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Harper government must move quickly to establish a relationship with a Barack Obama administration

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Release Date: November 6, 2008

VANCOUVER, BC-Despite Canadians' stated preference for a Barack Obama presidency, Prime Minister Stephen Harper will have his work cut out for him to convince the president-elect not to pursue polices that will negatively affect Canada, concludes a new study from independent research organization the Fraser Institute.

"On all the key economic and bilateral issues between our two countries, including trade, energy, border management, and defence, an Obama administration poses a major challenge to Canada's immediate interests," said Dr. Alexander Moens, author of Canada and Obama: Canada's Stake in the 2008 US Election and a senior fellow with the Fraser Institute.

"Prime Minister Harper has a very large hurdle ahead of him in terms of trying to gain Obama's attention, build a relationship, and advance Canada's interests."

In the new study, Moens, a political science professor at Simon Fraser University and expert on Canada-U.S. relations, breaks down the main policy issues of Canadian interest facing the two North American neighbours, and examines how an Obama presidency is likely to approach them. His conclusion is not reassuring for the Canadian economy, which relies heavily on exports to the U.S.

"There is no indication Obama will change the American approach to border security, and he has been critical of Canada's production of what he calls 'dirty oil.' Combined with Obama's lack of foreign affairs experience, it will be a challenge for Canada to get on his agenda," Moens said.

Moens points out that Canada did not feature in the Obama campaign except in the NAFTA flap, when a Canadian memo was leaked to the press in which an aide to Obama indicated that Obama was less critical of NAFTA than his campaign rhetoric would suggest.

For the past several years, Canada and the U.S. have been moving to integrate markets in the two countries, initially under the North American Free Trade Agreement (NAFTA) and more recently through the Security and Prosperity Partnership (SPP). The ability for transactions to occur freely across the border has been a key engine of Canadian growth in the past two decades. In 2007, Canada's trade with the United States amounted to 67 per cent of its overall trade, or 40 per cent of GDP. But these gains could disappear if the new U.S. administration embraces more protectionist policies.

"Given Obama's expressed hesitation for free trade agreements and his promises to seek more labour and environmental conditions in agreements such as NAFTA, Canada will likely face more than security demands from the new administration in bilateral negotiations on deepening trade," Moens said.

"But Obama is a highly intelligent person, and a master politician. If Harper can persuade him that the United States will benefit from good relations with Canada, he may adjust his policies."

The other key issue facing Canada is the likelihood of Obama bringing forward a carbon cap-and-trade system. Canada is particularly sensitive to arbitrary caps on carbon set in Washington which would most likely lead to American industry demanding import tariffs or levies on Canadian energy products and manufactured goods. Because carbon policies lead to trade distortions, Canada can only minimize its losses if it joins an American cap and trade system. Any difference between the two markets on these regulations will likely hurt the Canadian export sector.

Moens concludes that because of the challenge of getting Canada on Barack Obama's agenda and getting Canadian interests acknowledged, Prime Minister Stephen Harper needs to meet early with the new president and exert maximum effort to build a personal relationship of trust and respect.

And he suggests the Prime Minister concentrate on three main issues:

1. Renew efforts to open bilateral, rather than trilateral (with Mexico), discussions on trade and border issues. Canadian steps toward more border staffing and deeper cooperation on homeland security as well as joint projects on accelerated infrastructure (bridges and roads) could be a start.

2. Reconsider the decision to withdraw Canadian Forces from combat operations in Afghanistan in 2011. This issue should be put on the bilateral table to find a common strategy with the Obama administration on how to achieve long-term security and stability in Afghanistan using both military and diplomatic means.

3. If the new Administration and Congress launch a cap-and-trade system on carbon emissions, Canada should lobby for a single Canadian-American approach, rather than separate Canadian and American policies. Such an accord must give special protection for the oil sands industry to give it time to move towards more steam-assisted gravity drainage, the use of nuclear power to generate steam, and carbon sequestering.

Despite Obama's popularity among Canadians, Moens points out that the Canadian public remains leery of working closely with the United States and it remains to be seen if public opinion will change under an Obama administration.

"Canadians are almost evenly split on the operations in Afghanistan and they showed little support for the SPP initiative to deepen trade relations. Any Canadian government will face a tough challenge explaining why it is in Canada's national interest to move towards closer trade integration and border efficiency, as well as to bring the integrated energy markets even closer," he said.

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