Madam Speaker, I am very pleased to take part in this opposition day debate on the motion introduced by the leader of the Bloc Quebecois and by the hon. member for Charlesbourg. I thank them for their initiative.
The motion reads:
That, in the opinion of this House, a Special Committee of the House of Commons should be struck in order to consider the possibility of Canada's participation in the creation of a pan-American monetary union.
On January 1, a new currency came to existence: the Eurodollar. Over the next three years, national currencies, some of which have been in existence for several centuries, will be relegated to museums and private collections. The decision to have a new reserve currency, in addition to the U.S. dollar and the Japanese yen, is an important event in the economic history of the world.
The signing of the Maastricht treaty allowed European Union members to enjoy the free movement of people, goods, services and money on their whole territory. A monetary component has now been added to that economic alliance, with the result that, in the future, there will be only one currency and one key interest rate in effect in 11 countries of Europe. One cannot witness these changes without wondering what is going on in America.
The lesson to be learned from the adoption of the Eurodollar is that, sooner of later, economic integration raises the issue of monetary integration. Within about 50 years, Europe has gone from experiencing one of history's most bloody wars to creating a common market, which was restricted at first but later expanded through the Treaty of Rome, and finally establishing a true monetary union.
Why? Because there are many benefits associated with using a common currency when there is a high volume of trade between countries: it reduces uncertainty and the costs of currency transactions, there is increased pricing transparency, resources are better allocated, and there are many other pluses.
Naturally, there is a downside to abandoning national currencies. A currency is first and foremost a trade tool and a store of value, but it can serve as a buffer when our economy is undergoing stresses different from those of neighbouring nations.
The new currency must also be given time to settle in. Some people are still worried about the initial performance of the Euro in the markets and will wait until it is well established before they are prepared to trust it.
But the decision to convert to the Euro means that the 11 nations that did so felt that these disadvantages were offset by the benefits associated with the new currency. Otherwise, the Euro would never have seen the light of day.
The immediate result of the arrival of the Euro on money markets is the drop in the number of so-called intermediate currencies. The Euro replaces the French, Belgian and Luxembourg franc, the German mark, the Finnish markka, the Italian lira, the Austrian schilling, the Irish pound, the Dutch florin, the Spanish peseta and the Portuguese escudo.
In the medium term, the Euro will very likely also replace the English pound, the Greek drachma, the Swedish krona and the Danish krone. This is of direct concern to us; with so many currencies disappearing, what currency will international speculators settle on?
We have only to remember the ravages of the Asian financial crisis, when everyone rushed to the safety of the American dollar, to understand the concrete impact of the Euro. If the Canadian loonie had a rough ride in 1998, so did most European currencies to some degree.
However, it seems clear that, with the Euro on the scene, a new international financial crisis would not have the same repercussions in Europe. Unfortunately, such a crisis would still hit Canada just as hard, perhaps even worse, because those speculating on the rise and fall of currencies during a financial storm have now lost 11 of the horses they can bet on, thus increasing our chances of attracting their interest.
In 15 or 20 years from now, what major currencies will there be left, apart from the U.S. dollar, the Euro, the Japanese yen and maybe the Chinese yuan? In that context, in order to protect ourselves from the harmful effects of the growing speculation on currencies, some have proposed a tax on financial transactions, like the so-called Tobin tax.
But we cannot avoid analysing seriously the alternatives offered to us if we do not want to become one of the main targets of international speculators. For example, we could abandon our marginalized national currency and replace it by a strong currency. But still, which one should we choose?
Both Americas may be destined to have a common currency, from the north pole to the south pole, under an extended free trade agreement. But before we consider creating an all new currency, we should remember that there already exists a very strong currency very close to us, a currency which is used as a refuge when the global economy crumbles, that is the American dollar.
The Canadian money supply totals approximately $600 billion Canadian, or almost $400 billion U.S. In comparison, the American money supply is close to $6,000 billion U.S. and increased by approximately 10% in 1998 over 1997.
Considering that the Canadian money supply in American dollars represents only 6 or 7% to the American money supply, the “dollarization” of Canada, that is the conversion of our economy to the U.S. dollar represents, from the American point of view, barely several months of growth for the American money supply.
It is also interesting to note that in some regards, the new European central bank operates like the U.S. federal reserve. In both cases, the central bank establishes the common monetary policy in consultation with a number of regional bank representatives. Therefore, a system where the Bank of Canada would be the thirteenth regional bank of an American network is quite conceivable.
All this is hypothetical, at least for now. But this issue is already raising hackles, particularly in Canada. The main argument is that by giving up its currency, either through freezing the exchange rate relative to another currency or adopting the U.S. dollar, Canada will lose all flexibility with regard to its economic policies.
However, looking at the evolution of the Canadian and American bank rates over the last 50 years, one is forced to recognize that the independence of Canada's monetary policy exists only in some people's mind. In fact, the best way to determine the bank rate in Canada from 1950 to 1986 is to take the bank rate they had in the United States at a particular point during that period and increase it by 1.1 percentage point.
Of course, some may point out that in 1996 and 1997, the Canadian bank rate was lower than the American bank rate for the first time in 50 years. However, we became very aware of the limits of this so-called monetary autonomy on August 27 of last year, when the loonie plunged to record lows and the Bank of Canada had to intervene by raising the bank rate to support the Canadian dollar.
By rejecting this motion as if they were holders of the absolute truth, the Liberals are burying their heads in the sand, as if what goes on elsewhere will never affect us. This refusal to accept change reminds us of their historical position against the free trade agreement.
Recent developments in Europe, including the introduction of the Eurocoin, raise new issues. From whichever point of view, Quebec's or Canada's, federalist or sovereignist, one cannot escape the issues related to economic globalization. These issues are being raised today, and by addressing them in a timely fashion, we increase our chances of taking in stride this inevitable and already noticeable turn towards a new economy. This requires a great deal of thought. That is why the Bloc Quebecois is inviting all members of this House to think about this issue, to take part in this debate and to vote in favour of this motion.
