, the short answer to that question is easy: No. But the more interesting question is why would Iceland even consider this move, and what does it say about the Canadian economy? (Note: what follows is not ‘expert’ commentary, but rather observations from some pretty astute people who I have taken care to cite. As such, any errors are mine, and mine alone.). 

Why Iceland Would Want the Loonie

Well, there are some valid reasons for Iceland’s move. Its currency is basically worth nothing. (As Canada’s the Star points out, “The Icelandic krona is worth less than one Canadian cent at current exchange rates). Second, El Salvador and Ecuador have done the same thing—but with the American dollar. Both these countries, as a result, found that there banking systems improved. For Iceland, this result would be a godsend: three of the nation’s largest banks crashed, requiring serious confidence rebuilding in the international markets.  Why was this so much worse in Sweden than in the United States?  Well bank deregulation, which allowed banks to start going into the investment business, allowed Icelandic banks to borrow money to then investment, allowing them to grow their holdings--and offer a pretty whopping interest rate.  The problem?  They borrowed more than they had assets to cover (something that typical 'prudential' style banking regulation in the U.S. does not allow).  When the economy starting quaking, people wanted their money back from the banks, and guess what?  The banks (a) didn't have it and (b) couldn't get anyone else to lend to them.  And, even worse, they couldn't look to their own country to bail them out.  Why?  The banks had become 10 times bigger than the entire Icelandic economy. 

Also, Iceland and Canada share unique ties: (1) there are nearly as many Icelanders in Canada as in Iceland, and (2) both countries (Canada more recently) are northern resource-rich economies. 


3/7/12 Update:  More on Canada and Iceland's cultural ties, courtesy of Government of Canada:

The vibrant community of Icelandic descent in Canada (concentrated mainly in Gimli, Manitoba) plays a large role in keeping cultural ties strong and dynamic. The Icelandic National League of North America (formed in Winnipeg in 1918) plays a leading role in most cultural activities among the Icelandic people in Canada and the United States. As well, the Icelandic-Canadian Friendship Clubs in Montreal, Ottawa, Toronto, Winnipeg, Calgary, Edmonton and Vancouver offer various Artist Exchange Programs aimed at fostering two-way artistic links.

The Benefits to Canada:  Unclear if they can stop it & seigniorage (not to mention an ego boost)

And what does Canada get? Well, first it seems unclear whether Canada could stop Iceland from Loonie-izing their currency. Official dollarization happens when a country officially pegs its currency to that of Canada and cedes its power to print money or set interest rates to that country’s Fed. Second, Canada does get money from seigniorage—basically while it costs money for nations to print money, nations also make money by you holding their cold, hard cash. How? Well, basically Iceland would be paying Canada to hold their currency. It’s like any other financial instrument—Iceland is still buying Canadian dollars, it’s just in addition to that pegging their currency to Canada’s—ceding their monetary policy. But unlike, let’s say Iceland buying a Canadian bond, the cash isn’t collecting interest. Hence, the difference between that ‘interest-free loan’ and the cost of printing the Loonie equal seigniorage. And with Iceland’s population so GDP so smalled compared to Canada, 300,000 and 1% of Canada’s GDP, it’s not like Iceland buying up Loonies is going to cause a big shift in Canada’s monetary policy.

And, of course, there's just the ego boost from knowing that a country prefers to peg to your currency than the Euro or the American dollar.

So a Strong Currency Is Someone We Should All Want?  Not So Fast...

But what does this say about Canada’s currency? Well, first, the obvious: that Canada’s currency has essentially become closer to a petro-dollar (though, really, the economy—as any quick glance will show is diversified), and with energy costs increasing the currency is strong—again at near parity with the United States. But, even more attractive to Iceland, is that Canada’s GDP robust and debt is low—something that Europe and the United States would be happy to have.

Yet, a strong currency shouldn’t be read always a ‘good’ currency. As pointed out by another Star Report, a stronger currency can make it harder for domestic industries to compete internationally—and Canada, at least according to a recent IMF report, can attribute some of the 500,000 lost manufacturing jobs to this phenomenon. The result: manufacturing-based provinces (Ontario) aren’t thrilled with Alberta’s energy reserves pumping up not only oil but the Loonie:

On Monday, the Ontario premier ruffled the feathers of his Alberta counterpart, Alison Redford, by suggesting the strong “petrodollar” had hobbled his province’s manufactured exports.

“If I had my preferences as to whether we had a rapidly growing oil and gas sector in the West or a lower dollar, I’ll tell you where I stand — with the lower dollar,” McGuinty said.

His comments drew a swift attack from Redford and Saskatchewan Premier Brad Wall, but is somewhat backed by a 2008 report from the Organization for Economic Co-operation and Development that referenced the phenomenon known as “Dutch disease.”

The term was coined in 1977 by The Economist magazine to describe what happened when the Netherlands first began rapid expansion of a natural gas field in 1959. As the export of gas climbed, so did the Dutch currency, the guilder, making that country’s exports less competitive and leading to a collapse of jobs in other sectors.

 …

Looking at the historical record, periods of Canadian dollar strength have been associated with some of the weakest productivity gains, while the strongest increases have come during periods of loonie weakness,” Porter said.

And Canadians haven’t gained as much in terms of lower consumer prices as conventional wisdom suggests, possibly because retailers haven’t fully passed through the benefits of cheaper imports.

Porter also notes that average inflation has been a bit higher in the past 10 years at 2.1 per cent than in the previous decade, at 1.6 per cent.

But, again, the key is balance: while some manufacturing jobs may be lost, foreign goods should be cheaper in Canada—thus spurring more income for investment of spending.

Is Iceland Really Going to Loonie-ize Itself?  Six Important Questions and Icelandic Domestic Politics

But, returning to the bigger picture, there are some problems—and less economic-based reasons—with Iceland adopting the Loonie. First, Nick North of Carleton University asks six very pointed questions about the wisdom of Canada permitting Iceland to Loonie-ize:

1. Is Canada+Iceland an Optimal Currency Area? Is Canada one of Iceland's main trading partners for imports and exports? Is there high labour mobility between Canada and iceland, so that unemployed Icelanders could easily get jobs in Canada, and unemployed Canadians could easily get jobs in Iceland? Are macroeconomic shocks to Canada and Iceland highly correlated? None of these claims sound very plausible.

2. Who does Iceland imagine would act as lender of last resort to Icelandic banks? In 2008 Iceland's banks defaulted on their foreign currency liabilities. I am very glad that the Bank of Canada was not obliged to act as lender of last resort to Icelandic banks in 2008. Does Iceland think it can manage without a lender of last resort to its banking system? It didn't work so well in 2008.

3. The government of Iceland would presumably be issuing Loonie bonds. Given the recent experience of the Eurozone, governments borrowing in a foreign currency -- which they cannot themselves print -- does not look like a very stable arrangement. If the Eurozone has very weak fiscal relations, those between Iceland and Canada are non-existent. Would Canada be expected to play Germany to Iceland's Greece?

4. If there were a financial crisis in Iceland, is there any possibility that could spillover and affect Canada's financial markets and the exchange rate? Would the Bank of Canada be forced to act as lender of last resort to Iceland's government or banks in order to protect Canadian financial markets and the exchange rate from the fallout?

5. If Canada decided that it was not in Canada's national interest for Iceland to adopt the Loonie, is there anything Canada could actually do to prevent Iceland unilaterally adopting the Loonie?

6. (Update) One clear benefit to Canada would be the extra seigniorage revenue. Assume Iceland's GDP is 1% of Canadian GDP, the currency/GDP ratio is 5%, and the long-term nominal interest rate is 4%. The extra seigniorage from iceland adopting the Loonie would be 1% x 5% x 4% = 0.002% of Canadian GDP (somebody check my math please).

Also, Iceland’s flirtation with the Loonie may have more to do with domestic politics than long-term thinking. Naturally, the most obvious choice for Iceland is to join the Euro. But, as the Greece situation plays out, it’s tough to imagine politicians silly that to an already currency-weary electorate. And guess what? Iceland is having elections in 2013—and selling Icelanders on the Loonie is apparently doing far better than the euro, especially for the opposition parties.

And this story is only getting play because the Canadian ambassador to Iceland, Alan Bodes, stuck himself in the middle of this Icelandic domestic political affair by stated Canada’s openness to permitting Iceland to Loonie-ize. Naturally, the currency speech Bodes had apparently planned to give was cancelled by the Canadian government.


Conclusion:  No One Knows, And Some Concluding Questions

Thus, getting to the main question:  its really unclear whether Iceland will adopt the Loonie or not, let alone if Canada would approve of such a move--or even if they could do anything about it.

In any case, I have two outstanding questions to the possibility of Iceland adopting the Loonie. First, what impact does this, coupled with the emerging EU-Canada free trade agreement, have on Canada’s ability to trade in Europe, especially compared to the United States? Second, can Iceland just Loonie-ize without Canada’s permission?

But, in any case, whatever the reasons or the long-term wisdom of Iceland currency flirtation, Canada should bask in the Loonie's moment in the (Icelandic) sun.