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Security and shared border agreement key to preserving Canada's trade relationship with U.S.

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Release Date: May 16, 2007
Reaching an agreement on shared border security and defence is the best way for Canada to maintain an open border with the United States and safeguard our trade relationship, says a new study published by The Fraser Institute, an independent research organization with offices across Canada.

"Recent trade disputes such as softwood lumber and the so-called mad cow disease were allowed to fester and drag on primarily because Canada had no political capital with the White House that it could call on to help diffuse the disputes," said Dr. Alexander Moens, author of the report and a senior fellow with the Fraser Institute.

"Rather than approach each trade-related issue on a piecemeal basis, our government should be working with the US to reach a comprehensive agreement on security measures and a shared border to ensure we have continued access to the US market."

The report, Canadian American Relations in 2007, looks at the recent history of Canada and U.S. relations and trade disputes. It concludes that changes in governments on both sides of the border offer an opportunity to revive the bilateral relationship and co-operation that has traditionally existed between Canada and the U.S.

"The Conservative government elected in 2006 has moved to improve political relations with the United States and President George W. Bush. Given the need for the Bush administration to score success in a foreign area outside of Iraq, a window of opportunity has opened for a new deal with Canada," Moens said.

Moens points out that Canada has an enormous stake in the free flow of trade and investment to and from the United States. In 2005, 78 per cent of Canadian exports went to the U.S. with 65 per cent of our imports coming from the U.S. The total value of trade with the U.S. was $709 billion - about 51.8 per cent of Canada's GDP in 2005. Since the implementation of the Canada-U.S. Free Trade Agreement, Canadian trade with the U.S. has grown 120 per cent in real terms, with exports outpacing imports.

The U.S. expression "security trumps trade" signals what is at stake should another terrorist attack take place on U.S. soil. While trade is the single largest Canadian interest in its relationship with the United States, the events since September 11, 2001 show the United States considers a stable security relationship of greater importance. When the U.S. perceives that its security interests are not met and its political ties at the highest level are distant, the free flow of trade may be endangered.

"The growing distance between Canadian and American defence, security, and foreign policy began in the mid-1990s when Canada aligned its international objectives with soft, Western European, security goals and disconnected them from American diplomatic and security interests," Moens said.

"The problem worsened between 2001 and 2005 when Jean Chrétien and Paul Martin were in power. The lingering discord came into plain view and there was friction at many levels -- divergence on security and defence policies, several highly publicized trade disputes, and political aloofness at the highest level."

In that environment, when trade disputes erupted, it was virtually impossible for Canada's voice to be heard or for the country to plead its case to the highest levels of the U.S. government, Moens concludes.

And while Moens suggests that Canada still has much work to do to resolve the root issues of the softwood lumber dispute (stumpage fees) and the BSE issue (recognition that Canada and the U.S. are a single market for beef cattle), working towards a comprehensive border security and defence agreement would go a long way to helping minimize future trade disputes.

The report recommends a treaty to create a secure border permitting the free flow of trade and people and including:

• a customs union to remove differential external tariffs and costs associated with certificates of origin and whether products qualify for tariff-free shipment;

• a security-perimeter and border-management strategy that includes pre-clearing of all commercial crossings, joint border management and infrastructure, and harmonized biometric checks on people;

• common security criteria and harmonized processing systems for visas, refugees, and immigration;

• binational border command to deal with crime, smuggling, and terrorist threats; and

• enhanced labour mobility across the border.

The report also recommends negotiating a new binational defence treaty that includes:

• a single North American binational defence arrangement based on building out the NORAD model;

• a combined air, space, sea, and land binational command structure reporting directly to U.S. and Canadian decision-makers;

• a strategic plan for joint response to deal with any threat to North America; and

• Canada to invest in defence capacity in all areas, including Arctic security.

"It will require enormous diplomatic effort to generate political momentum in the United States to create a new paradigm where common security and trade policies and a continental perimeter gradually replace the physical barriers we know today," Moens said.

"The U.S. agenda is fixated on Iraq and the 2008 race for the White House. But this preoccupation does not historically mean that the Executive Branch cannot be engaged on bilateral issues. In the past, presidents in their waning years have reached out to foreign partners to accomplish things. The Canadian government should begin preparing the ground for big changes that may be consummated from 2009 onward."