Take-Home Assignment #2:

What are the likely consequences of the U.S. and Canada becoming one country?

Putting politics, culture, refugee crisis, and patriotism aside,

if Canada and the U.S. became one country, (one parliament, one currency, one president, one army)

what would be the likely ECONOMIC consequences of this union ?

Please answer the questions below. Please keep your answers short and to the point.

FORMATTING: Here is an example of what a good answer might look like based on the last year's version of this assignment (if the U.K. left the E.U.). Please remember, your question is about U.S.-Canada becoming one country. The Brexit is mentioned here only to show you examples of properly-formatted answers.

Sample Question 1: How will Brexit affect the volume of trade between the two territories?

Sample Answer 1: New trade barriers > Trade harder > Less trade.

Sample Question 2: How Brexit would affect the demand for British products in the E.U.?

Sample Answer 2: New trade barriers > trade harder > the cost of moving British products to the E.U. higher > price of British products up > when price up, demand down.

If you feel compelled to say more, feel free to use more detailed explanations. Supporting statistics or references are not expected and will not give you additional points, but feel free to include them if you think they will make your arguments stronger.

Make sure your answers are based more on the economic fundamentals such as supply, demand, price, competition, and and less on the populist factors such as "right-wrong", "us-them", "good-bad".

SCENARIO BACKGROUND:

The controversy surrounding the European Union, as well as the recent increase in tension between the U.S. and Canada leaders, prompted many American analysts and politicians to weigh pros and cons and predict likely economic of closer integration in North America.

While most agree a US-Mexico union would have outweighing negative consequences for the US at this stage, primarily because of the great economic, political, societal and cultural differences between the countries, there is no consensus on the likely outcomes of a US-Canada union. Opinions range from "it would be a great economic success" to "it would ruin economies of both countries".

The President and his administration do not see a US-Canada union as a likely scenario for the nearest future, but the government strategies have to consider and be prepared for any scenario, no matter how unlikely it may seem.

As a person knowledgeable in the area of the effects of government interventions in trade and regional integration, you are one of many experts invited by the Strategy Division of the Presidential Advisory Board to provide your visions on the likely consequences of a US-Canada Union. The scenario is planned for an economic union (common currency, taxes, laws and regulations, economic and foreign trade policies, unrestricted within-union trade and employment, central parliament, etc.) though a possibility of a political union is also considered.

The task is to predict the likely consequences of such a union, the two countries essentially becoming one, on public opinion, prices, internal and external trade, employment, investments, revenues and consumption. It is made very clear that your opinion must be rooted in existing economic theory covered in MGT 301. There are five questions (see template on the next page): If the US and Canada were to become one country, how would that likely affect the following domains of life?

Note: Please keep in mind that even though Canada and the U.S. are currently in a free-trade zone, there are many administrative, monetary, and political barriers to trade. For example, the traders must deal with the uncertainties and costs of currency exchange, the need to do separate certification in each territory, differences in taxes and other issues. So the trade between, for example, Montana and Alberta is still much harder than, for example, between North Carolina and Virginia.

The proposed scenario assumes a political union and removal of all trade barriers.

Note: The questions are about the changes in what today is the U.S. (will it affect the variety of products, prices, wages, unemployment and so far in the U.S. part of the new country).

However, the assumption is that the effect will be the same for both parts of the new country. If you believe that the effect will be different, you can explain it, though such differentiation is not required.

Likely public opinion about the U.S.-Canada become one country?

Negative in both countries

Positive in Canada but negative in the U.S.

Positive in the U.S. but negative in Canada

Positive in both countries

Explain your prediction for the public support

2. If Canada and the U.S. became one country (one currency, one president, one parliament, one army), how would that affect the trade volume between these territories? If you believe trade volume will change, explain why and list specific factors that will bring out that change.

Increase

Remain the same

Decline

Please explain the mechanism that will increase/decrease the trade volume

3. What will be the likely effect on the variety of products available to the consumers in the two countries?

Increase

Remain the same

Decline

Please explain the mechanism that will increase/decrease the product variety available to the consumers?

****The questions are bolded***