Many of the benefits that came from eliminating tariff barriers between the two nations have gradually been lost due to regulatory differences and border inefficiencies, states the report.
“Canada and the U.S. have a long, vibrant history of cooperation and success, but it is clear that bilateral relations have drifted,” said Chamber President and CEO Perrin Beatty in a statement. “At a time when the global economy is undergoing significant shifts, it is imperative that both countries recognize the advantages of the integrated North American market.”
The report titled “Strengthening Our Ties: Four Steps Toward a More Successful Canada-U.S. Partnership” examines how U.S.-Canada relations have become strained in recent years and outlines four areas—trade, regulatory policies, border efficiency, and environment and energy security—where “notable progress” would potentially strengthen economic growth and prosperity for both nations.
Canada in particular needs to develop a “dedicated strategy for engagement” in the United States, with focus on highlighting the gains made from the North American Free Trade Agreement (NAFTA) and promoting free trade, advised the Canadian Chamber of Commerce.
The protectionist policies adopted by the United States to combat the financial crisis, such as the 2008 “buy American” requirement, ignored the integrated nature of North American supply chains and harmed businesses on both sides of the border, noted the organization in their report.
“Canada must convey that policies that hinder the free flow of legitimate goods and services across the border not only reduce North American competitiveness but also weaken the foundations underpinning NAFTA,” said the Chamber's statement.
Recent data from Canada’s national statistics agency shows that the inter-country trade between the United States and Canada has been dwindling, particularly for manufactured goods. Canada’s annual review of merchandise trade showed that U.S. exports to Canada decreased by 21.6 percent in 2008 and declined further during 2009.
Canadian exports to the United States dropped by almost 25 percent in 2009, and for the first time, countries other than the United States accounted for more than a quarter of Canadian exports.
“While this decline can partially be attributed to the effects of the economic recession, the shift in trade patterns is still startling and is cause for concern,” states the report.
To avoid further erosion, Canada needs to present Washington with “new goals, new ideas, and new areas for partnership that will not only secure the future of both economies but will create jobs and make both countries more competitive,” said the Chamber's statement.
Canada is an important source of secure, reliable energy for the United States, as well as a major destination for U.S. exports and a key element in North American production networks.
“The key to recharging this relationship is ensuring Canada is seen as the solution to the serious economic problems the U.S. is facing,” said Beatty. “President Obama’s call to double American exports in the next five years has been one of his few economic gestures to attract support from all sides. If America is going to achieve this ambitious goal, it’s going to be in part because of Canada.”
In February, Canada became alarmed over the “buy American” provision in the U.S. economic stimulus package. Canada lobbied for an exemption to the provision, but its hopes have faded, according to a report published in November by the Canadian Centre for Policy Alternatives.
Since NAFTA entered into force in 1994, the total bilateral merchandise trade has grown by more than 120 percent. Eight million jobs in the United States and three million in Canada depend on continued bilateral trade. Canada is also the largest export market for 35 out of the 50 U.S. states.
“Yet the true importance of the Canadian market to the U.S. is often underestimated,” states the report.
With news reports circulating that Ottawa and Washington are negotiating an unprecedented “perimeter security” deal, the Chamber is also calling for improved border efficiency.
Layers of new fees and inspections, different regulations imposed by various departments, wait time uncertainty, and infrastructure restraints have served to clog the border and increase the cost of traveling and doing business in recent years.
“The border does not need to be an unmanageable burden for our governments,” said Beatty. “It is an opportunity to once again work together to design a strong, secure border that focuses on stopping the illicit trafficking of goods and people while promoting legitimate travel and trade.”
