It has been almost two years since Stephen Harper disclosed that his cabinet was having serious discussions about what to do to “restore the special Canadian and American relationship” that he said had become “lost” in the Bush years. “What has happened is that Canada lost that special relationship with the United States. We increasingly became viewed as just another foreign country, albeit an ally, a good friend, but nevertheless a foreign country. You know, the northern equivalent of Mexico in terms of the border,” the Prime Minister told Maclean’s in an interview back in December 2007. “That isn’t just a shift in the view of the administration, that’s somewhat a shift in American public opinion as well, which concerns me.”
At the time, Harper was preoccupied with a new passport requirement that threatened tourism and trade, adding a new scale to the ongoing red-tape “thickening” of the world’s longest undefended border. “I’m certain this trend will not be reversed in the lifetime of the current American administration,” Harper said at the time. “I’m more optimistic it will be deferred later by a new administration.” But, he added, “I’m far from sure.”
He was right to be wary. If the special relationship was lost under George W. Bush, nine months into the new administration it remains missing. At his Sept. 16 meeting with Obama at the White House, Harper boasted that it was his seventh session with the new President. But the passport requirement remains, as do agricultural inspection fees on commercial cross-border traffic and air travellers. Instead of “un-thickening” the border, the new administration has kept the Bush policies in place and even piled more on: in February, the U.S. sent unmanned aerial surveillance drones to patrol parts of the border with Canada. The drones, which can detect human movement 10 km away, are supposed to help catch smugglers. But they have raised concerns about privacy in border communities, and although they are unarmed, give the 49th parallel something in common with the tribal lands between Afghanistan and Pakistan.
Since Obama’s February trip to Ottawa, where he was greeted with a rapturous welcome on his first official foreign visit, the state of the world’s largest trading relationship has become even more fraught. Given that fully one quarter of the Canadian economy depends on exports to the U.S., growing American protectionism has proven to be a growing threat. Problems began with a Buy American provision in the US$787-billion stimulus bill. While there have been reports that an exemption for Canada may be imminent, in return for Canadian municipal and provincial governments allowing procurement contracts for U.S. companies, rules similar to the Buy American provision are now being repeated in other legislation. Protectionism has also surfaced in proposed climate change legislation that would impose border tariffs on imports from countries whose carbon policies Washington deems insufficient. And there are other issues galore that affect Canada, from complicated and costly trucking rules and the treatment of Canadian hydroelectricity under U.S. environmental laws to “country of origin” labelling that imposes costs on Canadian agricultural producers and reduces the appeal of their goods in the U.S. marketplace.
Oh—there’s Canada’s national sport as well. In August, Canadian NHL teams faced the prospect of having their seasons thrown into limbo by a sudden Obama administration crackdown on Canadian charter flights operating between U.S. cities. That issue arose when a U.S. charter airline and an American pilots’ union complained that the Air Canada charter company was beginning to take U.S. business, and the Department of Transportation stepped in. When Harper sat down with Obama at his Sept. 16 Oval Office meeting, he took precious minutes away from discussions of Afghanistan and Iran to address the war over hockey players.
That problem was eventually resolved, with Air Canada agreeing to “an unprecedented level of monitoring and enforcement” of who boards the flights. But it was just one more high-profile imbroglio between the two countries that may have left many Canadians asking the question: is America Canada’s biggest problem?
Jason Myers, the president of the Canadian Manufacturers and Exporters, calls growing American protectionism “the hottest issue for us.” He is not only concerned about new rules that affect us directly, but also those aimed at other countries that lead to problems for Canada. For example, when Obama announced in September that the U.S. would impose tariffs on tires from China, Myers worried that any Chinese retaliation against the U.S. auto industry would hurt Canadian businesses, too, because that sector is so integrated in North America. “We just see a whole lot of areas where the U.S. is becoming more closed, protectionist and isolated in terms of trade,” Myers says. “It’s not just that it’s our biggest market, but we make things together. We are part of an integrated supply chain. It has far-reaching impacts throughout industries.”
The impact of the Buy American provisions has been not only to exclude Canadian suppliers from government contracts at the state and local level, but also to encourage American distributors to stop carrying Canadian products. “The impact of this goes well beyond the procurement markets at state and local levels and beyond the federal restrictions,” Myers says. The economic impact is hard to estimate, in part because only a small portion of the stimulus money has been disbursed, but at least 250 Canadian companies have lost business, he adds.
Washington, Ottawa and the provinces have worked toward a solution to the problem. But even if Canada gains an exemption from the Buy American provision, Canadian businesses are worried that initiative may have been just the tip of the iceberg. Similar protectionist rules have been included in several bills pending in Congress, including the Water Quality Investment Act, which Myers notes could affect $4 billion worth of Canadian exports.
