Canada should be able to pursue its own distinct social, fiscal, and other policies while benefiting from close integration with the U.S., Standard & Poor’s Ratings Services says.

In a commentary examining Canada’s ability to maintain distinct policies while benefiting from close integration with the world’s largest economy, S&P notes that relationship between the U.S. and Canada “offers an insight into the nature of globalization.”

“It indicates that good economic management and strong public institutions allow smaller countries to retain considerable autonomy in designing policies while enjoying the prosperity that comes from integrating with the outside world,” said S&P credit analyst Joydeep Mukherji.

Mukherji said that differences in fiscal policy — including different priorities for public spending and on levels of taxation — illustrate the extent of flexibility Canada enjoys in shaping policies to suit its own needs. “Canada should be able to maintain its current level of flexibility in designing economic and social policies in key sectors such as health and education, provided that it maintains sound public finances, low debt, and prudent macroeconomic management,” he added.

“Canada’s ability to prosper from close links with the U.S. while maintaining such distinctions demonstrates that economic integration need not lead to convergence in all types of policies and practices, even between neighbors,” Mukherji said.