Bloomberg News

Obama Agrees to Perimeter Security With Canada to Bolster Trade

December 12, 2011

Dec. 7 (Bloomberg) -- President Barack Obama and Canadian Prime Minister Stephen Harper agreed to take steps to speed the flow of goods and people across the border while enhancing security and harmonizing regulation, in a bid to counter weakening trade ties between the two countries.

The pact, announced by Obama and Harper following a meeting in Washington, moves the two countries toward a “perimeter” security system that lays out plans to inspect more cargo and travelers before they arrive in North America. Canada and the U.S. will also seek to streamline and align regulations on some goods.

“Moving security to the perimeter of our continent will transform our border and create jobs and growth in Canada by improving the flow of goods and people between our two countries,” Harper said in a statement. “These agreements represent the most significant step forward in Canada-U.S. cooperation since the North American Free Trade Agreement.”

The Canada-U.S. trade relationship has struggled under the impact of tighter border security following the Sept. 11 terrorist attacks, as well as the emergence of China as a competitor and slowing global growth. The share of Canada’s shipments to the U.S. has been declining since 2000, a trend that accelerated as the global recession curbed demand for Canadian exports.

The two countries agreed on 29 initiatives to harmonize regulation as a “first step” toward new regulatory cooperation, focused on agriculture and food, transportation, health products and the environment.

Autos and Rails

Auto producers and rail companies will benefit from efforts to harmonize vehicle safety standards, the Canadian government said in a background document released in Ottawa. Other steps will include developing a common naming system for meat cuts, aligning regulations for pesticides and harmonizing rules in the pharmaceuticals industry.

“This announcement is not about a common border, it is about an integrated economy and our shared vision for good jobs, increased investment and a higher standard of living,” Jayson Myers, chief executive of the Canadian Manufacturers and Exporters, said in a statement.

Border regulations cost Canadian businesses about C$16 billion ($15.8 billion) annually, the Canadian government said.

The accord comes after Obama announced last month he would delay until 2013 a decision on the $7 billion, 1,661-mile (2,673-kilometer) Keystone XL pipeline, proposed by TransCanada Corp. Approval of the pipeline, which would carry Canadian oil- sands crude through the Great Plains to the Gulf of Mexico, is a “no-brainer,” Harper said in a Sept. 21 interview with Bloomberg.

Canada Irked

The Keystone delay is the latest of several U.S. moves that have irked Canada. Canada objected to “Buy American” provisions in the Obama administration’s $447 billion jobs bill that was blocked by Republicans in Congress, as well as the restoration of a $5.50 fee on Canadian travelers arriving in the U.S. by plane or ship.

The two countries have agreed to coordinate their systems for screening cargo so goods entering either nation only have to be cleared once. They plan to integrate passenger baggage screening systems, meaning Canada will have to adopt the U.S. system for detecting explosives. In exchange, U.S. authorities will lift the requirement that baggage be re-screened when travelers switch to connecting flights in the U.S.

Expanding NEXUS

They also agreed to expand a program called NEXUS that allows frequent travelers to pass more quickly through customs. Canada will expand NEXUS lanes and booths at several border crossings, including Windsor, Ontario-Detroit. There will be “significant” investments in physical infrastructure at various border points, the documents say.

Canada and the U.S. will develop coordinated entry-and-exit systems, so the record of land entry by individuals into one country can be used to track the exit from another. Canada will adopt the U.S. exit system, under which airlines must share their passenger manifests on outbound international flights.

Canada will also beef up practices to identify potential terrorist threats before they reach North America, in part by increasing screening of travelers to Canada, and sharing information on high risk inbound travelers.

--With assistance from Greg Quinn in Ottawa and Roger Runningen in Washington. Editors: Paul Badertscher, Joe Sobczyk

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net, Andrew Mayeda in Ottawa at amayeda@bloomberg.net.

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net.


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