The following is the partial text of a cable sent by former U.S. Ambassador to Canada Paul Cellucci to various U.S. government officials. Apparently the full cable isn't available.
Source: wikileaks.ch/cable/2005/01/05OTTAWA268.html
Date: 2005-01-28
ID: 05OTTAWA268

This cable shows that - despite what a long series of establishment hacks said - the Bush administration was indeed working on something similar to a North American Union. See that link for the details.

-----------------
UNCLAS SECTION 01 OF 03 OTTAWA 000268

SIPDIS

SENSITIVE

STATE FOR WHA/CAN - BREESE AND HOLST

WHITE HOUSE/NSC - SHIRZAD

STATE PASS USTR FOR CHANDLER

USDOC FOR 4320/OFFICE OF NAFTA/GWORD/TFOX;
3134/OIO/WESTERN HEMISPHERE

TREASURY FOR IMI

GENEVA FOR USTR

E.O. 12958: N/A
TAGS: ETRD EINV CA
SUBJECT: PLACING A NEW NORTH AMERICAN INITIATIVE
IN ITS ECONOMIC POLICY CONTEXT

REF: (A) 04 Ottawa 3431 (Regulatory agenda)

(B) 04 Ottawa 066 (Canadian trade policy)

SUMMARY/INTRODUCTION
--------------------

¶1. THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED. NOT FOR
DISTRIBUTION OUTSIDE USG CHANNELS.

¶2. (SBU) An incremental and pragmatic package of tasks
for a new North American Initiative (NAI) will likely gain
the most support among Canadian policymakers. Our research
leads us to conclude that such a package should tackle both
"security" and "prosperity" goals. This fits the
recommendations of Canadian economists who have assessed the
options for continental integration. While in principle
many of them support more ambitious integration goals, like
a customs union/single market and/or single currency, most
believe the incremental approach is most appropriate at this
time, and all agree that it helps pave the way to these
goals if and when North Americans choose to pursue them.

¶3. (SBU) The economic payoff of the prospective North
American initiative - in terms of higher incomes and greater
competitiveness - is available, but its size and timing are
unpredictable, so it should not be oversold. Still, a
respectable economic case has been made for such an
initiative, and this message spells it out. We believe
that, given growing Canadian concern about "border risk" and
its effects on investment, a focus on the "security" side
could also produce the most substantial economic/trade
benefits.

END SUMMARY/INTRODUCTION

CANADIAN ECONOMIC PERSPECTIVE
-----------------------------

¶4. (SBU) Canadian economists in business, academia and
government have given extensive thought to the possible
options for further North American integration. Nearly all
of this work assumes that each of the three countries is
pursuing standard economic policy goals - growth,
productivity and competitiveness (rather than more specific
concerns raised by Mexican analysts such as migration
management, regional development, or environmental
protection). Since 9/11, Canadian economists working in
this area have generally endorsed a comprehensive initiative
with the United States on security, trade, and immigration.
Following is our summary of the professional consensus:

PROCESS: At this time, an "incremental" approach to
integration is probably better than a "big deal"
approach. However, governments should focus on
choosing their objectives, and not on choosing a
process.

BORDER VS. PERIMETER: Even with zero tariffs, our land
borders have strong commercial effects. Some of these
effects are positive (such as law enforcement and data
gathering), so our governments may always want to keep
some kind of land border in place. Canada and the
United States already share a security perimeter to
some degree; it is just a question of how strong we
want to make it.

BORDER RISK: The risk that business will be obstructed
at the border by discretionary U.S. actions, such as
measures to defend against terrorism or infectious
disease, in addition to growing congestion, have become
major risks to the economy, inhibiting investment in
Canada. For small businesses, the complexities of
navigating the border are apparently even more
intimidating than the actual costs. Reducing this risk
is Canada's top motive for pursuing further
integration.

LABOR MARKETS: Many Canadian economists point to labor
markets - both within and among countries - as the
factor market where more liberalization would deliver
the greatest economic benefits for all three countries.
They advocate freeing up professional licensing laws,
and developing a quick, simple, low-cost work permit
system, at least for U.S. and Canadian citizens.

REGULATION: Canadian economists agree that Canadian
regulations (if not their standards, then their
complexity) are needlessly restricting foreign
investment and impeding food, communications and other
industries. (Inter-provincial differences are
important here, since Canada's federal government does
not have the benefit of a U.S.-style "interstate
commerce" clause). While much of the problem is
domestic in nature, an international initiative could
help to catalyze change.

CUSTOMS UNION: A common external tariff, or a customs
union which eliminated NAFTA's rules of origin (ROO),
is economically desirable. NAFTA's ROO are so
restrictive that importers often prefer to pay the
tariff rather than try to prove North American origin.
However, economists differ on the size of the benefits
available and on whether these would justify the effort
of negotiation. One study estimated that a full
customs union which eliminated ROO would only raise
national income by about one percent.

CURRENCY UNION: Canadian economists are split on
whether a return to a fixed exchange rate, or adopting
the U.S. dollar, would benefit Canada in current
circumstances. (Canada last tied its dollar to the
U.S. dollar from 1962 to 1970). The central bank
governor has taken the position that "monetary union is
an issue that should be considered once we have made
more progress towards establishing a single market."

NORTH AMERICAN INTEGRATION: WHAT WE KNOW
-----------------------------------------

¶5. (SBU) Past integration (not just NAFTA but also many
bilateral and unilateral steps) has increased trade,
economic growth, and productivity. Studies suggest
that border efficiency and transportation improvements
(such as the lower cost and increased use of air
freight) have been a huge part of this picture.
Indeed, they may have been more important to our
growing prosperity over the past decade than NAFTA's
tariff reductions. Freight and passenger aviation are
critically important to our continent's
competitiveness, and businesses are very sensitive to
the timing, security, and reliability of deliveries -
hence the "border risk" which so concerns Canadian
policymakers.

¶6. (SBU) A stronger continental "security perimeter"
can strengthen economic performance, mainly by
improving efficiency at land borders and airports. It
could also facilitate future steps toward trilateral
economic integration, such as a common external tariff
or a customs union, if and when our three countries
chose to pursue them. Paradoxically, the security and
law enforcement aspects of the envisioned initiative
could hold as much - or more - potential for broad
economic benefits than the economic dimension.
WHERE'S THE UPSIDE?
-------------------
¶7. (SBU) Some international economic initiatives (such
as FTAs) produce across-the-board measures that
generate broad benefits for a country's industries and
consumers on a known time-line. This was true of NAFTA
but it is less likely to be true of the economic
aspects of the NAI. Non-tariff barriers such as
standards and regulations generally must be tackled one-
by-one. This is a piecemeal process and the ratio of
payoff to effort is likely to be lower than with across-
the-board measures. Governments naturally focus on
resolving the problems which their firms or citizens
bring to their attention. While this approach has
merits, it tends to deliver the payoffs toward
particular interests. If there are hidden costs, there
might be little impact on national performance. As we
move toward a list of barriers to tackle, it will
remain important to balance those interests. For
example, some Canadian economists have suggested that
NAFTA fell short of expectations with respect to
increasing consumer choice in Canada; that may be a
theme we should stress as efforts to promote further
integration take shape.

¶8. (SBU) In contrast, cooperative measures on the
"security" side, a critical focus of current bilateral
efforts, can deliver substantial, early, and
widespread economic benefits. Security and law
enforcement within North America have evolved rapidly
since 9/11, leading to many less-than-perfect processes
for handling legitimate international traffic.
Collaboration to improve these processes could yield
efficiency improvements which would automatically be
spread widely across the economy, leading to general
gains in trade, productivity, and incomes.

A NOTE OF CAUTION
-----------------

¶9. (SBU) There is little basis on which to estimate the
size of the "upside" gains from an integration
initiative concentrating on non-tariff barriers of the
kind contained in NAI. For this reason, we cannot make
claims about how large the benefits might be on a
national or continental scale. When advocating NAI, it
would be better to highlight specific gains to
individual firms, industries or travelers, and
especially consumers.

CELLUCCI