Report Says U.S. - Canada Relationship is Worsening

(The Fraser Institute is an independent international research and educational organization with offices in Canada and the U.S. and active research ties with similar independent organizations in more than 70 countries around the world.)

Problems Include Border Security, Regulatory Barriers, Protectionism

Among other things, the report finds that the U.S.-Canada relationship is suffering from the following (partial list):

• Slipping trade growth. The growth rate in Canada-US bilateral trade in the last decade has slipped far below that of the 1990s.
• Focus on security. The two countries have radically switched from an undefended border to a border that divides, discourages trade, and intimidates citizens.
• Regulatory barriers. Separate regulations and incompatible product standards combined with a complicated border is making North America less competitive in global production.
• Few efforts since NAFTA. There has been no concerted political effort to follow up on the North American Free Trade Agreement (NAFTA) despite the pressing need to establish accords on commercial regulation, product standards, and dissolving the remaining barriers to trade.
• U.S. protectionism. The U.S. Congress is increasingly open to protectionist political sentiment, with some calling for a U.S. withdrawal from NAFTA and others calling for more “Buy American” policies.
• Environmental issues. There is uncertainty whether various U.S. legislative and regulatory plans to reduce greenhouse-gas emissions would disrupt Canada’s most important export sector - crude oil products.

Recommend Regulatory Harmonization, Liberalized Public Procurement, Etc

The report states that Canada and the U.S. should work to have a single security strategy and take the following measures (partial list):

• Deepen trade integration. The two countries need to deeper trade integration in areas such as regulatory harmonization, common external tariffs on manufactured products, free trade in agricultural products, and an overall energy and environmental accord.
• Work to liberalize public procurement. Negotiations should continue for full reciprocity on public procurement at federal and sub-federal levels with the fewest mutually agreed exceptions possible.
• Common standards for beef/pork. There should be a single standards regime and bi-national inspection regime in the cattle and hogs industries and agreement on national (single-market) treatment for Canadian (and U.S.) beef and pork products, exempting these products from mandatory country of origin labeling (COOL)¹.
• Wait for U.S. Cap & Trade. Despite pressure from environmental groups and opposition parties to launch standalone Canadian targets for greenhouse-gas reductions, the Canadian government’s plans to begin defining a cap-and-trade system by means of the Canadian Environmental Protection Act should not proceed ahead of any U.S. action.

¹A World Trade Organization panel was established in November 2009 to examine complaints by Canada and Mexico on U.S. COOL regulations which require certain tracking and recordkeeping by suppliers and require retailers to inform consumers of the country of origin for certain beef, chicken, goat, pork, ground meat; fish, nuts, etc. (See ITT’s Online Archives or 12/04/09 news, (Ref: 09120425), for BP summary.)

Fraser Institute report, "Skating on Thin Ice: Canadian-American Relations in 2010 and 2011" (dated April 2010) available at http://www.fraserinstitute.org/commerce.web/product_files/skating-on-thin-ice-canada-us-relations.pdf