the new petro power paradigm - Diplomat Magazine

It’s time for cross-border recalibration
By Derek H. Burney
CanadA-U.S. Relations|DIPLOMATICA
diplomat and international canada
Long line-ups and cumbersome reporting requirements, all in the name of enhanced security,
have undermined the quality and quantity of Canada and U.S. trade, writes Derek Burney.
The joint action plan on perimeter
security and economic competitiveness
announced with much fanfare
by Prime Minister Stephen Harper and
President Barack Obama in February was
a refreshing step in the right direction.
The concept is compelling in principle.
The question is: Will it produce yet another
spasm of communiqué massage offering
the promise of relief but with little
lasting effect? Or will it deliver actual
benefits in terms of enhanced security
and improved border access? There is
some merit to the effort itself because, for
Canada, constructive engagement with
the U.S. can be more rewarding than
neglect. While it is more than timely to reconsider
and recalibrate North America’s
mutually dependent economic and security
environment, the proof, as the saying
goes, will be in the pudding.
For the better part of the decade since
9/11, the bilateral relationship between
Canada and the U.S. languished more or
less on idle, reflecting a lack of common
resolve, a dearth of ideas and a diminution
of mutual respect. Meanwhile, U.S.
security concerns introduced a plethora
of new inspection and monitoring procedures
and fees at our shared border which
violated the spirit of NAFTA undertakings
and hobbled the efficiency of cross-border
trade in goods and services.
The Canadian Chamber of Commerce
estimated that these new provisions
added an average of $800 in cost to autos
produced in North America, parts and
sub-assemblies of which cross the border
several times.
Long line-ups and cumbersome reporting
requirements — all in the name
of enhanced security — undermined the
quality and the quantity of trade, as well
as the competitive positions of North
American companies facing rising pressures
from rapidly growing Asian economies.
Negatively affected as well was the
40 percent of bilateral trade that is based
on intra-firm value chains where products
are assembled from components from
various North American suppliers. Efficient
trade flows were hampered further
by duplicative but separate regulatory
regimes, divergent standards and inspection
routines that often defied rational explanation.
All served to compound border
administration.
As a recent study by the Canadian Federation
of Independent Business (CFIB)
confirmed, the cost of understanding and
coping with thousands of regulations and
paperwork requirements prevented many
small and medium-sized Canadian firms
from attempting to serve other markets,
notably the one on our southern border.
John Noble, president of the Ottawabased
Canadian International Council,
and Michael Hart, Simon Reisman
Professor of Trade Policy at Carleton
University's Norman Paterson School
of International Affairs, estimated that
in 2003, Canadian border officials were
charged with ensuring compliance with
almost 100 statutory instruments on behalf
of dozens of federal departments and
agencies. Their U.S. counterparts administered
roughly 400.
Patrick Grady 1 has observed that the
number of U.S. agents at the border increased
six-fold from 340 in 2001 to 1,845
in October 2009. (The food industry is rife
with incompatible grading, inspection and
packaging requirements that hobble trade.
Some, on beef for example, are blatantly
protectionist and have nothing to do with
food safety.)
The Beyond the Border Working Group
(BBWG), led by senior officials, is expected
to report annually to the leaders on the
implementation of its work plan and the
mandate is to be reviewed after three
years.
[It] is joined at the hip by the creation
of a regulatory cooperation council (RCC)
with a two-year mandate to improve
regulatory cooperation and adopt more
compatible approaches that, in turn, are
meant to drive greater efficiency and fuel
prosperity for both countries. This is a tall
hill to climb and one that has frustrated
many initiatives in the past.
Much [bilateral trade] is based on
“value chains.” This is especially true of
the automobile, telecommunications and
aerospace industries. Yet integrative trade
is hampered by needlessly divergent
standards and inspection procedures from
different jurisdictions compounded by
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