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Security partnership with the United States key to Canada's long-term economic growth

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Release Date: April 8, 2010

VANCOUVER, BC-Canada must formulate a unified, single security strategy with the United States in order to establish deeper trading ties and secure Canada's vital long-term economic interests, suggests a new study released today by the Fraser Institute, Canada's leading public policy think-tank.

Establishing a unified security regime between the two countries would create a more positive Canada-U.S. political atmosphere, ushering in a new era of cooperation, reciprocity, and deeper trade integration after a decade of tentative relations between the two countries, says Alexander Moens, Fraser Institute senior fellow and author of the report, Skating on Thin Ice: Canadian-American Relations in 2010 and 2011 .

"Gaining unimpeded access to the U.S. market for Canadian exports and imports remains Canada's top economic interest," Moens said.

"A security deal between the two countries would make Americans more receptive to increased trade, investment, and tourism in Canada."

The study singles out American protectionism, costly border delays, potential carbon levies, declining gas exports, a high Canadian dollar, weaker American demand, and persistently lower Canadian productivity rates as factors that have hampered growth in trade with the United States. These hurdles have compounded the already strained trade relationship between the two countries, which has grown increasingly difficult due to post-9-11 border changes and, more recently, the global economic downturn.

But establishing a unified security regime between Canada and the U.S. would pave the way for deeper trade integration including regulatory harmonization, common external tariffs on manufactured products, free trade in agricultural products, and an overall energy and environmental accord, where existing policies are hampering economic integration.

The report makes several specific recommendations concerning trade, security, and environmental regulations:

  • Canada should continue negotiations with the United States for full reciprocity on public procurement at the federal and sub-federal levels with the fewest mutually agreed exceptions possible;
  • Canada should propose a single standards regime and bi-national inspection regime in the cattle and hog industries and agree on national (single-market) treatment for Canadian and American beef and pork products, exempting these from Country of Origin Labeling (COOL) standards;
  • Canadian stakeholders should explore through their U.S. allies new lobbying opportunities for oil sands interests in Congressional election campaigns to forestall so-called "dirty fuel" regulations and punitive carbon measures;
  • The two governments should negotiate a Beaufort Sea settlement in a set timeframe. They should also suspend the disagreement on the Northwest Passage and move towards a joint Arctic surveillance plan;
  • Canada must avoid carbon regulations that simply slow down growth. Rather, governments need to create the right incentives to encourage oil exploration and energy efficiency; and
  • 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.

The author maintains that the best Canadian policy on carbon emissions is caution and delay: caution, because the public-policy issue of global warming may not be supported as strongly as its early advocates projected; and delay, because the American political agenda limiting carbon emissions is in flux. Canada should not commit itself to higher targets for reductions in carbon emissions than the U.S. or finalize them until the American targets are clear and decided.

Moens notes that a silver lining in the cloud hanging over Canada-U.S. relations can be found in the agreement on government procurement President Obama and Prime Minister Stephen Harper announced in early February 2010.

"This agreement will encourage free traders on both sides of the border to continue pressing for deeper economic cooperation. It also testifies to the importance of ensuring a positive Canadian-American political atmosphere, an objective the Harper government has pursued since 2006," Moens said.

"But ultimately, the way forward toward deeper economic integration starts at the strategic security level. Canada cannot insist on its privileged trade status with the United States without recognizing the common security threat and sharing in the response. And the United States cannot treat Canada like all other countries if these two North American neighbors are fully integrated in a North American security and defense framework."