It’s been a year since Prime Minister Stephen Harper and President Barack Obama announced framework agreements on Beyond the Border and the new Regulatory Cooperation Council. While most of the subsequent work has been below the waterline of media interest, let’s look at the progress to date.
With Obama’s re-election, there is good reason to believe that we soon will feel a positive difference for people and goods crossing the border. The regulatory initiative has the potential to be a real boon, both in the elimination of existing silly regulations — the “tyranny of small differences”, to borrow a phrase — and in setting sensible, complementary standards going forward.
Access to the United States market — still the largest in the world and, for Canadians, the most accessible — is an enduring Canadian objective dating back to when we were British North America. A European-style union is not in the cards but a more integrated continental economy, one which includes Mexico, makes a whole lot of sense.
Access to the U.S. has been the trade priority of every Canadian prime minister. Our domestic market is too small to generate the sales we need to put bread on the table and pay for those things, such as medicare, which define what it is to be Canadian.
Defence production led the way under Mackenzie King and Roosevelt. It was followed by the Auto Pact (Pearson and LBJ), the Canada-U.S. Free Trade Agreement (Mulroney and Reagan) and NAFTA (which transitioned from Mulroney/George H.W. Bush to Chretien/Clinton). Some relief from the security curtain imposed after 9-11 was provided by the Manley-Ridge ‘Smart Border Accord’ but the border continued to thicken. The Security and Prosperity Partnership — started by George W. Bush, Paul Martin and Mexico’s Vicente Fox — came to naught.
Mr. Harper had the border on the agenda when Mr. Obama came to Ottawa just after his first inauguration but the issue lost traction. The prime minister had to personally put it back on the president’s agenda – another vindication of Brian Mulroney’s axiom: “If you don’t have a friendly and constructive personal relationship with the president of the United States, nothing is going to happen.”
It is estimated border inefficiencies cost the Canadian economy 1 per cent of GDP, or $16 billion a year — roughly $500 for each Canadian.
So what do our two nations have to show for their efforts a year on, besides some frequent flyer points for civil servants doing the capital shuffle (and not a lot of those, given the bite of austerity)? Three areas stand out: getting goods across the border, easing border congestion, and the process itself.
Supply chain dynamics increasingly account for most of our trade in things like trains, planes and automobiles, soup, and the ubiquitous BlackBerry. Just-in-time delivery is especially critical for the auto trade, still our biggest traded manufacture.
Getting stuff efficiently and quickly across the border is vital for manufacturers. Global production means that more and more of our parts come from Asian workshops. The port closest to those suppliers is Prince Rupert, B.C., where containers are put on trains and shipped south, passing through Portal, Sask., enroute to the industrial hub around Chicago.
Rail cars crossing the border have long been screened for illegal migrants as well as chemical or radiological content — but they’ve still been subject to secondary inspection. Southbound, rail is now handling about 60 per cent of the surface volume (trucks carry the other 40 per cent). Containers arriving at U.S. ports still avoid this kind of rigorous inspection.
Now, joint inspections in Prince Rupert allow faster transit — giving real effect to the principle ‘inspected once, approved twice’. Montreal likely will be the next pilot port for this fast-tracked inspection service, with Halifax and Vancouver to follow. The value of integrated gateways was demonstrated recently when Hurricane Sandy obliged the diversion of cargo to Halifax from East Coast U.S. ports. Halifax was able to double its intake and, between re-transit by sea and more rail cars for land travel, the containers reached their southern destinations with minimal disruption.
For the frequent traveller there are now designated NEXUS lines at most major airports giving ‘fast-pass’ cardholders one less travel headache.
The challenge will be to preserve the pre-clearance facilities at Canadian airports as the fiscal crunch bears down on U.S. departments. Unlike other foreigners, we can remind the Americans that Canadians continue to flock south of the border to spend their money, making more than 21 million visits to the U.S. last year (including 59,619 nights in Florida).
Canadians represent more than a third of all foreign visits to the U.S. Canadians’ annual spending in the U.S. — $24 billion in 2011 — dwarfs the sum spent by Americans stationed in Canada.
We are also beginning to make the border more accessible by constructing new lanes and building facilities designed for easier flow in places like St. Stephen, N.B., and Calais, Maine.
Despite recent blocking efforts, it appears the vital second crossing between Windsor and Detroit is back on track. The trade that crosses the Ambassador Bridge is worth more than all U.S. trade with Japan. National security alone would argue for presidential approval of the necessary waiver and a quick start to bridge construction, which will create thousands of jobs.
The bureaucratic process set in place by the initiatives — especially on the regulatory side — is very promising. Here the Americans are ahead of us. A pair of Executive Orders (the equivalent of cabinet directives) oblige U.S. regulators to demonstrate why they would diverge from complementarity in new regulations with regulatory partners like Canada.
Working groups across the current designated areas are using a sensible schematic in looking at new rules:
- Is it really required?
- Is there another way to address the requirement (i.e., data sharing)?
- For those deemed necessary, can administrative burdens be reduced or eliminated?
There is also a process to re-examine old rules and bring them into line with the new approach. The best net effect would be a change in attitude among those who administer the rules. The current enforcement mentality should evolve into one of common sense and risk-management aimed at expediting people and goods. This alone would be a very positive outcome.
A shrewd Canadian ‘ask’ was for an inventory of border fees and charges. As the U.S. approaches its ‘fiscal cliff’, it’s almost certain that there will be an effort to find alternate revenue sources such as the $5.50 fee levied last October on Canadians entering the U.S. by air or sea as ‘compensation’ for revenue lost under the U.S.-Colombia Free Trade Agreement. We need to be vigilant about new border fees.
After nearly seven years in office, Prime Minister Harper has got to be thinking of his legacy. Beyond the Border and regulatory cooperation would be an historic achievement.
But President Obama also needs this deal. He has pledged to double American exports. The twin initiatives with Canada, America’s biggest trading partner, will advance that goal but it will require continued attention from the president to make it happen.
At a time when questions are being asked about the direction of American policy, the ability of the U.S. to deliver on a deal with Canada will not be lost on officials in Mexico City, the partners in the Trans Pacific Partnership and friends and allies everywhere.
Colin Robertson is Vice President and a Distinguished Research Fellow of the Canadian Defence & Foreign Affairs Institute
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