By Alan M. Field
By any measure, Canada and the United States enjoy a truly unique relationship. Although Americans like to obsess about China, it is first and foremost the largest bilateral trading relationship in the world, with over $1.5 billion per day in goods and services crossing the border between the two countries in 2011.
Put differently, Canada purchased 19 per cent of all U.S. exports last year and supplied 14.3 per cent of all U.S. imports. The United States supplied 49.5 per cent of Canada’s imports of goods in 2011 and purchased 73.7 per cent of Canada’s merchandise exports. Two-way trade with the United States represented a remarkable 40.2 per cent of Canadian GDP last year. Symbolic of that relationship, in 2010, the Ambassador Bridge and Detroit-Windsor Tunnel complex that links Detroit, Michigan, and Windsor, Ontario, was the largest trade link in the world with more than 3,340 daily truck crossings with cargo valued at more than $91.7 billion per year.
As cordial and long-lasting as that mutual relationship has become, few people in the U.S. seem to be entirely satisfied with it, or with the tone and direction of Canada’s changing trading relationship with the 95 per cent of the world’s population that live beyond the U.S. border. At a time when the U.S. economy is growing much more slowly than that of China and other emerging Asian markets, Canada has been pursuing a flurry of “boutique” free-trade pacts (FTAs) with its smaller trading partners. The Conservative government of Prime Minister Stephen Harper, first elected in 2006, has placed a greater emphasis on negotiating regional and bilateral FTAs.
Following a 2008 agreement with the European Free Trade Association (comprised of Iceland, Liechtenstein, Norway and Switzerland), Canada signed an agreement with Peru in 2009, and enacted an FTA with Colombia in 2011 – almost a year before the enactment of the U.S.-Colombia FTA. Legislation to implement FTAs with Jordan (signed in 2008) and Panama (signed in May 2010) were re-introduced in the Canadian Parliament on November 15, 2011. In addition, negotiations have been started for Canadian pacts with the European Union, Morocco, the Dominican Republic, India, Ukraine, the nations of the Caribbean Community, South Korea, Singapore, and the “Central American 4” nations (Guatemala, Honduras, Nicaragua and El Salvador.)
Of greater direct concern to the U.S., Canada has held consultations with the United States about participating in the new Trans-Pacific Partnership (TPP), which would bring together the U.S. and at least nine trading partners that have borders on the Pacific Ocean. Although it was recently invited to join the negotiations, Canada reportedly has encountered resistance from both New Zealand (which is one of the four “founding signatories”) and the United States over Canada’s dairy and poultry supply management policies, and from the United States about Canada’s intellectual property rights regime. For its part, Canada has vigorously pursued membership, attempting to make the case that Canada was willing to meet the high level of ambition for the talks.
On June 19, President Obama and Prime Minister Harper welcomed the announcements by the nine TPP countries to incorporate Canada into the TPP negotiations. The current TPP countries are Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam.
What other barriers stand in the way of the further economic integration of the U.S. and Canadian economies? And what are the potential benefits of other recent initiatives aimed at lowering the cost of cross-border transportation and customs compliance in North America? In both Canada and the U.S., there is no clear consensus about whether the two countries are about to embark on a major new stage in their relationship – or whether the Canada-U.S. relationship will take a back seat to a stronger focus in both countries on deepening both countries’ economic ties with the faster-growing markets in the Asia-Pacific region, in large part under the auspices of the new TPP, viewed widely as a more extensive, ‘new generation’ of free trade pact.
“You can’t change geography”
Despite its economic dependence on the United States market, Canada has long viewed multilateral trade negotiations – rather than bilateral pacts – as the most effective venues to represent its interests, said Colin Robertson, a former Canadian diplomat who is Senior Strategic Advisor at the law firm McKenna, Long and Aldridge LLP in Ottawa. Rather than go head-to-head with the United States, which has a population ten times that of Canada, “We have tried to leverage our smaller size better in a multilateral context” such as the World Trade Organization, where more than 150 nations engage in trade talks under one umbrella. “It was better for us to make common cause with Mexico” on some trade issues, he said, such as restrictions on truck travel in North America” rather than go it alone against Washington.
Why has Canada been pursuing so many bilateral free-trade agreements in recent years? A key reason, said Mr. Robertson, is that international logistics costs have declined significantly over the past decade, making it possible to ship goods to and from the other side of the world at competitive prices. Many nations that were thought of as too remote to become profitable trading partners – such as Vietnam and Cambodia – are no longer viewed as such. Another factor is that many of the emerging nations of Asia and Latin America have been enjoying an economic boom, enabling consumers and manufacturers in those countries to afford a rising volume of imports from industrialized countries, including raw materials such as iron ore and logs from Canada. Equally significant, the World Trade Organization- sponsored Doha Round of multilateral trade talks, launched in 2001, ground to a halt a few years ago, forcing free-traders in Canada to choose between pursuing new bilateral (or bi-regional) free-trade agreements, or lose the opportunity to improve market access for Canadian exports in those countries.
For all the talk about such FTAs, Canada’s economy will forever be intimately tied to that of its giant neighbour to the South, said Mr. Robertson. “You can’t change geography,” he said. “Geography links us inextricably to the U.S., which is our biggest market and the biggest economy in the world.” Although Canadians often complain about American dominance, the proximity of the U.S. market provides “a big asset for us [Canadians]. We have the benefit of geography. The U.S. will remain our largest market, and we share its language and culture.” Traditionally, when Canadian firms make their first attempt to find new markets outside their homeland, the United States is the first country they look at – and that is not about to change.
Beyond its importance as a natural market for Canadian exporters, the U.S. has more than ever become a place where Canadian suppliers and manufacturers work hand-in-hand with U.S. suppliers and manufacturers to produce high-value added products for North American and other markets. With the Canada-U.S. free-trade agreement of 1988, which morphed into the 1994 North American Free Trade Agreement with the addition of Mexico, Canadian automotive component exporters, for example, became able to supply automotive parts to the U.S. Gradually, Canada and the U.S. became two countries that make things together, not just buy and sell things across their common border.
Although few people in the U.S. (if not in Canada) realize it, North American vehicle components often cross the Canada-U.S. border several times during the manufacturing supply chain before winding up being assembled into final products sold in either country. That is particularly true in the 40 big companies that contribute about 80 per cent of all U.S.-Canada trade, noted Mr. Robertson. These companies, in particular, view North America as a single continental market; not a Canadian market and a U.S. market.
This complex reality often gets lost in the rhetoric about faster growth in emerging Asian nations, argues Dr. Robert A. Pastor, Director of the Center for North American Studies at American University in Washington, D.C. “If President Obama wants to double exports and give a positive jolt to the U.S. economy, he should give priority to forging a seamless market with Canada and Mexico,” said Dr. Pastor. In 2010, noted Pastor, total U.S. trade with its two neighbours (Canada and Mexico) exceeded $1 trillion – or 30 per cent more than the total U.S. trade with China and Japan. “The best markets to expand U.S. exports are not in Asia but with our neighbours. For every additional dollar that our neighbours buy from abroad, about 80 cents are spent on U.S. exports, and for every additional dollar that we import from our neighbors, a large proportion – over 40 per cent – is actually our exports to them.”
A lack of imagination in leadership
Although much progress was quickly made in creating a seamless Canada-U.S.-Mexico border after the establishment of NAFTA in 1994, the emergence of security-related initiatives after the Sept. 11 attacks in 2001 have reduced the competitiveness of North America as a whole, argue Dr. Pastor and Mr. Robertson. After virtually disappearing during the first seven years of NAFTA, the U.S.-Canada border “existed again after Sept. 11” said Robertson, when security concerns took centre stage in the U.S. Companies were forced to calculate the extra costs involved in crossing the border in their investment decisions. “In retrospect, North America peaked in 2001 because of new security-related barriers installed at the border because of Sept. 11, Chinese commercial power and a lack of investment in infrastructure,” said Dr. Pastor. For all that, “The main reason is the lack of imagination and leadership of the three leaders of the United States, Canada and Mexico. Rather than negotiating a common approach to the North American agenda, the three governments reverted to unequal and ineffective dual-bilateralism, with the United States negotiating the same issues separately with Canada and Mexico.”
For his part, Mr. Robertson argues that “President Obama does not have a strategic appreciation of Canada.” For example, in 2010, noted Mr. Robertson, President Obama declared that the U.S. was establishing a National Export Initiative (NEI), aimed at doubling U.S. exports worldwide by the end of 2014, stressing job growth in the U.S. alone, rather than development of North America as a whole. More oddly, added Mr. Robertson, Obama announced the NEI during a visit to Asia, as if to underline the importance of burgeoning Asian markets, not those closer to home. “Why not start with your biggest trading partner, which is Canada?” asked Mr. Robertson rhetorically.
Like many Americans, Obama has not focused his international economic strategy on strengthening trade relations with Canada, said Mr. Robertson, because “Canada is not a problem.” According to Mr. Robertson, Obama has spent some 300 hours on strategic talks about U.S. policy toward Afghanistan, but barely any time at all talking with and about Canada. “He is missing out on the Keystone XL Pipeline” – which Obama refused to approve, at least for the time being, “because he is blinded by the political calculation” of appeasing his political base – rather than addressing the opportunity to secure a strategic supply of energy for the U.S. “Security and economics are always linked from the U.S. perspective,” added Mr. Robertson. “While Canadians tend to focus on economics, Americans are preoccupied with security issues.” Despite some rhetoric about promoting “cheaper, faster trade and travel” between the U.S. and Canada – by reducing regulatory red tape – “that mentality has not been getting across along the border,” where the enforcement mentality remains paramount. Mr. Robertson continued, “Until we see an attitudinal change, we won’t see the best results despite the best efforts of the Prime Minister.”
Maryscott “Scotty” Greenwood, a Washington-based Senior Advisor to the Canadian American Business Council, disagrees with Robertson, arguing that President Obama has spent a great deal of time discussing the strategic importance of bilateral issues with Prime Minister Stephen Harper. “There are two major bilateral international agreements (including Beyond the Borders) as well as multilateral agreements (including the Trans-Pacific Partnership) on which the U.S. and Canada are working closely,” she added. Beyond trade and transportation issues, the two countries are intimately involved in their intelligence strategies. “There is an enormous amount of intelligence sharing between them.”
Nevertheless, the Obama administration’s recent unwillingness to grant approval to the completion of the Keystone XL Pipeline is symbolic of its lack of serious concern for Canada’s strategic importance, say some critics. Ms. Greenwood said that the Keystone XL Pipeline “makes a great deal of sense. My hope is that it gets approved in 2013. The U.S. is a natural market for Canada” to export its gas. But the delay in approving the Keystone XL Pipeline does not show that the U.S. disregards the strategic importance of Canada for the long-term economic security of the United States, she added. “The politics on both sides” of the political aisle in the U.S. “are pretty intense, and Canada understands what is going on,” said Ms. Greenwood. In her view, most Canadian politicians realize that the Keystone XL Pipeline has become a political issue during a presidential campaign year, and that once the election is over, the U.S. will approve the extension of Keystone – with some modification in its route.
Is the Trans-Pacific Partnership a real opportunity for Canada?
After meeting in Washington D.C. with Presidents Obama and Felipe Calderón of Mexico in April, Prime Minister Harper emerged as the only North American leader who was assured of holding power next year, noted Ms. Greenwood. (Calderón will definitely be replaced this fall because the Mexican constitution prohibits re-election.) That assurance may have given the Prime Minister added confidence to act more decisively on promoting Canada’s presence in the Trans-Pacific Partnership talks. “I don’t think that the prime minister will take his foot off the gas” during subsequent meetings about TPP with senior leaders, said Ms. Greenwood.
For his part, Mr. Robertson said that the U.S. also wants the Canadian government to act decisively to bring Canada up to speed with international intellectual property rights protection. Last year, the Office of the U.S. Trade Representative, the U.S. government’s trade policy arm, again listed Canada on its Special 301 Report on intellectual property rights protections; a “priority watch list” for intellectual property rights (IPR) protection. Placing Canada on its priority watch list meant that Canada had significant issues to resolve with respect to its IPR protection, enforcement and market access for persons relying on intellectual property; and that these problems merit “increased bilateral attention.” Canada joined China, Russia and other notorious violators of IPR. Once again, the U.S. also used the occasion to urge Canada to implement the World Intellectual Property Organization (WIPO)’s Copyright Treaty, which Canada has signed but not ratified.
Beyond that slap in the face, U.S. trade negotiations expressed concern about Canadian trade in pirated and counterfeit goods, and urged greater enforcement and “deterrent-level” penalties for IPR infringement. The United States also urged Canada to adopt tougher border security measures to crack down on this trade, including permitting the seizure of pirated and counterfeit goods by Canadian customs agents without a court order.
In response to such criticism, the Canadian government re-introduced the Copyright Modernization Act (“C-11”) last September. The legislation is intended to bring Canadian copyright law into conformance with the WIPO Internet treaties, and to allow for some format shifting and fair-dealing (fair-use) exceptions. Bill C-11 would also prohibit the circumvention of digital protection measures. The act would clarify the rights and responsibilities of Internet service providers for infringement of their subscribers. “Canada is finally moving on its own on intellectual property protection,” including anti-piracy provisions, said Ms. Greenwood. “It is a massive show of good will,” she added.
Another initiative that made it easier for Canada to join the TPP talks includes reforms with respect to foreign ownership in the telecomunications industry. A new bill introduced by the federal government in March would open up 10 per cent of the Canadian market to foreign firms. Regarding the TPP, Greenwood said, “The U.S. has a legitimate argument” for such reforms. Overall, President Obama said in April that Prime Minister Harper is “making a very strong case” for Canada playing a role in the TPP. “We’ll see whether there is a way to get this done without slowing down the talks” to let Canada play a significant role, said Ms. Greenwood.
Whether or not Canada will ultimately sign on to TPP will depend on numerous factors, the most obvious of which is that, with so many parties around the table, irreconcilable differences will emerge which may stall the process altogether. Second, it has been made clear that Canada will need to abandon its agricultural supply management policies. During the past few years, domestic policy research analysts and business groups have criticized the continuation of marketing Boards and restrictive marketing policies for being protectionist, uncompetitive, inhibiting innovation, and preventing Canadian dairy and poultry operations from becoming more productive. However, many rural communities have become dependent on the maintenance of existing policies, and their abandonment will not occur without serious opposition. Other industries have forever been subject to foreign ownership restrictions, which have been an irritant in the eyes of foreign investors, and have lessened domestic competition, particularly in the telecommunications industry. To what extent would Canada have to provide greater access to foreign investment?
Negotiating country free trade agreements and membership to trade blocs like TPP are ultimately a necessity: economies are becoming more integrated and need to be more competitive. With companies residing in offshore Treaty jurisdictions having the future right to do business in Canada, domestic companies that previously did not have to worry about foreign competition may find that uncomfortable. However, if they rise to the challenge, they will not only protect their existing market, but also create opportunities to enter foreign markets successfully.
“Buy American” – or Buy North American?
Despite the growing economic integration of their economies, the future of Canada-U.S. trade could suffer a setback from “ill-informed trade protectionism” in the U.S., said Ms. Greenwood. Just when it appeared to have become a non-issue, the controversy over “Buy American” provisions in U.S. law – which sparked huge controversy a few years ago – has been revived, providing further evidence that many Americans fail to view North America as a single integrated market or view Canada as a particularly vital strategic partner. The upshot of this bid for protectionism is that some Canadian companies that are hoping to win contracts on upcoming road and bridge projects may wind up being prohibited from bidding on those contracts. A provision in the Moving Ahead for Progress in the 21st Century Act (MAP-21) would prohibit foreign firms from bidding on any federal construction project that has the even smallest amount of U.S. federal funding. A proposed amendment to the bill would prohibit state governments from contracting outside the country if any part of the project receives U.S. government funding. Both the Senate and the House of Representatives are now in complex negotiations to finalize the law, which is also known as the Surface Transportation Reauthorization Bill.
Predictably, Canadian business groups have reacted with dismay. The bill includes provisions “that represent a significant departure from existing ‘Buy America’ preferences,” wrote Amgad Shehata, Chair of the Washington-based Canadian American Business Council (CABC), in a letter to the U.S. Senate and the House conferees. “Specifically, if at least one contract for a project receives any federal funding under this act, then all contracts for a project, regardless of their funding source, would be subject to Buy America preferences,” Shehata said.
Over the decades, various Buy American provisions in U.S. laws have attempted to create new American jobs by imposing restrictions on imported construction materials, mostly iron and steel. The issue seemed to have been settled in February 2010, when the two governments agreed on reciprocal bidding in each other’s countries on infrastructure projects such as bridges and roads following President Barack Obama’s $787 billion economic stimulus bill. In retrospect, Dr. Pastor faults President Obama for succumbing to political pressure to include a Buy American provision in his 2009 stimulus bill. “That was a violation of NAFTA, and after negotiating for more than a year with Canada to change the provision, the President repeated the same mistake in the summer of 2011 with his second jobs bill. If the President understood the importance of Canada and Mexico, he would have proposed a ‘Buy North American provision,’ and instead of a U.S. Infrastructure Fund, he would have suggested a ‘North American Infrastructure Fund.’ Both of those provisions would do more to stimulate the U.S. economy and create jobs than TPP.”
This year’s unprecedented Buy American provision comes during a presidential election year, when Ohio’s 18 electoral votes are widely viewed as vital to President Obama’s re-election prospects. The provision is clearly an attempt to win over undecided voters who are not already convinced that President Obama is doing everything possible to generate new jobs. Although aimed mainly at Chinese steel and iron producers, CABC feels that Canadian bidders would suffer as a result. “Buy American provisions applied to Canadian companies will inhibit, not create, economic growth in both the U.S. and Canada, given the integrated nature of our two countries’ economies,” said Mr. Shehata, who is also a Canadian-based Vice-President of Strategy and Governmental Affairs at UPS, the package delivery firm.
For her part, Ms. Greenwood suggested that the U.S. pursue a policy that exempts Canadian goods from Buy American provisions. Ms. Greenwood noted that among U.S. consumers, “there is a disconnect” between the convenience and greater selection that they derive from globalization and the economic anxiety about job losses that surrounds the same phenomenon of globalization. American consumers, like their counterparts elsewhere, want low-priced consumer products imported from Asia, yet they often complain that American jobs are being shipped abroad in favour of low-cost suppliers who can afford to manufacture and export low-priced goods. When it comes to buying made-in-Canada imports, Americans rarely understand how closely integrated the two economies have become, and how interdependent they are. The unique relationship between the two economies calls for a unique view of what it means to “Buy American,” said Ms. Greenwood. Namely, “Buy North American.”
The controversy over the Harbor Maintenance Tax
Another lingering, contentious issue for some Canadians concerns speculation that some U.S.-bound shippers prefer shipping to Canadian ports, in order to avoid paying the U.S. Harbor Maintenance Tax (HMT) imposed on all incoming ocean cargo to the U.S. Both Canadian and international organizations have objected to that assumption, arguing that the HMT is not a factor in the decision for some shippers to choose Vancouver, Prince Rupert, or other Canadian ports over their counterparts in the U.S. Freight entering the U.S. from Canada is not subject to any tax. Representatives of the World Shipping Council, the National Industrial Transportation League and the National Retail Federation, have jointly stated that “the non-application for the U.S. Harbor Maintenance Tax (HMT) to cargo that transits through Canadian ports is not a ‘loophole’ in U.S. law nor can one safely assume that U.S. destination cargo that arrives through a Canadian port has been ‘diverted’ to that route by the potential application of the HMT to it if it arrived in a U.S. port.”
Nevertheless, if the U.S. Federal Maritime Commission finds that the HMT has caused U.S. ports to lose business to Canadian ports, the U.S. government could decide to impose a fee on inbound cargo from Canada that arrives in those U.S. ports by land. Opponents of imposing such a tax argue that it would violate WTO rules. While such an initiative would be clearly protectionist, “it could spin out of control in an election year,” warns Greenwood.
Areas of progress
More optimistically, Canada and the U.S. have continued to make progress in their wide-ranging Beyond the Border initiatives, and their various bilateral initiatives aimed at harmonizing regulations in the two countries. The Beyond the Border declaration, signed by President Obama and Prime Minister Harper in February 2011, described a shared U.S. and Canadian vision for a common approach to perimeter security and economic competitiveness. The Beyond the Border initiative covers multiple concerns, including information sharing and assessments in order to create a common understanding of joint threats to the two countries; promoting investment in infrastructure to accommodate continued growth in cross-border business and passenger traffic; integrated cross-border law enforcement operations; and integrated steps to strengthen shared cyber-infrastructure. Details of this vision were fleshed out last December in an Action Plan, which established goals and progress metrics related to harmonized cargo screening under the “cleared-once, accepted twice” principle; joint inventories and gap analysis related to travel and trade threat assessments and border surveillance; automated biographic and biometric data sharing; an integrated entry-exit system; enhanced pre-clearance of goods and travelers, and the expansion of interoperability among law enforcement and deployment of cross-designated personnel.
Already, the U.S. and Canada have expanded their “NEXUS” trusted traveller program to 19 border crossing locations, 33 marine reporting locations, and eight Canadian pre-clearance locations. Starting in 2004, Canada and the U.S. have taken steps to share passenger information on high-risk travellers en route to either country through a joint risk-scoring scheme and shared “lookout” data. But in the Beyond the Border Action Plan, they have pledged to implement more deeply integrated cross-border law enforcement efforts, widespread cargo and passenger pre-clearance, and an integrated biometric entry-exit system.
Why is there so much interest in the plan, a full decade after Sept. 11? According to an April 2012 report by the U.S. Congressional Research Service, security officials on both sides of the border still consider the U.S.-Canada border to be “the locus of a wide range of security threats” including transnational terrorist entities that have a presence along both sides of the U.S.-Canadian border; and various criminal enterprises that trade in illegal drugs, firearms, tobacco, intellectual property and currency. The Canada-U.S. border, adds the report, is also vulnerable to issues involving migration, agriculture, and transnational health. According to a 2010 report by the U.S. Government Accountability Office, the U.S. Customs and Border Protection (CBP) agency then considered that only 69 of the nearly 4,000 miles of the U.S.-Canada border was subject to an acceptable level of control, using the CBP’s own metrics for security.
Already, driver’s licenses containing enhanced biometric information are being issued by the provinces of British Columbia, Manitoba, Ontario, and Quebec, and by the states of Michigan, New York, Vermont, and Washington. Meanwhile, Canada’s customs service stepped up the purchase of high-tech X-ray equipment, and U.S. and Canadian customs agents are collaborating to inspect containers at several Canadian and U.S. seaports. Border security personnel levels have also been strengthened and Integrated Border Enforcement Teams have been established in high-priority regions. Canada also has set up an Air Transport Security Authority, which, among other activities, is responsible for pre-board screening.
In another important initiative, Canada and the U.S. jointly created the Regulatory Cooperation Council in February 2011, in an effort to increase regulatory cooperation and ensure the simplicity, transparency, and compatibility of regulations where possible to promote commerce and eliminate barrier to trade between the two nations. Initial efforts are focused on harmonizing regulations concerning agriculture and food, transportation, health, personal care products, workplace chemicals and the environment.
Regulatory reform is more important than ever, noted CABC’s Greenwood, because governments on both sides of the border (both local and national) are no longer willing to engage in expensive stimulus programs aimed at reducing transportation and supply chain costs. Given this situation, one of the most effective ways to improve the flow of cross-border trade is to remove those inefficiencies that stem from unnecessary or counter-productive regulations, noted Ms. Greenwood. “Government policies cause companies to spend money on duplicative regulations that raise costs,” and make North America as a whole less competitive against other regions around the world.
Take, for example, the differences in automotive crash testing regulations on the two sides of the border: New cars have to be crash-tested at two slightly different speeds on the two sides of the U.S.-Canada border, but it would make sense – and save money – if vehicles were tested at the same speeds on both sides of the border, Ms. Greenwood said. Another area where common, cost-savings regulations are likely to emerge is food safety inspection, which vary in the two countries. Since both sides are dealing with common science-based issues, “this will take a lot of needless costs” out of cross-border trade, said Ms. Greenwood. Mr. Robertson added, “A lot of this stuff [regulatory differences] makes no sense since we are both interested in the health of our citizens.” Creating regulations that are complementary – if not precisely the same – does make sense, he adds, except in those cases where there are cultural differences – such as the French language – that make it necessary to duplicate labelling in both the English and French languages.
Finally, another area where tighter economic integration might make a great deal of sense would involve facilitating cross-border labour mobility, said Ms. Greenwood. Given the growing interdependence of the two countries, it makes sense for Canada and the U.S. to develop a “new paradigm” about how to deal with labour shortages by promoting labour mobility across the U.S.-Canada border, said Ms. Greenwood. In those cases where, for example, there is a shortage of skilled workers in a specific sector (such as oil or construction) in Alberta or British Columbia, yet an overabundance of such workers in the U.S., unemployed but skilled workers from the U.S. might easily be put to work in Canada, serving the needs of Canadian companies as well as those of U.S. workers. Yet NAFTA visa requirements regarding the quantity of labour and the process for getting labour permits on the other side of the U.S.-Canada border make it impossible to create a free cross-border in labour at this time.
Although current NAFTA provisions for labour are “archaic,” said Ms. Greenwood, she is encouraged by the progress the U.S. and Canada are making in their Beyond the Border initiatives. For his part, Dr. Pastor argues that such initiatives don’t get nearly far enough to use joint North American resources to solve the common problems of the continent. He proposes that the transportation ministers of Canada, the U.S. and Mexico should negotiate a North American Plan for Infrastructure and Transportation, to create new trade corridors that would extend from Canada all the way to south Mexico. He added that leaders of the three countries should also eliminate their costly NAFTA ‘rules of origin,’ – complex barriers to trade that he said were an “inefficient tax estimated at over $500 million per year.” The three countries should also establish a common external tariff whose revenues would fund a North American Investment Fund, whose main goal would be to fund infrastructure and transportation, added Pastor. Among other new institutions would be a lean North American Commission on Regulatory Convergence, which would “do research and provide options for the three governments to improve competitiveness and security in North America.”
No doubt, such bold initiatives will strike many as being far too ambitious to attract widespread political support in either Canada, the U.S. or Mexico. In each of these countries, protectionist forces are well-entrenched, and many oppose any initiative that would seem to cede too much power to foreign governments and international institutions. Nevertheless, the countries’ leaders may gradually be impelled to move at least part of the way toward such bold solutions as their economies becoming increasingly integrated – and yet equally challenged by competition from other regions of the world.