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TORONTO -- Canada would benefit from monetary union with the United States and could reap the same benefits as the 12 countries in Europe that adopted the euro, Canadian academic Tom Courchene says.

"The euro represents an unprecedented watershed in the annals of economic and monetary history," he said in a presentation at the University of Toronto yesterday. "The distribution, over roughly a weekend, of billions of notes and coins across 12 member countries as well as much of Eastern Europe must rank as the largest logistical undertaking ever," he added.

"The business community must come onside," in order for a North American monetary union to happen, Mr. Courchene said, and it would benefit from the elimination of transaction costs of currency conversion, and more stable rates of return.

Such a union could take place in the next 10 to 15 years, he said.

"Volatility of the Canadian dollar is increasingly a problem in a knowledge economy where predictable costs are key to ensuring that foreigners will look favourably on Canada as a location for producing [under the North American free-trade agreement]," Mr. Courchene said.

"Because the dollar is so volatile, we're not getting our fair share of U.S. investment."

The time is right for moving toward such a union because the United States faces growing use of the euro in the Americas, in countries that trade with Europe or are former colonies of European countries, he said.

"Enormous pressures will build on the U.S. for some help in providing hemispheric currency stability, particularly if the euro users are stable and growing," Mr. Courchene said.

At some point the euro will mount a global challenge to the supremacy of the U.S. dollar as the preferred currency for transactions and as a safe haven, he said. Global funds will shift into the euro because its member countries have a large current account surplus, while the current account deficit in the United States reached a record $130-billion (U.S.) in the second quarter of this year.

With the increasingly integrated North American economy, Canada would benefit from a monetary union that could include the adoption of a common currency and a new central bank -- the Federal Reserve Bank of North America -- which would act in a similar fashion as the European Central Bank.

The Bank of Canada would have a seat on the board, but the 12 U.S. Federal Reserve Banks would maintain control.

The Bank of Canada would continue to exist and would issue a new Canadian currency that would be exchanged on a one-for-one basis with the U.S. dollar.

If the conversion rate was established at 150 cents (Canadian) for each (U.S.) dollar, then 100 new Canadian dollars would exchange for 150 old Canadian dollars, and items that previously cost $150 would now cost $100 of the new currency.

"Thus we maintain existing price differences, and no real change in relative Canada-U.S. prices," Mr. Courchene said.

The new North American currency would look like the U.S. currency of the same denomination, and would carry a picture of a Canadian symbol such as the Rocky Mountains on the reverse, he said.