July 
2009

Vol 9 - No. 1


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Managing Canada U. S. relations: A case study at 30,000 feet
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BY DEREK BURNEY (IDN)

We face some major challenges in our bilateral relationship with the U. S. They call for a strong combination of vigilance and dexterity. Let me illustrate the need to match initiatives with changing realities with a bit of history -- from my own involvement with air policy during my time in Washington as ambassador to the United States. In 1989, the Canada-U. S. Free Trade Agreement had just come into effect and was aimed at transforming the Canadian economy through increasing North American economic integration.

If the FTA was to succeed fully, we also had to rethink the management of things like transportation links with the U. S., especially those in the aviation sector. Dating from 1966, the Canada-U. S. Air Agreement was stuck in a time warp, reflecting tight, cautious micro-management. It had been amended only modestly and its limited cross-border routes, along with other restrictions, impeded many rewards from the FTA. Deregulation, meanwhile, had transformed the U.S. aviation market into a network of hubs and spokes. Increased competition was leading to rationalization, code-sharing and some consolidation of the industry. The North American aviation environment was changing, but the policy framework was stagnant.

So we in the embassy tried to persuade those in Ottawa to relegate the old agreement to the museum of relics. But we faced entrenched resistance from a bureaucratic mindset in which the unerring instinct is to defend the status quo long after the quo has lost its status. Some carriers were enthusiastic. Others much less so and their apprehension prevailed.

Five years later, however, the two governments signed the Open Skies Agreement, which swept away the restrictions on cities served, the number of airlines permitted to operate and the fares that could be charged. I don't need to tell this audience about the enormous benefits this agreement provided for Canadian travellers, shippers and airports.

My point is not to claim credit for a success in which many hands, notably the emerging local airport authorities, played a part, but to underline how important it is that all parts in a complex, modern economy adapt together to match the dynamics of change.

Today, Canada must, first and foremost, be "on guard" against protectionist impulses from the U. S. Congress. The Buy American provisions of the original House and Senate stimulus bills showed the dangerous streak of nativist fever emerging in Washington. And there are still teeth with the potential to bite Canada in the current stimulus legislation.

We need to be particularly wary of the potential for "green protectionism," like carbon import taxes. These are measures intended ostensibly to "protect" the environment but which in fact are designed to hobble imports. There can be no more lethal mix than morality wrapped in nationalism.

In mounting our defences, we should assert the plain fact that Canada is the largest export market for the U. S. Our manufacturing and agricultural sectors are integrated. In many sectors -- from beef, to autos, to steel -- it is no longer possible to talk about Canadian and American products as if they were separate. As others have observed, Canada and the U. S. don't trade things with each other, they make things together. Upwards of 70% of cross-border trade is intra-firm trade.

Much of the congestion at our border is in fact protectionism disguised as security measures. Constantly changing and increasingly onerous procedures, inspection fees and more rigorous but often nonsensical labelling requirements on health and product standards threaten to erode the benefits of free trade.

During President Obama's visit in February, the Prime Minister set the right tone on this subject. We share American concerns about threats to security. But we need to strike a healthier balance between genuine threats to security and our mutual need for smooth, efficient access across our border for people, goods and services.

The President's comments may have indicated an openness to look at new answers but his Secretary of Homeland Security's more recent remarks, equating the U. S.'s northern border with its southern border, and exaggerating the threat, fly in the face of history and reality. Some remedial education is called for on that front. Our ambassador to the U. S. characterized these comments as "misconceptions." That, by the way, is diplomatese for "flat wrong."

We should be looking at a Canada-U. S. perimeter approach on security, making more intelligent use of technology on our external border while relieving congestion on our internal border. By perimeter, I mean extending NORAD to land and sea as well as air, allowing the two countries to move many border functions, such as product safety inspection and risk assessments, away from the border. Canadian and American personnel already work side-by-side in five major seaports targeting North American shipments from third countries. We need more of that.

For cross-border travel, one size should not fit all. The greater the number of companies and citizens that become trusted shippers and travellers, the greater our mutual security. I am sure there are also ways we could relieve customs congestion at airports like Toronto's Pearson.

A sharper focus is also warranted on the nexus of energy security and the environment. Canada is, significantly, the largest and most reliable supplier of oil, gas and electricity to the United States. That is a key point and that is why a dialogue on clean energy, launched during President's Obama's February visit to Canada, makes sense. That is why efforts by our two governments to chart a common path toward effective reductions in greenhouse gas emissions -- bilaterally and globally -- makes sense. If we each go our own way -- with a spaghetti bowl of separate initiatives at national, state and provincial levels -- we will do precious little for our shared environment, and, most likely, undermine our economies along the way. 

Derek Burney is senior strategic advisor, Ogilvy Renault LLP. The full text of the speech is available at www.ctpl.ca. The above is an excerpt from Derek Burney's speech to the Canadian Airports Council at the Hilton Lac-Leamy in Gatineau, Que., on April 28. The article was published in National Post on May 05, 2009. 

 

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