Recent Development in International Trade Regulation

An audible sigh of relief emanated from Canada's business community in February 2010 when Canada and the United States signed The Canada-U.S. Agreement on Government Procurement, a pact intended to remove procurement barriers that resulted from the American Recovery and Reinvestment Act.

However, salutary the agreement may have been, there was still a long way to go at press time. Quite apart from Buy America and the existence of longstanding protectionist disputes in sectors such as softwood lumber, the Canada-US border has been thickening in many other ways — so much so that it has eroded the international perception of Canada as an increasingly diversified economy with unimpeded access to a North American market of 400 million people.

Increased inspection fees, non-tariff barriers, the extra-territorial impact of US export control laws on the development of Canadian technology, and the imposition of prohibitive duties on Canadian exports ruled as non-NAFTA originating by US authorities are but a few of the examples underlying a deteriorating border situation.

Otherwise, the US Consumer Product Safety Improvement Act of 2008 requires importers to use third-party laboratories that have been accredited under the legislation. The upshot is that Canadian exporters must comply with the legislation and cannot rely on Canadian accredited laboratories.

The forestry, packaging and value-added sectors have been subject to burdensome data reporting requirements by amendments made to the US Lacey Act in 2009. The changes require very detailed reporting of any plant matter incorporated in imported products — no matter how miniscule the quantity.

As well, the US Food, Conservation and Energy Act requires mandatory country of origin labelling (COOL) requirements for all beef, pork, lamb and chicken sold at retail in the US.

Oil and gas are also not immune from protectionist measures. US authorities have suggested that they may view both Canadian liquefied natural gas that is comingled with non-NAFTA LNG and heavy crude oil diluted with non-NAFTA material for pipeline transportation as non-originating and therefore subject to higher duties and fees.

Things aren't much better on the people side. Border authorities are asking a lot more questions. Issuing I-94s, which govern the nature and duration of a stay, is becoming an increasingly common practice.

While the much vaunted NEXUS pass has facilitated border crossing for eligible individuals, it is fraught with risks. Individuals can lose their NEXUS status for something as innocent as importing a banana.

Otherwise, consultants and technician going to work in the US are also subject to much more careful scrutiny. While a letter from the employer explaining the assignment may have sufficed in the past, US authorities now require actual photocopies of credentials, as well as much more detailed explanations and proof of the type of work involved.

So heavy is the burden that the Fraser Institute has estimated the cost of border compliance as equivalent to between two and three per cent of total trade.

There's no doubt that the events of September 11, 2001, were a trigger for all this. Security became more important than trade liberalization. Both Canada and the US moved their border control from departments concerned with revenue into new departments whose primary concern was public safety.

Indeed, the situation may have reached a low point when Janet Napolitano, the US Secretary of Homeland Security, suggested to a Brookings Institute gathering that the Canada-US border should be treated no differently from the Mexican border.