Economic Integration?

60 PATTERNS OF COMMITMENT IN AMERICAN LITERATURE Edited by MARSTON LAFRANCE Some of the leading scholars in the field of American literature have contributed to this collection of eleven previously unpublished essays, among them Harry Haydon Clark on Hawthorne, Munro Beattie on Henry James, Michael Millgate on Faulkner, and Roger B. Salomon on Mark Twain. Sponsored by Carleton University this volume examines the major writers in the American tradition to produce an original interpretation and fresh understanding of this literature. $7.95 (paper $2.95) UNIVERSITY OF TORONTO PRESS Review: Economic Integration? W. T. HUNTER Free Trade Between The United States and CanadaThe Potential Economic Effects, Harvard University Press, 1967, 430 pages by Ronald J. Wonnacott and Paul Wonnacott, In the first part of their book, the Wonnacotts compare potential Canadian and United States costs under conditions of free trade, assuming exchange parity and present wage levels. In this way they go beyond the rather academic point that since Canadian costs are higher than American ones, the American tariff is not really protective as far as Canadian manufacturers are concerned. Obviously Canadian costs are higher in many secondary industries at the present time, and a very strong case can be made for the proposition that these higher costs stem in ·large measure from the tariff. However, it does not really get us very far to conclude from this that the solution lies in unilateral abolition of tariffs in Canada. Re-organization of Canadian industry to increase efficiency and lower costs would be problematic indeed, if there were little hope of access to the American market. And it can hardly be seriously contended that the manufacturing sector would simply be allowed to decline , or that politicians will employ visible subsidies in place of the less obvious but wellentrenched tariff. Thus, as the authors point out, the real question is what would Canada's competitive position be in the event of access to a greatly enlarged North American market, and their :findings are very encouraging to the prospects of a continuing Canadian manufacturing sector. After taking account of wage and capital costs, taxes and a large number of locational influences, they conclude that Canadian industry , and particularly those businesses located in the central ragions of Ontario and Quebec, is relatively well placed, primarily because of lower wage costs which are not entirely offset by higher capital costs, and a location relatively close to Revue d'etudes canadiennes the Chicago-NewYork axis, which may be roughly defined by drawing a wedge from Chicago to Boston and Washington. While one might be uneasy about the rather pragmatic statistical approach forced on the authors in many cases by limited data, the fact that they have consistently placed a conservative interpretation on their results by using less than optimal (from the Canadian viewpoint) findings is re-assuring to those Canadian free traders who find the results unexpectedly attractive. The estimation of costs in two countries between which there are no tariffs is, in itself, an analysis of absolute advantage, and one must take account of the adjustment processes in order to arrive at some estimate of comparative advantage on which trade will ultimately be based. There are perhaps two distinguishable aspects of this adjustment process, the movement in relative wage levels and/or the exchange rate to effect equilibrium in the balance of payments, and the structural adjustments necessary for industry to take account of the changed conditions under free trade. The authors conclude that, since Canada would be relatively well placed assuming the present wage level, even with the exchange rate at parity, the adjustment from present conditions necessary to balance of payments equilibrium will take place through rising Canadian wage levels relative to those in the United States, or an appreciation of the Canadian currency vis-a-vis the American standard. As practical limits for these movements, the Wonnacotts take exchange and wage parity. This latter condition would mean that Canadian regions would still possess a slight cost advantage in comparison with adjacent areas in the northern United States where wages are somewhat above the national average, and this would serve to offset the higher costs of capital in Canada, although the relative difference...