Order Code 96-397
Canada-U.S. Relations
Updated May 15, 2007
Carl Ek, Coordinator, and Ian F. Fergusson
Foreign Affairs, Defense, and Trade Division
Blas Nunez-Neto and Stephen F. Clarke
Domestic Social Policy Division and Law Library
Amy Abel, Pervaze Sheikh, Eugene H. Buck, M. Lynne Corn,
Stephen Cooney, Ross W. Gorte, Charles E. Hanrahan,
James E. McCarthy, and Randy Schnepf
Resources, Science, and Industry Division

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Canada-U.S. Relations
Summary
During the 1980s, the United States and Canada generally enjoyed very good
relations. The early 1990s brought new governments to Ottawa and Washington, and
although Canada’s Liberal Party emphasized its determination to act independently
of the United States when necessary, relations between the two countries continued
to be generally cordial. Canada’s new Conservative government, under Prime
Minister Stephen Harper, is regarded as more philosophically in tune with the Bush
Administration than the Liberals were; some observers believe that this compatibility
may facilitate bilateral cooperation.
The two North American countries continue to cooperate extensively in
international security and political issues, both bilaterally and through numerous
international organizations. Canada’s foreign and defense policies are usually in
harmony with those of the United States. Areas of contention are relatively few, but
sometimes sharp, as has been the case in policy toward Iraq. Since September 11, the
United States and Canada have cooperated extensively on efforts to combat
terrorism, particularly in Afghanistan.
The United States and Canada maintain the world’s largest trading relationship,
one that has been strengthened during the past fifteen years by the approval of two
multilateral free trade agreements. Although commercial disputes may not be quite
as prominent now as they have been in the past, the two countries in recent years
have engaged in difficult negotiations over items in several trade sectors, including
natural resources, agricultural commodities, and the cultural/entertainment industry.
However, these disputes affect but a small percentage of the total goods and services
exchanged. Also, the United States and Canada work together closely on
environmental matters, including monitoring solid waste transfers, and protecting and
maintaining the quality of border waterways.
Many Members of Congress monitor U.S.-Canada environmental, trade, and
transborder issues that affect their states and districts. In addition, because the
countries are similar in many ways, lawmakers in both countries study solutions
proposed in the other to such issues as federal fiscal policy and federal-provincial
power sharing.
This report provides a short overview of Canada’s political scene, its economic
conditions, and its recent security and foreign policy, focusing particularly on issues
that may be relevant to U.S. policymakers. This brief country survey is followed by
several summaries of current bilateral issues in the political, trade, and environmental
arenas. The report is updated annually.

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Contents
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Canada’s Domestic Scene . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Security and Foreign Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Economic and Trade Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Environmental Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Border Security Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Border Security: Trade and Commercial Concerns . . . . . . . . . . . . . . . . . . . . . . . 24
Immigration and Refugee Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Canada and the WTO Doha Development Agenda . . . . . . . . . . . . . . . . . . . . . . . 30
North American Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
U.S. Imports of Canadian Softwood Lumber . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Wheat Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Corn Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Cattle and Beef Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Waste Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Electric Reliability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Natural Gas Pipeline from Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Northern Energy Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Great Lakes Restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Status of Polar Bears . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

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Canada-U.S. Relations
Overview1
Relations between the United States and Canada have undergone changes in
tenor over the past three decades. The 1980s and early 1990s were marked by an
increasingly close partnership, whose milestones included the mid-1980s “Shamrock
Summits” (named after the Irish heritage shared by the two countries’ leaders, Brian
Mulroney and Ronald Reagan), the 1988 U.S.-Canada Free Trade Agreement, and
the 1993 North American Free Trade Agreement (NAFTA). To many Canadians,
however, Ottawa seemed at times to have drawn a bit too close to Washington, D.C.,
with Canada casting itself too willingly in a secondary role.
In 1994, one Canada watcher observed that in the foreign policy arena, Canada
“politely distances itself from the United States” in certain ways.2 In an interview for
a nationally syndicated American magazine, the newly elected Liberal Prime Minister
Jean Chrétien summed up his view of the bilateral relationship: “We like each other.
I just don’t want Canada to be perceived as being the 51st state of America.... With
me, a more mature relation will exist between us and the United States.”3 Some
believe, however, that this initial show of mild reserve was intended for domestic
consumption, particularly during election campaigns, and that Canada and the United
States in fact continued to enjoy excellent relations. Chrétien and Clinton are said
to have had congenial meetings; they focused on areas where the two countries were
able to reach agreement, including environmental issues, cooperation on border
measures and technology projects.
In February 2001, President George W. Bush met with Chrétien. The two
leaders discussed energy, missile defense, and trade. Since September 11, however,
economic and environmental issues have largely taken a back seat to joint efforts to
combat international terrorism. Canada became involved in the crisis at the outset,
and has cooperated closely with the United States in the war on terrorism. In the
immediate aftermath of the attacks, U.S. airspace was temporarily closed and Canada
allowed more than 200 flights to American destinations to be diverted to Canadian
airports.
Nevertheless, Chrétien did not establish with President Bush the same rapport
that he had enjoyed with Clinton. Differences over a number of issues tended to
1 Prepared by Carl Ek, Specialist in International Relations; Foreign Affairs, Defense, and
Trade Division.
2 “Canada Narrows Its Foreign Policy Goals to Focus on Trade.” By Charles Trueheart.
Washington Post. November 17, 1994. p. A44.
3 “Don’t Take Canada For Granted.” By Tad Szulc. Parade Magazine. February 20, 1994.

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CRS-2
strain relations. The Bush administration inherited some long-standing trade
disputes, most notably over wheat and softwood lumber, and Canada and the United
States were on different sides of several international issues, including the U.S.
withdrawal from the ABM treaty and the International Criminal Court. In addition,
the Liberal government’s plan to decriminalize marijuana raised concerns in
Washington. But it has been over security-related matters, particularly defense
spending, Iraq, and missile defense, that the two governments had their sharpest
differences. Notwithstanding these controversies, Canada and the United States have
been working together on a number of fronts to thwart terrorism, including
strengthening border security, sharing intelligence and expanding law enforcement
cooperation. The Canadian government passed a new anti-terrorism act, and Canada
has contributed significant military assets to the coalition in Afghanistan. Although
bilateral tensions heated up in 2005 over the issues of missile defense and softwood
lumber, Canada’s government and private citizens responded promptly and
generously to assist the United States after hurricane Katrina.
Paul Martin, who became prime minister in December 2003, met several times
with President Bush. At the January 2004 Summit of the Americas, the two leaders
discussed several topics and came to agreement on Canadian eligibility to bid on
reconstruction contracts in Iraq and on the ground rules for U.S. deportation of
Canadian citizens. In April 2004 in Washington, D.C., Martin and Bush met once
more and talked about a variety of issues, from the war on terrorism to the “mad
cow” crisis. In November 2004, during President Bush’s first official visit to
Canada, he and Martin discussed missile defense, border security, and global “hot
spots.”4
In February 2006, after a come-from-behind election victory, the Conservative
Party assumed power as a minority government, and Stephen Harper became
Canada’s 22nd Prime Minister, the first Conservative to lead the country in 12 years.
Observers believe that Harper’s government is somewhat more politically compatible
with the Bush administration in many areas. However, although the policy
orientation of Harper’s Conservatives may be similar to that of the Republicans in
Washington, differences have still arisen on certain issues, particularly those that
touch upon matters of perceived sovereignty. For example, on January 26, 2006,
days before his inauguration, Harper sharply took exception to comments made
earlier by U.S. Ambassador to Canada David Wilkins and asserted Canada’s
sovereignty over the so-called Northwest Passage, the frozen arctic region that global
warming may turn into a waterway linking Asia and Europe.5
Canada’s Domestic Scene
Background and Current Political Situation. In August 2002, Jean
Chrétien, who had served as Prime Minister since 1993, announced that he would
4 Bush Welcomes Canadian Prime Minister to the White House. State Department Press
Release. April 30, 2004. “Bush Launches Bid To Repair US-Canada Ties.” Agence
France-Presse. November 30, 2004.
5 “Harper Tells U.S. To Butt Out On Plans For Defending Canada’s Arctic.” The Canadian
Press. January 26, 2006.

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CRS-3
retire from politics when the Liberals held their next leadership vote. Paul Martin,
the former Finance Minister, became Prime Minister in December 2003. Although
elections need not have been held until late 2005, Martin called for elections to be
held in spring 2004. Maintaining a Liberal majority appeared to be a safe bet when
Martin took office, but such an outcome became doubtful in February 2004, when the
“sponsorship scandal” erupted. Canada’s Auditor General published a report stating
that, under a program intended to build support for Canadian unity, the Chrétien
government had funneled C$100 million in public funds for dubious contracts to
Québec advertising firms associated with the Liberal party. The Auditor General,
who characterized the program as “such a blatant misuse of public funds that it is
shocking,” reported that questionable methods had been used in awarding the
contracts and that little or no actual work had been performed.6
The Liberals’ standing in the polls plummeted, and the opposition parties gained
strength. To the right of the Liberals, two conservative parties had merged under a
popular new leader, Albertan Stephen Harper. And to the left, the New Democratic
Party (NDP) likewise had recently elected a dynamic party chief, Jack Layton. In the
June 2004 elections, the Liberals won 135 out of 308 seats in the House of Commons
— a loss of 33 seats — and chose to govern as a minority.
In May 2005, the Liberals survived — by one vote — a proxy confidence vote
and avoided spring elections. But in November they lost a second confidence vote,
and federal elections were held on January 23, 2006. This time, the Conservatives
won a plurality.7 They currently hold 125 out of 308 seats in the House of Commons,
a gain of 25 seats, and are governing as a minority (the Liberals have 101 seats, the
Bloc Québécois 51, and the NDP 29.)
Some analysts caution that the Tory victory does not necessarily represent a
“paradigm shift” to the right in Canadian politics; they note that the Conservative
party won only 37% of the popular vote. Because minority governments only last an
average of about 18 months in Canada, Prime Minister Harper has been keeping one
eye on the next elections.8 In addition, Harper has relied upon the ad hoc support of
the other three parties to ensure passage of the various items on his legislative
agenda. Many therefore believe that is why he has advocated fairly centrist policies,
by, for example, seeking legislative approval of the five priorities on which he
campaigned: 1) greater government accountability; 2) shorter health care wait times;
3) tax cuts; 4) child care assistance; and 5) criminal law reform.9
6 “Canada: Martin on the Ropes in Funding Scandal.” Oxford Analytica. February 25,
2004. “Scandalous!” By John Geddes. Maclean’s. February 23, 2004. “Canada’s Premier
Acts to Counter Scandal.” By DeNeen L. Brown. Washington Post. February 17, 2004.
7 For a description of the campaign, see “Inside Story.” By Paul Wells. Maclean’s.
February 6, 2006.
8 See “Interview: Stephen Harper.” Maclean’s. March 6, 2006.
9 See “Conservatives To Govern From Political Center.” Oxford Analytica. January 24,
2006. “Harper’s Five Easy Pieces.” Economist. April 8, 2006.

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CRS-4
Harper immediately began to work on these items. The first bill his government
introduced in parliament was the Federal Accountability Act, the Conservatives’
response to the sponsorship scandal. The proposal is intended to “change the way
business is done in Ottawa forever” by addressing such issues as whistleblower
protection, political contributions, lobbying reform, and government contracts and
appointments. Some critics charge that the new law is selective, while others
maintain that it represents overkill. Supporters praise the measure as an effort to
bring about long-overdue changes.10 During his 15 months as prime minister, Harper
has dealt with several other issues, including the environment, crime, Senate reform,
and health care. For the most part, he has not forcefully advocated controversial
social issues.
However, Harper has been willing to challenge public opinion over Canada’s
participation in the international stabilization effort in Afghanistan. In March 2006,
he made a surprise visit to Canadian troops in Kandahar. Two months later, he won
a narrow vote in parliament to keep Canadian troops in Afghanistan for two
additional years. Harper initially characterized the mission as humanitarian in nature
and also asserted that it was in Canada’s national interest to demonstrate its ability
to play a leadership role internationally. Over the past year, however, Canadian
operations have shifted from peacekeeping to counter-insurgency, and support for
Canada’s presence in Afghanistan has diminished. In addition, it has been reported
in recent months that Taliban fighters captured by Canadian Forces allegedly have
been tortured after having been turned over to the custody of Afghan authorities. A
recent poll showed that two-thirds of Canadians endorsed the return of Canadian
forces from Afghanistan by 2009. However, on April 24, 2007, parliament turned
aside legislation that would have required Canadian troops to be brought home in
2009.11
In December 2006, after a months-long campaign, the opposition Liberals
elected Stéphane Dion as their new leader. A former academic, Dion had
spearheaded Chrétien’s federalist policies toward Québec and also served as Paul
Martin’s environment minister. A native of Québec, Dion came from behind to
defeat the two front-runners for the party leadership post, Michael Ignatieff and Bob
Rae. Polls indicate that Dion has had some difficulty gaining traction with voters.
In May 2007, he revamped his communications office and launched an outreach
program. He will likely press hard on the environment — an issue that has emerged
as one of key importance to Canadian voters, and one in which the Harper
government appears to be vulnerable.
Budget Policy. The federal deficit, which stood at a record high C$42 (as of
May 9, 2007, one Canadian dollar equals US$0.90) billion when Chrétien became
Prime Minister in 1993, was reduced steadily each year until 1998, when then-
Finance Minister Paul Martin introduced Canada’s first balanced budget in nearly
10 “Harper Rolls Out His Ethics Act.” CanWest News Service. April 12, 2006. “Clean
Doesn’t Get Any Squeakier.” By John Ibbotson. Globe and Mail. April 12, 2006.
11 “Harper’s Mission Statement.” By Andrew Coyne. National Post. March 15, 2006.
“Bring Troops Home In 2009, Majority Says.” Ottawa Citizen. April 24, 2007. “Troop
Pullout Bill Defeated In Canada.” Washington Post. April 25, 2007.

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CRS-5
three decades. This dramatic elimination of the deficit was accomplished in part
through higher than anticipated tax revenues, and through such politically risky
measures as cutting federal funding for health and education transfers, and applying
a means test to those eligible for Seniors Benefits.
For the past nine years, Canadian politicians have been in a post-deficit
environment in which they have had to select among competing demands on annual
budget surpluses. Some officeholders argue that much of the budget surplus should
be devoted to large reductions in corporate and income taxes. They maintain that
Canada’s high taxation, relative to that of other countries, discourages job creation,
reduces household incomes, diminishes worker productivity, and causes a “brain
drain” of Canadian professionals, chiefly to the United States. However, other
policymakers point out that Canada’s current tax system enables the government to
maintain a host of social programs that make Canada the envy of many countries; in
addition, they note that, high taxes notwithstanding, thousands of talented people
emigrate to Canada every year.12
The Conservatives tabled their first budget in May 2006. Some of the Harper
government’s fiscal priorities arose from campaign themes, including a pledge to
reduce by one percent the Goods and Services Tax (GST, a form of national sales
tax); income and corporate taxes were also cut. In addition, funding was earmarked
for child care allowances and infrastructure improvements. The 2007 budget,
introduced in March, emphasized several programs long favored by the Liberals,
including increased spending for health care, post-secondary education, and
infrastructure. The spending blueprint also contained a “green levy” consisting of
higher taxes for vehicles with poor gas mileage, and a rebate for the purchase of fuel-
efficient cars and trucks. Perhaps most notably, the budget continued to transfer
large sums to the provinces — Quebec being the big winner, with 40% of the
increase. Both the 2006 and 2007 budgets maintained a surplus.13
National Unity. For four decades, an emotional debate has raged over the
status of French-speaking Québec, Canada’s second largest province geographically
and home to about one-quarter of its population. Many Québécois are concerned that
their language and culture will be overwhelmed by the rest of English-speaking
Canada. Some believe that their society may only be preserved if Québec separates
from the rest of Canada and forms an independent country. A 1980 referendum on
“sovereignty-association” for Québec was defeated 60%-40%.
In October 1994 elections, after the provincial Liberals had governed Québec
for several years, the province once more elected the separatist Parti Québécois (PQ).
The victorious PQ held a referendum on sovereignty on October 30, 1995.
Québeckers voted on whether they wished to continue to remain a part of Canada, or
strike off on their own. The question was decided by the narrowest of margins; the
12 See “The Tax Trap. By Mary Janigan.” Maclean’s. April 12, 1999. p. 14. And: “The
Brain Drain: Myth and Reality.” By Ross Finnie. Choices. Vol. 7, No. 6. November 2001.
13 “A Budget So Liberal, the Grits Should Sue.” John Ibbitson. Globe and Mail. March 20,
2007. “Money, Money Everywhere ... .” Jeffrey Simpson. Globe and Mail. March 20,
2007.

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CRS-6
vote went 50.6% to 49.4% in favor of keeping the country whole. The wafer-thin
margin shocked federalists and separatists alike. The country is still affected by the
impact of what has been called a “near-death experience.”
Québec held provincial elections once again in October 1998, and the PQ
retained a comfortable majority in the provincial legislature. In 2003, however,
Québec voters turned out the Péquistes and replaced them with the Liberals, led by
Jean Charest. A former leader of the Progressive Conservatives at the national level,
Charest is a committed federalist, which rules out another sovereignty referendum
during his tenure. During the early part of his first term, Charest lost popularity when
he attempted to reduce the economic role of the provincial government; those efforts
prompted strong protests from the powerful public service unions. Some Québec-
watchers assert that Charest learned from this experience and changed his tactics.
Charest was said to have been encouraged by the victory of Harper, who favors
greater government decentralization. The two also share an opposition to
sovereignty, and, for pragmatic political reasons, have cooperated with one another
in several areas.14 Many believe that Harper (and, by association, Charest) won favor
in the province in November 2006 by gaining parliamentary approval in Ottawa of
a measure recognizing Québec as a “nation” within a united Canada. More recently,
some observers believe that Charest’s standing received a boost by the announcement
that Harper’s 2007 budget would provide generous transfers from Ottawa to the
province.
Québec held elections on March 26, 2007, and the Liberals won a plurality
(33%) of the vote. Charest remains premier, but he leads the first minority
government the province has had in more than a century. The PQ captured only 28%,
and was knocked down to third place. Some believe that the real winner of the
elections was Mario Dumont’s Action Démocratique du Québec (ADQ), which took
31% of the votes. A relatively new party, the moderate ADQ espouses a vaguely-
defined “autonomy” over outright independence for Quebec. It is believed to reflect
the views of small towns and rural areas whose residents are proud Quebeckers, but
do not wish to hold another referendum. On May 8, 2007, André Boisclair stepped
down as leader of the PQ. Some speculate that he may be succeeded by Gilles
Duceppe, head of the federal Bloc Québécois.15
Since the debate began in the 1960s, the United States government has
assiduously sought to remain officially neutral on the issue of Québec, continually
repeating the three-point “mantra” that the United States enjoys excellent relations
with a strong and united Canada; that the Québec question is an internal issue that is
for Canadians to decide; and that the United States does not wish to interfere with
Canada’s domestic matters. However, some analysts detected a slight “tilt” on the
part of Clinton Administration toward the federalists during the 1995 referendum
campaign. If, at some future date, Québec eventually does leave the confederation,
the U.S. government will be faced with difficult political and economic questions.
14 “Unpopular Charest Needs Harper’s Help To Gain Re-election.” By Rhéal Séguin. Globe
and Mail. April 15, 2006.
15 “Au Revoir Separatism, Bonjour ‘Autonomy.’” The Economist. March 31, 2007.

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CRS-7
Security and Foreign Policy Issues
Canadian Security Issues. Canadians are proud of their active role as
international peacekeepers. Since the United Nations first dispatched an armed
peacekeeping contingent, to help defuse the Suez Crisis in 1956, Canada has
participated in nearly every U.N. peacekeeping operation, from Cyprus and the Sinai,
to Bosnia, Rwanda and Somalia. As of March 29, 2007, nearly 2,700 Canadian
Forces personnel were participating in international operations in Afghanistan, the
Balkans, the Middle East, and Africa.16
As with other countries in the 1990s, Canada’s military was subject to dual
pressures. In Ottawa’s view, the collapse of the Soviet Union and the Warsaw Pact
reduced the military threat, making it more difficult for the government to justify
sustaining historic spending levels on defense. Leaders believed that the country’s
large debt early in the decade necessitated funding cutbacks in most areas of
government, including defense. However, relative to its NATO allies, Canada had
devoted only a modest share, about 2% of GDP, of its budget to defense spending
during the 1980s and 1990s. That percentage declined even further, from 2.01% in
1990 to 1.1% in 2005; among the 26 NATO members, only Luxembourg and Iceland
(which has no armed forces) spend a lower percentage. Canada’s meager military
budget has irked some within the alliance, particularly the United States; former U.S.
Ambassador Paul Cellucci repeatedly urged the Canadian government to devote
greater resources to its military.17
After the round of cutbacks in the 1990s, the number of active personnel in
Canada’s armed forces tumbled from 87,000 in 1989 to 52,000, the 56th largest in the
world. The Canadian forces have also been strapped for resources to replace aging
equipment. This trend has disturbed many in the military and may be affecting
morale. There have been numerous warnings in recent years. In March 2002, a
Canadian Senate committee called for increased defense spending to counter the
threat of international terrorism; it also recommended that personnel levels be
increased and that more resources be provided to the Canadian Security Intelligence
Service. A November 2002 Senate report recommended boosting troop levels to
75,000 and restructuring the armed forces. A brace of studies in the fall of 2003
likewise called for changes in force restructure and procurement practices and for
increases in manpower and budgets. A news report characterized one of the studies
as concluding that “Canadian Forces are teetering on the edge of irrelevance.” In
September 2005 the Senate published yet another report, which called for a doubling
of spending on defense.18
16 Canada and International Peacekeeping. By Joseph T. Jockel. Center for Strategic and
International Studies/Canadian Institute of Strategic Studies. Washington, DC, 1994.
Current Operations. Canadian National Defence website. Updated May 9, 2007.
[http://www.forces.gc.ca/site/operations/current_ops_e.asp]
17 “Spend More On Military, U.S. Envoy Urges Ottawa.” Toronto Star. February 25, 2004.
18 “Canada’s Security At Risk.” By Jim Bronskill. Ottawa Citizen. March 2, 2002. “Pull
Troops From Overseas, Senators Say.” By Allison Dunfield. Globe and Mail. November
12, 2002. “Armed Forces Hobbled, Report Says.” By Daniel LeBlanc. Globe and Mail.
(continued...)

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CRS-8
Canada’s defense spending has been trending upward in recent years. The
budget tabled in February 2005 contained the largest military spending increase in
two decades: C$12.8 billion — roughly equal to one year’s military budget — spread
over five years. The Harper government’s first budget boosted added C$5.4 billion
in military spending over the next four years. The 2007 budget confirmed the
previous year’s spending increase.19
In April 2005, the Martin government released its long-anticipated International
Policy Statement, of which defense is one part (the last such defense policy overhaul
took place in 1994.) The new security plan aims to make Canada’s military “more
effective, relevant and responsive.” Among other things, it calls for a change in the
command structure; the addition of 5,000 regular troops and 3,000 reserves; the
expansion of Canada’s special forces, including tactical support equipment; the
creation of an anti-nuclear, biological, and chemical weapons unit and a rapid-
reaction force; and the acquisition of a wide range of materiel, particularly of air,
land, and sea transport. The Harper government plans to procure both tactical as well
as strategic transport aircraft as well as land and sea transport.20
U.S.-Canada Security Issues. According to the U.S. State Department,
“U.S. defense arrangements with Canada are more extensive than with any other
country.” Former Canadian Ambassador Michael Kergin referred to the defense
relationship as being “intermestic” in nature.21
Over the past century, U.S.-Canadian defense cooperation has been close. In
1940, President Roosevelt and Prime Minister McKenzie King established the
Permanent Joint Board on Defense (PJBD), which formalized bilateral consultation
on military matters. In 1949, the two countries were founding members of NATO.
During peacetime, military cooperation has occurred chiefly in the context of
multinational organizations.
In 1958, Canada and the United States signed the North American Aerospace
Defense Command (NORAD) agreement. The continental air defense pact monitors
U.S. and Canadian airspace and encourages joint efforts in aerospace technologies.
The pact, which had been subject to five-year renewals, was made permanent (subject
to review) in May 2006. In the wake of the September 11 terrorist attacks, there were
discussions of deepening military cooperation along the NORAD model, in the
18 (...continued)
December 3, 2003. “Senators Sounding Alarm On Defence.” The Gazette. October 3,
2005.
19 Defence and Budget 2005 — Highlights. Canadian Department of National Defence
website. [http://www.forces.gc.ca/site/reports/budget05/summ05_e.asp] Defence and
Budget 2007 — Highlights. [http://www.forces.gc.ca/site/Reports/budget_2007/
index_e.asp]
20 “‘Canada First’ Defence Procurement.” DND website. Updated March 15, 2007.
[http://www.forces.gc.ca/site/Focus/first/index_e.asp]
21 United States Department of State. Bureau of Western Hemisphere Affairs. Background
Note: Canada. March 2007. “Remarks to the Center for Strategic and International
Studies.” February 28, 2005.

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CRS-9
context of the newly-created U.S. Northern Command, to include land and sea forces.
But some Canadians were concerned that such a move might impinge upon Canada’s
sovereignty, and in August 2002, the Canadian government announced that its land
and sea forces would not be participating in the command. In December 2002,
however, the two countries signed a new accord creating a binational planning group
(BPG) based at NORAD to coordinate responses to terrorist attacks and other crises.
The BPG issued its final report in March 2006; the panel put forward numerous
recommendations, including that the two countries develop a common security vision
and improve interoperability through joint military planning, training, exercises, and
information sharing. In August 2004, Canada and the United States amended
NORAD to permit it to share information on incoming ballistic missiles. Ottawa and
Washington also agreed to expand the scope of the agreement to encompass nautical
surveillance.22
Ottawa also long debated whether it should participate in the U.S. missile
defense (MD) system. Some analysts expressed reservations over the plan, in the
belief that it might spark a new arms race, while others reportedly preferred to keep
Canada’s options open. Parliament held hearings on the issue, but no official policy
was enunciated. Finally, in May 2003, Canada said that it would enter into
discussions with the United States; a Canadian military affairs journalist described
Canada’s likely negotiating goals:
Canada wants the anti-missile shield run by NORAD — in effect, giving Canada
equal status in protecting North America and a finger on the trigger. Ottawa
wants a share of the industrial benefits and access to secret technologies, all
while paying little or nothing. And it continues to insist that space not be
weaponized.23
On February 24, 2005, the Canadian government said that it would not
participate in MD. However, Canada’s ambassador to the United States had pointed
out earlier that the two countries had already agreed to allow NORAD to share
information with U.S. MD commands. U.S. officials expressed puzzlement and
disappointment with the announcement, noting that Canada had sent signals that it
would likely sign on. Polls showed that a majority of Canadians, particularly
Québeckers, opposed MD, leading some analysts to suggest that domestic political
pressures may have guided the decision. In late February 2006, newly named
Defense Minister Gordon O’Connor said that the Harper government likely would
22 “Continental Divides.” By Sydney J. Freedberg, Jr. National Journal. March 23, 2002.
“Leading academics Examine Risks Inherent In Closer Military Co-operation With the
United States.” Canada NewsWire. April 26, 2002. “Canada Won’t Join Norad-Like Land-
Sea Force. By Rick Mofina.” Ottawa Citizen. August 15, 2002. “All For One?” By Luiza
Ch. Savage. Maclean’s. September 12, 2005. Binational Planning Group. Final Report.
March 13, 2006. [http://www.canadianally.com/BPGFinalReport.pdf] “Tory NORAD
Agreement Wins Approval of House.” Globe and Mail. May 9, 2006.
23 “Shoot Down Defence Dreamers.” By Paul Koring. Globe and Mail. June 25, 2003.

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CRS-10
review the missile defense issue if asked to do so by Washington. Any final decision
on participation, he added, would be subject to a parliamentary vote.24
In February 2002, Canada agreed to participate in the further development of the
U.S.-led Joint Strike Fighter program, contributing $150 million over a 10-year
period. In December 2006, it was announced that the Canadian government had
committed an additional C$500 million for the development of the aircraft, and had
agreed to purchase up to 80 of the new fighters to replace its own fleet of CF-18
planes when they are retired in 2017. Canada is apparently reaping rewards from its
participation; in May 2004, Jane’s Defence Weekly noted that Canada “has been
particularly successful in acquiring JSF contracts.” More recently, it was announced
that Canadian firms so far had won 147 contracts worth about $130 million.25
Although it has no troops stationed in NATO territory in Europe, Canada in
recent years contributed several hundred troops to the NATO-led Stabilization Force
(SFOR) in the Balkans and 500 troops to maintain stability in Haiti. Canada also
supplied 200 troops to NATO’s mission in Macedonia, and 600 to the initial U.N.
peacekeeping mission in East Timor. In addition, Canada cooperated “wing-to-wing”
with the United States in Operation Allied Force, the NATO campaign of air strikes
against targets in Serbia and Kosovo, contributing 18 CF-18 fighter aircraft and
providing two rotations of approximately 1500 troops each to KFOR. Canada also
provided 844 personnel to assist in the post-Hurricane Katrina relief activities in
New Orleans. Canada currently has hundreds of peacekeepers stationed in
Afghanistan, the Balkans, Africa and the Middle East.26
Canada has been engaged in the debate over NATO’s future. It supported
enlargement and has announced that it will participate in the NATO Response Force,
which the alliance agreed to at its November 2002 Prague summit. In April 2003,
Foreign Minister Graham, along with the Dutch and German governments, requested
that NATO take over command of ISAF in Afghanistan; in February 2004, a
Canadian general took over command of the peacekeepers in Kabul.27
Canada has also made military contributions to the global war on terror. It was
one of the first countries to join the military operation in Afghanistan. In October,
2001 the government launched Operation Apollo, in support of U.S. Operation
Enduring Freedom. Nearly 900 infantry troops and approximately 40 members of
24 “Canada and the U.S. Missile Defense System.” Dwight M. Mason. CSIS Hemisphere
Focus. January 9, 2004. “Martin and the Politics of Missile Defense.” Globe and Mail.
May 1, 2004. “Missile Defence Won’t Work.” Ottawa Citizen. December 15, 2004.
“Martin’s Move Irritates U.S.” By Sean Gordon. Toronto Star. February 24, 2005.
“Minister Backs U.S. Missile Plan.” Toronto Star. February 24, 2006.
25 “Canadian Firms Big Winners In U.S. Jet Project.” National Post. April 21, 2006.
“Canada Commits Up To $500 Million to the Development of CF-18 Replacement.” The
Canadian Press. December 13, 2006.
26 Current Operations. May 9, 2007. Canadian Department of National Defence web page:
[http://www.forces.gc.ca/site/operations/current_ops_e.asp].
27 “NATO Umbrella Sought.” By Allan Thompson. Toronto Star. April 4, 2003. “NATO
Sees Key Role For Canada In Afghan Security.” Reuters. May 6, 2003.

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Canada’s special forces unit, Joint Task Force 2, served in the initial combat in
Afghanistan. Their main task was to provide airbase security, but they were also
involved in delivering humanitarian aid and in combat missions, including Operation
Anaconda. Other Canadian military assets supporting Operation Enduring Freedom
have included a naval task force group and transport and surveillance aircraft. Along
with British and U.S. troops, Canadian forces are currently serving on the front line
in the combat operations to counter attacks by al Qaeda and Taliban fighters. A total
of 54 Canadians, including one diplomat, have died in Afghanistan. The most recent
casualties occurred in April 2007, when improvised explosive devices killed 8
Canadians.
In August 2005, a Canadian Provincial Reconstruction Team began an 18-month
mission in Kandahar. As of January 5, 2007, Canada had 2,500 troops in the country.
Ottawa has provided humanitarian and reconstruction assistance to Afghanistan. In
February 2007, the Harper government announced that it would increase by C$200
million the annual allocations of C$100 million for Afghanistan.28
Foreign Policy Background and Issues. After Chrétien became prime
minister in 1993, some analysts concluded that he had “tilted Canada’s foreign policy
towards the more explicit pursuit of economic self-interest and away from concerns
about human rights abroad.”29 Under Lloyd Axworthy’s leadership beginning in
1996, however, many observers detected a swing in attitude at the Foreign Affairs
Ministry back toward Canada assuming the role of “soft power,” relying on its
reputation as an honest broker to help effect consensus through negotiation and moral
suasion rather than military force or economic sanctions.30 In the most significant
example of this approach, Axworthy launched the “Ottawa process” to reach
agreement on a treaty banning the manufacture, trade, and use of antipersonnel land
mines; the effort culminated in a December 1997 conference at which more than 100
nations signed the accord. The United States did not sign the pact.
John Manley replaced Axworthy in 2000; in January 2002, when Manley
became Deputy Prime Minister, Bill Graham, chairman of the parliamentary
committee on foreign affairs and international trade, took over. According to one
writer, Graham “can often sound like Axworthy,” while others believe he placed
more emphasis on pragmatism.31 In July 2004, Martin reshuffled his cabinet, moving
28 “Backgrounder: Canadian Forces Operations in Afghanistan.” January 5, 2007. DND
website: [http://www.forces.gc.ca/site/newsroom/view_news_e.asp?id=1703]. “Canada’s
New Government Substantially Boosts Support To Development Efforts In Afghanistan.
Website of the Prime Minister’s office.” February 26, 2006. [http://www.pm.gc.ca/eng/
media.asp?category=1&id=1552]
29 “Canada Bows Out As ‘Boy Scout’ To the World.” By Jeffrey Simpson. Hemisfile:
Perspectives on Political and Economic Trends in the America. July/August 1995.
30 “Canada to Play Global Role as ‘Soft Power.’” By Mike Trickey. Ottawa Citizen. March
3, 1998. “Ottawa’s New-Age Diplomacy Ruffles Many Feathers in Washington.” By
Steven Pearlstein. International Herald Tribune. February 22, 1999.
31 “Out of Africa: The Perils For A PM.” By Anthony Wilson-Smith. Maclean’s. March
25, 2002.

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Graham to Defense and replacing him with Pierre Pettigrew, a Québecker. In
February 2006, Harper named Nova Scotian Peter MacKay Foreign Minister.
As a middle power, Canada has exercised a somewhat disproportionate
influence in world affairs, chiefly through its active participation in international
organizations, including the G-8, and the Asia-Pacific Economic Cooperation forum.
From 1998-2006, Canadian diplomat Louise Frechette served as Deputy Secretary
General of the United Nations, and from 1996-2006 Canadian Donald Johnston was
Secretary General of the Organization for Economic Cooperation and Development.
The president of the International Criminal Court is Judge Philippe Kirsch from
Canada. The first head of the U.N. War Crimes Tribunal was Canadian Louise
Arbour. In June 2005, Canadian Air Force General Ray Henault was named head of
NATO’s military committee.
Canada and the United States have worked closely together in a number of
troubled regions. One example of such cooperation over the past decade was the
U.N. mission in Haiti, where a contingent of the Canadian armed forces, along with
members of the Royal Canadian Mounted Police, took the reins from departing U.S.
forces who had helped restore the democratically elected government in Haiti in
1994. In 2004, after the Aristide government stepped down in the face of armed
rebellion, Canada joined the United States and France in providing peacekeepers to
the U.N.-authorized Multinational Interim Force sent to the troubled island; Canada
dispatched 6 helicopters and nearly 500 troops. Ottawa also said it would provide
C$1 million in emergency aid to flood victims in Haiti and the Dominican Republic.
U.S.-Canada Agenda. Canada was disinclined to expand the war on
terrorism beyond Afghanistan to Iraq. In February 2002, Foreign Affairs Minister
Graham stated that Ottawa would oppose U.S. unilateral action against Iraq unless
Baghdad were linked to terrorism, or it were “shown that they are amassing their
weapons of mass destruction with a vision of using them against someone in the
immediate future....” Later, when asked whether Canada would require “tangible
proof” of a connection between terrorists and the Iraqi government before Canada
would consider joining a military action against Iraq, Graham replied “Yes,
absolutely.”32
In September 2002, during a brief meeting in Detroit with President Bush,
Chrétien reaffirmed Canada’s preference for a U.N. mandate, a stance that strongly
reflected Canadian public opinion. Two months later, Washington requested of
Ottawa specific military commitments in the event of a conflict with Iraq, but no
definitive answer was given. Over the following months, the government’s
statements on Iraq were characterized by the media as imprecise and at times
contradictory, an apparent attempt to keep options open. But in the House of
Commons on March 18 2003, Chrétien stated unequivocally that “Canada will not
32 “Canada Won’t Back War On Iraq.” By Mike Trickey and Hilary Mackenzie. Ottawa
Citizen. February 15, 2002. “Canada FM Requires Proof Of Terror Links For War Beyond
Afghanistan.” Agence France-Presse. March 11, 2002.

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CRS-13
participate.”33 One week later in Toronto, U.S. Ambassador Cellucci delivered a
speech in which he expressed the Bush Administration’s disappointment with the
Canadian government’s decision. The remarks raised strong concerns in Canada
over the state of bilateral relations, particularly after the White House postponed a
state visit by President Bush to Ottawa. In April, seeking to repair the apparent rift,
Secretary of State Powell acknowledged that “differences will come along,” and
declared the two countries to be “inseparable.”34
Washington subsequently requested that Canada assist in the reconstruction of
Iraq by sending troops or military police. Ottawa responded by offering 150
members of its Disaster Assistance Response Team, a non-traditional military unit
consisting of security, engineering, and medical personnel. Since then, Canada has
provided funding in a number of areas, including humanitarian and reconstruction
aid, support for elections, and police training. Altogether, the Canadian International
Development Agency has pledged C$300 million in assistance to Iraq. In January
2004, Canada announced that it would cancel Iraq’s $564 million debt.
Cuba has been another issue where the two countries have not seen eye-to-eye.
For decades, Canada and Cuba have had relatively extensive business links. Because
of this ongoing commercial relationship, Canadian government officials have
publicly criticized a U.S. law (the Cuban Liberty and Democratic Solidarity Act, P.L.
104-114) that seeks to apply indirect pressure on the Castro regime by permitting
Cuban-Americans to file lawsuits against foreign firms that use Cuban property that
was expropriated by the Castro regime. U.S. supporters of the Cuba embargo have
been critical of Canadian mining companies and hotel chains that do business with
the island nation. Canadians, who are sensitive to being perceived as America’s
“junior partner,” object that the law amounts to the United States forcing its foreign
and commercial policies upon other countries. In 2003, after the Castro government
handed down Draconian prison terms to several political dissidents, Ottawa
expressed official disapproval.35
The International Criminal Court (ICC) is another issue on which the two
countries differ. Canada has long been a leading advocate of the U.N.-sponsored
tribunal, while some U.S. policymakers have opposed U.S. participation on the
grounds that it might make U.S. military personnel vulnerable to politically
motivated prosecution by hostile regimes. In May 2002, the Bush administration
declared that the United States would not support the ICC; the same day, Foreign
Minister Graham declared that he was “extremely disappointed” with the U.S.
33 “Well, Maybe ... .” Economist. September 28, 2002. “PM Scolds McCallum On
Canada’s Role In Iraq.” By Shawn McCarthy and Daniel Leblanc. Globe and Mail.
January 16, 2003. “Bravos Greet Chrétien.” By Tim Harper. Toronto Star. March 18,
2003.
34 “Powell Says Canada and US ‘Inseparable’ Friends Despite Iraq Tiff.” By Robert Russo.
Canadian Press. April 15, 2003.
35 “Chrétien Admits Having ‘A Problem’ With Cuba, But Will Maintain Pressure.” Agence
France-Presse. April 10, 2003.

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CRS-14
decision. In a U.N. speech four months later, Graham faulted the United States “for
its ‘ad hoc and unilateral pursuit’ of the prosecution of crimes against humanity.”36
In the wake of the attacks on New York and Washington, U.S.-Canadian
relations came to the fore. In particular, the issue of U.S.-Canada border security was
brought into sharp focus. The issue first became a matter of urgent concern in
December 1999, when U.S. border officials, acting on a tip from Canadian
authorities, stopped Ahmed Ressam at the U.S.-Canadian border as he was
attempting to smuggle explosives into the United States; it was later discovered that
Ressam had planned to bomb the Los Angeles airport, and that he had received
terrorist training from Al-Qaeda in Afghanistan.
Despite the fact that none of the 19 September 11 highjackers entered from
Canada, the attacks sparked renewed debate over Canadian laws regarding the
treatment of immigrants seeking refugee status or political asylum. By February
2002, Ottawa had already made “steps to tighten immigration and refugee policies,
including more rigorous screening of people who claim refugee status and stepped
up detentions and deportations of claimants suspected of being security risks.”37
Some American policymakers pointed to the Ressam case as proof that the
United States must tighten its borders with Canada. Skeptics, however, note that
such measures might seriously impede commerce by creating long delays at border
crossings, and that determined terrorists and criminals would at best be
inconvenienced, not stopped, in traversing the two countries’ 5,500-mile border.
About 70% of U.S.-Canada merchandise trade crosses the border by truck; many of
these shipments are “just-in-time” deliveries; their delay at border crossings can
seriously disrupt manufacturing in the United States and Canada.38 Both sides have
strong incentives to strengthen security but keep goods flowing.
Since the September 11, 2001, attacks, Ottawa and Washington have taken
numerous steps, separately and jointly, to improve border control. In December
2001, they signed the Smart Border declaration that aims at improving security and
efficiency at border crossings; the agreement lays out a 30-point (since increased to
32-point) list of areas of joint activity, ranging from pre-clearance of goods (the
FAST program) and people (NEXUS), to biometric identifiers, to infrastructure
improvements. The cooperation covers crossings by air, land, and sea traffic. In
December 2002, the two nations signed the Safe Third Country agreement, which
will permit coordination of refugee and asylum policy.
Ottawa and Washington are currently working to resolve issues surrounding the
Western Hemisphere Travel Initiative, a provision of a 2004 U.S. law that will
36 “Canada Raps U.S. Rejection Of World Criminal Court.” By David Ljunggren. Reuters.
May 6, 2002. “U.S. Rift With Allies On World Court Widens.” By Julia Preston. New
York Times. September 10, 2002.
37 “Al-Qaida In Canada?” CBSNEWS.com. April 25, 2002. “Canada Alters Security
Policy To Ease Concerns of U.S.” By Clifford Krauss. New York Times. February 18,
2002.
38 “Delays at the Canadian Border Eat Up Trade.” By John Stark. AP. February 1, 2003.

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require travelers passing between the two countries to present a passport, or an
equivalent document, at the border — possibly as early January 2008. Travel-
dependent businesses, particularly in Canada, are concerned that the cost of acquiring
either a passport (only about 25% of Americans and 40% of Canadians hold
passports) or similar ID would inhibit travel; other critics are worried that the
requirement could indirectly discourage Asian and European investment in both
countries. Canadian officials say they are hoping that the United States can agree to
a requirement that travelers display an alternative document that is secure,
inexpensive, and would be carried anyway — for example, a driver’s license
containing enhanced biometric information.39
Canada’s custom service stepped up the purchase of high-tech X-ray equipment,
and U.S. and Canadian customs agents are working together, inspecting containers
at several Canadian and U.S. seaports. Border security personnel levels have also
been beefed up, and Integrated Border Enforcement Teams have been established in
high-priority regions. Canada also has set up an Air Transport Security Authority,
which, among other activities, is responsible for pre-board screening.
The Martin government in December 2004 created a Department of Public
Safety and Emergency Preparedness, a counterpart to the U.S. Department of
Security (DHS), and a Border Services Agency. Recent Canadian federal budgets
have contained new monies for security-related priorities such as intelligence,
maritime and cyber security, threat assessment, and emergency response.
Canada has taken other actions beyond the realm of border security, including
freezing terrorists’ assets, broadening the scope of terrorist activities punishable by
law, extending police investigative powers, introducing legislation that would put
restraints on fund-raising activities by extremist organizations, expanding
cooperation between the FBI and the Royal Canadian Mounted Police, and increasing
outlays for countering nuclear, biological, and chemical weapons attacks.
In early June 2006, Canadian tactical police squads conducted a series of raids
in the Toronto area, arresting 17 individuals. The arrests were made in accordance
with the Anti-Terrorism Act passed late in 2001. The group reportedly had discussed
attacking several possible targets, including power plants, a Canadian military base,
the Toronto Stock Exchange, and other prominent sites. The plan involved having
some members of the group detonate truck bombs while another group reportedly
would storm the parliament buildings and capture hostages. Prime Minister Harper
was said to have been a key target; he allegedly was to be beheaded if he failed to
order a withdrawal of Canadian troops from Afghanistan, as well as the release of
jihadist captives. Most of the 17 were men and youths in their teens or early 20s. All
were either Canadian-born or had immigrated to the country at an early age. The
suspects had a variety of backgrounds; some were students, some held jobs, and
some were unemployed. Many were from middle class backgrounds, and few of
them had criminal records.
39 “A Tightening Border Has Canadians Worried.” By Ian Austen. New York Times. April
15, 2006.

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U.S. Secretary of State Condeelezza Rice praised the police operation as “a very
great success,” and other U.S. officials claimed that the arrests proved that Canada’s
law enforcement and intelligence services are doing an excellent job of ensuring
security. An FBI spokesperson said there was “no imminent threat” to the United
States stemming from the Toronto operation. However, some U.S. Members of
Congress claimed that Canada maintains lax immigration and asylum policies, and
that the arrests demonstrated that stricter controls over the U.S.-Canada border are
in order. The incident prompted close consultations between U.S. and Canadian
policymakers and law enforcement officials. The operation has not arisen as a
domestic political issue in Canada, but it has renewed debate about Canada’s
immigration practices, its commitment to a multicultural environment, its security
measures, and the presence of its troops in Afghanistan.40
During a March 2005 summit meeting in Texas, President Bush, Mexican
President Vincente Fox, and Prime Minister Martin agreed to a Security and
Prosperity Partnership of North America. The initiative is intended to provide
security for the continent against criminal activities and external threats, while easing
the flow of goods and travelers who cross the borders between the three countries.
It also aims to improve prosperity in all three countries through promoting
cooperation in a number of areas, including health, food safety, environmental
protection, transportation, energy, and financial services. Government officials from
all three countries meet in working groups to discuss was to eliminate duplication
and harmonize regulations. Presidents Bush and Fox, joined by Harper, met again
in March 2006 and agreed to five priority areas: 1) competitiveness and regulatory
cooperation, 2) emergency management, 3) avian and pandemic influenza, 4) energy
security, and 5) smart, secure borders. In February 2007, cabinet officials from the
three governments met in Ottawa to review progress and plan the next phase of
cooperation.41
Economic and Trade Issues
Canada’s economy in recent years has proven itself to be resilient. Despite
afflictions caused by what the Globe and Mail referred to as “the Four Horsemen of
the Apocalypse — BSE, forest fires/hurricane, SARS, and a massive blackout,”
Canada’s GDP grew by 3.3% in 2004 and by 2.9% in 2005 and 2.7% in 2006.
Annual inflation in 2006 stood at 2.0%, buoyed up in part by higher petroleum and
natural gas prices. The April 2007 unemployment rate was 6.1% — the lowest rate
in 33 years.42
40 “Canada’s Terror Sweep Grabs Spotlight in U.S.” Canadian Press. June 3, 2006. “U.S.
Praises Canada On Terror Arrests But Critics Blast Immigration Laws.” Canadian Press.
June 4, 2006. “Terrorists In Toronto: Is Canada Safe? Are We?” By Tanya Primiani and
Christopher Sands. CSIS Commentary. Center for Strategic and International Studies. June
20, 2006. “The Toronto Terror Plot.” Economist. June 10, 2006.
41 See SPP website: [http://www.spp.gov/].
42 “Federal Budget 2004.” Globe and Mail. March 24, 2004. Economic data are from wire
service reports and from “The Economy In Brief, April 2007.” Website of Department of
Finance Canada. Updated April 11, 2007. [http://www.fin.gc.ca/ECONBR/ecbr07-

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Although the Canadian economy overall is in healthy condition, prosperity has
been somewhat uneven over the past decade. British Columbia suffered from Asia’s
financial turmoil, and the prairie provinces from the loss of livestock export revenues
caused by the BSE scare. In addition to SARS, Ontario was pummeled by the
August 2003 blackout. The economy of oil-rich Alberta, on the other hand, has
benefitted significantly from higher petroleum prices.43 U.S.-Canadian interest rate
gaps, along with strong oil prices and sound fiscal policies, boosted the value of the
Canadian dollar (known as the “loonie”) 20% against the U.S. dollar after 2003.
Some economists are concerned that this may affect Canada’s export sector, which
over the past two decades has increasingly represented a significant share of the
economy. In 2006, Canada enjoyed a current account surplus of $21.5 billion.
In February 2003, Chinese officials announced the outbreak of the severe acute
respiratory syndrome (SARS) and in March, it was discovered that a traveler had
carried the disease to Toronto. Eventually, about 150 Canadians contracted the
illness, and 23 died. Canadian health authorities made strenuous efforts to contain
the sickness, and in April, the World Health Organization lifted the travel advisory
it had placed on Toronto.44 The Martin government announced the establishment of
a Canadian Public Health Agency, which will play a role similar to that of the U.S.
Centers for Disease Control and Prevention. Many public heath officials on both
sides of the border are worried over the possible spread of avian influenza. Bird flu
has a much higher mortality rate and is a matter of serious concern to
epidemiologists. The security of the two countries’ food supplies is another area that
policymakers continue to monitor.
Canada is the United States’ largest supplier of energy — including oil,
uranium, natural gas, and electricity — and the energy relationship has been growing.
Canada is the world’s seventh largest petroleum producer, and its reserves are
believed by some to be second only to those of Saudi Arabia; Canada’s sources of oil
include traditional and offshore wells and, increasingly, Alberta’s tar sands. Canada
provides 17% of U.S. oil imports and supplies 18% of U.S. natural gas demand.
Canada is particularly valued because it is reliable source of energy, a key factor
contributing to U.S. economic security — it is not a member of OPEC. The two
countries are cooperating on the development of pipeline construction projects.
China recently has begun to show increasing interest in Canada’s oil sector, a
development that is believed to have “caused some consternation in Washington.”
Canada also a net exporter of electricity to the United States, and the North American
electricity grid is closely interconnected. Following the August 2003 blackout, the
42 (...continued)
04e.html]
43 “Alberta Gallops Ahead, As Eastern Canada Struggles.” By Clifford Krauss. New York
Times. March 28, 2006.
44 “A Model of Epidemic Control.” David Brown. Washington Post. May 3, 2003.
“SARS: Fear and Loathing in Toronto.” Jonathon Gatehouse. Maclean’s. May 5, 2003.
“Canada Says SARS Has Infected Its Economy.” Gilbert Le Gras. Reuters. April 29, 2003.

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two sides have worked to develop improved standards for electricity transmission
reliability.45
Bilateral Trade Issues. The United States and Canada enjoy the largest
bilateral commercial relationship in the world; the U.S. State Department estimates
total two-way trade at $1.4 billion per day. Many analysts believe that the sharp
differences of the past, over diverse items ranging from automobiles to peanut butter,
are not as prominent today. A likely reason for this is the conclusion of two
important bilateral treaties: the 1988 U.S.-Canada Free Trade Agreement and the
1993 North American Free Trade Agreement. These documents, along with major
revisions in the Uruguay Round of the General Agreement on Tariffs and Trade and
the creation of the World Trade Organization (WTO), contained mutual concessions
on commercial trade barriers, and, more importantly perhaps, established or
improved upon mechanisms for resolving disputes.46
Nevertheless, several trade issues — some old, some new — have yet to be
completely resolved. Many of these disputes involve long-running battles over
agricultural commodities or natural resources, including softwood lumber and farm
goods. Some analysts attribute the longevity of these conflicts to the inherent
incompatibility of the two countries’ different natural resource and agricultural
programs, others to the political sensitivity of the commodities under negotiation.
This was particularly true of the long-running dispute over softwood lumber.
A 1996 agreement restricting Canadian lumber exports to the United States expired
in March 2001. Shortly thereafter, the U.S. Commerce Department launched
countervailing duty and anti-dumping investigations; in May 2002, the International
Trade Commission (ITC) found that Canadian imports threatened to injure U.S.
industry, and Commerce applied 27% (later reduced to 21%) duties on Canadian
softwood. Canada challenged the agency decisions under NAFTA and in the WTO.
In August 2005, NAFTA affirmed earlier NAFTA decisions resulting in an ITC “no
threat” determination. Canadians asserted that the United States should lift its tariffs
on softwood and refund some C$5 billion in estimated lumber duties, which might
otherwise be distributed to U.S. lumber producers under the Byrd Amendment. The
Bush Administration maintained, however, that the ITC “no threat” determination
(issued in September 2004) was superseded by a November 2004 “threat of injury”
determination issued by the ITC in response to a separate WTO decision. Further
complications arose later in August when a WTO panel preliminarily ruled that the
November threat determination was not in violation of WTO rules. Canada has
challenged implementation of the November ITC determination in U.S. court.
Finally, on April 26, 2006, the two sides announced that they had struck a tentative
45 “Canada — Natural Resources.” Jane’s Sentinel Security Assessment. June 13, 2005.
“Canada: Challenges Remain In Oil Sector.” Oxford Analytica. February 16, 2005. The
Canada-U.S. Energy Relationship. Updated February 23, 2007. Canadian Embassy website:
[http://www.dfait-maeci.gc.ca/can-am/washington/trade_and_investment/energy-en.asp].
U.S. Energy Information Administration. Country Analysis Briefs: Canada. Available
online at [http://www.eia.doe.gov/emeu/cabs/Canada/Background.html].
46 “Current State of U.S.-Canada Economic Relations.” By Sidney Weintraub. American
Review of Canadian Studies. Winter, 1994.

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seven-year agreement on softwood. As part of a complicated formula, the United
States will allow unlimited imports of Canadian timber when market prices remain
above a specified level; when prices fall below that level, Canada will impose export
taxes. In addition, the United States will return to Canada a large majority of the
duties it had collected.47
In May 2003, a cow in the Canadian province of Alberta was discovered to be
infected with bovine spongiform encephalopathy (BSE, or “mad cow” disease). The
United States banned importation of Canadian cattle or cattle products. The
Canadians quarantined several ranches and destroyed and tested several thousand
animals. In September 2003, the United States began permitting importation of live
animals young enough to be at low risk of having the disease. In December,
however, a Canadian-born cow in Washington State was discovered to have BSE,
and most countries banned imports of U.S. beef. In January 2005, two new BSE-
infected animals were found in Canada. In early March, a U.S. federal judge blocked
a USDA ruling that would have permitted more Canadian cattle to enter the United
States, and the Senate approved a White House-opposed resolution that would
overturn the rule. A U.S. appeals court reversed the blocked ruling in July,
permitting Canadian cattle to enter the United States. The two countries have been
cooperating bilaterally and in international organizations to develop consistent
approaches to animal health and food safety regulations. On May 2, 2007, a ninth
Canadian animal was discovered to be infected with BSE.48
Regardless of the occasional rancor of U.S.-Canadian trade disputes, there is
little danger that such conflicts would ever escalate into a full-blown trade war. The
Canadians in particular have a strong incentive to resolve feuds and maintain close
trade ties with the United States. The Canadian economy is heavily export-oriented,
and its largest trading partner by far is the United States, takes more than 80% of
Canada’s exports and is the source of nearly two-thirds of its imports. And although
sharp disputes still plague the enormous bilateral trade relationship, it is important
to bear in mind that such disputes normally affect only 2% of trade.
Environmental Issues
The United States and Canada, which share a common border that stretches
5,500 miles, cooperate extensively on environmental matters. Since they signed the
Boundary Waters Treaty in 1909, the two countries have, through the International
Joint Commission, worked together on protecting and maintaining border waterways,
especially the Great Lakes. In 1978, the two signed the Great Lakes Water Quality
Agreement.
47 “U.S. Gets a Lift In Lumber Fight With Canada.” By Ian Austen and Clifford Krauss.
New York Times. August 31, 2005. “Conservative Government Wins Softwood Truce.”
Globe and Mail. April 28, 2006.
48 For further information, see CRS Report RS22345, BSE (“Mad Cow Disease”): A Brief
Overview. By Geoffrey S. Becker. “Mad Cow Case Is Found In Canada.” New York Times.
April 17, 2006.

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The long feud over Pacific salmon — one of the more prominent bilateral
disputes in recent years — had both environmental and commercial aspects. Canada
contended that American fishermen were taking more than their equitable share of
the migratory fish; the United States, on the other hand, maintained that its fishing
was in accordance with the 1985 Pacific Salmon Treaty and with sound conservation
practices. Talks resumed in 1997, and the two sides finally reached an accord in
1999; both countries are monitoring implementation of the agreement.49
One area of contention concerns the diversion of the naturally-overflowing
waters of Devils Lake, in North Dakota. For flood-control purposes, the state has
constructed a channel that diverts excess water ultimately to the Red River, which
flows northward. Manitobans have objected to this solution, arguing that the lake
water contains toxic chemicals from agricultural runoff; they are also concerned that
the introduction of alien species of aquatic life may disturb the ecological balance
and endanger fishing in Lake Winnipeg, into which the Red River empties. The
Canadian government has requested that the case be referred to the International Joint
Commission. In April 2006, after meetings between senior environmental officials
of the two governments, the United States agreed to install a permanent filtration
system at the Devils Lake outlet.50
Other environmental problems the two countries have dealt with in recent years
include secondary wastewater treatment, control of predator fish introduced into the
Lakes by ocean-going vessels, and sustainability of the St. Lawrence Seaway. In
addition, the United States and Canada concluded a hazardous waste trade agreement
in 1986; more recently, transboundary shipments of solid waste, particularly from
Ontario to Ohio, Michigan, and other U.S. states, have been under review. The two
countries have continued the long-standing debate over the ecological impact of
possible development in Alaska’s Arctic National Wildlife Refuge. Finally, the two
sides continue to monitor the progress of the 1991 Canada-United States Air Quality
Agreement. On January 7, 2003, Canadian and U.S. officials announced a new Joint
Border Air Quality Strategy; under the initiative, pilot programs to reduce air
pollution will be developed involving stakeholders at the state, provincial and local
levels.
49 CRS Report RL30234, The Pacific Salmon Treaty: The 1999 Agreement In Historical
Perspective, by Eugene H. Buck.
50 “Devil Down South.” The Economist. July 16, 2005. “Little-Known White House Office
Negotiates Devils Lake Dispute.” AP. September 5, 2005. “U.S. Promises Devils Lake
Filter, But Water May Flow Before Installation.” Canadian Press. April 25, 2006.

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CRS-21
Border Security Issues51
Issue Definition. Border security has emerged as an area of public concern,
particularly after the September 11, 2001 terrorist attacks. Since the terrorist attacks,
the United States and Canada have been striving to balance adequate border security
with the facilitation of legitimate cross-border travel and commerce. As Congress
passes legislation to enhance border security and the Administration puts into place
procedures to tighten border enforcement, concerns persist with respect to the
potential for terrorists to exploit the border. Congress previously passed significant
border security-related legislation as discussed below, and issues pertaining to the
oversight of such legislation and their possible policy implications for U.S.-Canada
border relations continue to be of interest to Congress. These issues include (1) the
new requirement that Canadian nationals, along with other foreign nationals from
countries in the Western Hemisphere, will soon need a travel document to enter the
United States; and (2) improvements to infrastructure at the border and ports of entry.
Background and Analysis. Both the United States and Canada have taken
various measures to better secure the shared border while simultaneously preventing
disruption to the flow of people and trade. While such efforts date back to 1995,
recent efforts include a 30-point plan, commonly referred to as the “Smart Border
Accord” (signed on December 12, 2001). The declaration includes a 30-point (now
32-point) plan to secure the border and facilitate the flow of low-risk travelers and
goods through coordinated law enforcement operations, intelligence sharing,
infrastructure improvements, improvement of compatible immigration databases,
visa policy coordination, common biometric identifiers in travel documents,
prescreening of air passengers, joint passenger analysis units, and improved
processing of refugee and asylum claims, among other things. Previously, on
December 3, 2001 the two countries signed a joint statement of cooperation on
border security and migration that focuses on detection and prosecution of security
threats, the disruption of illegal migration, and the efficient management of legitimate
travel. Other efforts to increase border security between the U.S. and Canadian
government include the 1999 Canada-U.S. Partnership Forum (CUSP) and the
February 24, 1995, joint accord, Our Shared Border.
Congress also took action to better secure the border by passing the USA
PATRIOT Act (P.L. 107-56). The act authorized the Attorney General to triple the
number of border patrol personnel and immigration inspectors along the northern
border and authorized $50 million for the former INS to make technological
improvements and to acquire additional equipment for the northern border. The
Enhanced Border Security and Visa Reform Act of 2002 (the Border Security Act;
P.L. 107-173) similarly authorized additional personnel and technological and
infrastructure improvements at the borders. The Border Security Act contained a
provision that required the development of technology to track the entry and exit of
foreign nationals (referred to as the US-VISIT program). Both the USA PATRIOT
Act and the Border Security Act required travel documents to be tamper resistant and
contain a biometric identifier that is unique to the card holder.
51 Prepared by Blas Nuñez-Neto, Analyst in Domestic Security, Domestic Social Policy
Division.

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Western Hemisphere Travel Initiative. More recently, Congress passed
legislation that requires the Secretary of Homeland Security, in consultation with the
Secretary of State, to develop and implement a plan as expeditiously as possible to
require a passport or other document, or combination of documents, “deemed by the
Secretary of Homeland Security to be sufficient to denote identity and citizenship,”
for all travelers entering the United States. Commonly referred to as the Western
Hemisphere Travel Initiative (WHTI), this provision in the Intelligence Reform and
Terrorism Prevention Act of 2004 (P.L. 108-458) would have required American and
Canadian nationals (and other foreign nationals) to present some form of approved
travel document to enter the United States by January 1, 2008. The DHS
Appropriations Act of fiscal year (FY) 2007 included language modifying the WHTI
deadlines in P.L. 108-458. The new deadline for implementation of WHTI is the
earlier of the following two dates: June 1, 2009; or, three months after the Secretaries
of Homeland Security and State certify that a number of implementation
requirements have been met. On November 24, 2006, DHS published a Final Rule
concerning the acceptable WHTI travel documents for entry into the United States
through airports. The DHS final rule required all U.S. citizens and nonimmigrant
aliens from Canada, Bermuda, and Mexico to present a valid passport in order to be
allowed entry into the United States at airports starting on January 23, 2007.
The WHTI has fostered much debate in Canada as well as the United States.
According to published reports, only about 23% of Americans and 40% of Canadians
own passports. These statistics have led some observers to voice concerns that the
increased documentation that will be required at the border may suppress travel
between the two nations. The Department of Homeland Security (DHS) and the
Department of State (DOS) recently announced that the vehicle for WHTI
documentation would be known as the People Access Security Service (PASS). The
PASS card would be credit card sized, cost less than a passport, contain a biometric,
and provide documentation of citizenship. Issues surrounding the implementation
and oversight of WHTI will likely continue to be of concern for the 110th Congress.
Current Coordination Between the Two Countries. The U.S. and
Canadian governments continue to implement the provisions in the Smart Border
Accord. For example, both countries have expanded the NEXUS program to eleven
land border crossings. Both countries continue to explore the feasibility of creating
additional joint facilities at agreed upon ports of entry and sharing of information
through interoperable technology. Additionally, both countries have begun to take
steps to share passenger information on high-risk travelers en route to either country
through a risk-scoring scheme that was jointly developed; and in 2004, an automated
process to share “lookout” data between both countries was developed. However,
negotiations between the U.S. and Canada over two proposed pre-clearance pilot
programs were reportedly recently abandoned by DHS due to concerns about
Canadian legal restrictions on Customs and Border Protection officers’ authority to
fingerprint individuals who refuse inspection.

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CRS-23
Questions.
1. When fully implemented, the WHTI will make significant changes to the current
documentary requirements needed to enter the United States. What steps will the
Canadian government be taking to ensure that Canadian citizens are aware of these
changes? Will the Canadian government consider imposing similar requirements on
American citizens entering Canada?
2. In recent years, a number of different technologies, including the US-VISIT
program, have been implemented at northern ports of entry. With the advent of the
WHTI, the demand for improved infrastructure will continue to be critical. What
measures have been taken by the Canadian government to mitigate the impact of such
a demand at its border crossings?
3. The Smart Border Accord calls on the two countries to develop approaches to
move customs and immigration inspection activities away from the border. While
such an approach is already present at Canadian airports, there has been interest in
expanding it to areas away from land ports of entry. What is the Canadian
government doing to facilitate this objective? What was the reason that negotiations
over the land-border pilot program failed? Are there any potential solutions for the
problems that led to the pre-clearance pilots to be scrapped?

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CRS-24
Border Security: Trade and Commercial Concerns52
Issue Definition. The aftermath of the terrorist attacks on the United States
on September 11, 2001 increased scrutiny of the Canadian border as a possible point
of entry for terrorists or for weapons of mass destruction. The potential for economic
disruption that closing the border would cause has spurred cooperation between the
United States and Canada to improve border security in an atmosphere conducive
to continued and expanded commerce. This brief details commercial considerations
in U.S.-Canadian border security discussions.
Background. The issue of border security is linked to the increased
integration of the United States and Canadian economies. This integration has been
aided by several trade agreements, culminating in the North American Free Trade
Agreement of 1994 (NAFTA). These trade agreements not only eliminated tariff
barriers between the two nations, but also reoriented Canada’s industrial structure
towards the United States. Industries in each country are now able to produce goods
for a larger continent-wide market, and productivity has increased through increased
economies of scale and specialization. Such specialization led to increased bilateral
trade, much of it in intermediate products. This integration has, in turn, led to
industrial practices such as “just in time” parts procurement that depend on a
relatively open border.
The volume of economic activity across the border underscores the extent of
economic integration between the United States and Canada. Today, the United
States and Canada have the largest trading relationship in the world with over $1.5
billion per day in goods and services crossing the border in 2006. Canada purchases
22% of U.S. exports, a share larger than Japan and the entire European Union. The
United States purchased 79% of Canadian goods exports in 2006, a sum that
represented approximately 25% of Canadian GDP. The Ambassador Bridge that
links Detroit, Michigan and Windsor, Ontario is the largest trade link in the world
with more than 7,000 daily truck crossings totaling more than $120 billion per year.
Action Programs and Initiatives. New initiatives to increase security of
the border without impeding the flow of commerce are being developed under the
Security and Prosperity Partnership (SPP), which was launched by the leaders of the
United States, Canada, and Mexico in March 2005. Many of these initiatives expand
upon previous bilateral efforts by the United States and Canada, including the Smart
Border Action Plan of December 2001 consisting of 4 pillars: the secure flow of
people, the secure flow of goods, a secure infrastructure, and coordinated
enforcement and information sharing. The pillar concerned with the flow of goods
consists of initiatives on harmonized commercial processing, supply chain
management, clearance away from the border, joint or shared facilities, enhancement
of information sharing, and infrastructure improvements.
The U.S. Bureau of Customs and Border Protection’s Customs-Trade
Partnership Against Terrorism (C-TPAT) and the Canadian Border Security
52 Prepared by Ian F. Fergusson, Specialist in International Trade and Finance, Foreign
Affairs, Defense, and Trade Division.

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CRS-25
Agency’s Partners in Protection Program are supply-chain security initiatives in
which companies undertake audit-based compliance measures to enhance security
along the supply chain. Goods shipped under these programs are eligible for
preclearance away from the border. The SPP calls for the two programs to be
harmonized within two years.
The Free and Secure Trade (FAST) is a joint harmonized commercial
processing initiative at 21 border locations (as of April 2006), which provides for
dedicated inspection lanes to goods carried by approved lower-risk shippers, to
goods purchased from pre-authorized importers such as C-TPAT, and to goods
transported by pre-authorized drivers and carriers. A complementary program
(NEXUS) to expedite the secure movement of people has also been established for
frequent travelers who have undergone security clearances on both sides of the
border.
Another objective of the border security efforts has been the screening of goods
entering North America. The ongoing U.S. Container Security Initiative (CSI) is
designed to pre-screen high risk containers entering the United States at overseas
ports of departure. Under the SPP, the three countries will develop common
screening methods and technology, establish criteria to identify high risk cargo, and
harmonize cargo information technology. Preclearance and prescreening is a possible
first step in the creation of a North American security perimeter, a concept whereby
clearance occurs at the first point of entrance rather than at the final border.
Status. Land preclearance away from the border by U.S. and Canadian customs
agents working in each other’s territory is an issue that has proven controversial,
primarily due to concerns about sovereignty. Joint U.S.-Canada customs teams
already operate in the CSI ports of Halifax, Montreal, and Vancouver, as well as
Newark and Seattle-Tacoma, although the visiting agent serves only an advisory role
with no enforcement powers. The SPP calls for negotiations on a U.S.-Canada
preclearance agreement with implementation of two pilot sites, the Peace Bridge
(Buffalo, NY-Fort Erie, ON) and the Thousand Islands Bridge (Alexandria Bay, NY-
Landsdowne, ON). However, these negotiations were suspended on April 26, 2007,
over the issue of fingerprinting Canadian citizens crossing the border. Canadian law
does not provide for fingerprinting Canadian citizens that have not been charged with
a crime.
A second issue is the ability of the transportation infrastructure to cope with
increased security measures. The aging condition and limited capacity of the land
border infrastructure preceded the terrorist attacks. For example, the Ambassador
Bridge and the Detroit-Windsor Tunnel, which together carry 25% of total U.S.-
Canada cross-border traffic, both opened in 1930. Approaches to the crossings, often
city streets, have been criticized as inadequate to the commercial needs of the 21st
century. This issue affects the efficient implementation of security measures. The
FAST system provides for dedicated lanes at land border ports for expedited
preclearance. However, these lanes will not save time if the FAST participant cannot
access this lane due to congestion or delays at the points of access. The SPP
completed a pilot program that attained a 25% improvement in border crossing times
at the Detroit-Windsor gateway in December 2005, yet the aging and adequacy of the
border infrastructure may affect whether such improvements are sustainable. A

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CRS-26
binational partnership to construct additional crossing capacity at the Detroit-
Windsor gateway is engaged in technical and environmental assessments of potential
new crossing sites; however, the opening of new bridge or tunnel capacity is not
envisioned before 2013.
Questions.
1. Is Canada doing enough to secure the border against the transit of terrorists or
weapons of mass destruction? Do Canadians think that the United States has placed
too much emphasis on securing the northern border against terrorists to the detriment
of efficient trade relations?
2. Is Canadian sovereignty threatened by having U.S. customs agents with
enforcement powers active on Canadian soil? Do you believe the fingerprinting issue
is a make-or-break issue concerning land preclearance? What are the elements of
sovereignty that most concern you? Is legislative action necessary to permit this
cooperation?
3. Are Canadian business and government officials concerned that another terrorist-
related border shutdown could cause the relocation of business to the United States
or dampen the attractiveness of Canada as a recipient of foreign investment?
4. Who should pay for the replacement or improvement of aging border
infrastructure? Should business pick up part of the tab?

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CRS-27
Immigration and Refugee Policies53
Issue Definition. Should the United States be concerned that Canada’s
immigration and refugee laws and policies pose a threat to its national security? If
so, what has been the impact of the implementation of the 2002 Agreement designed
to require many potential refugees to present their claims in their first safe country
of entry?
Background and Analysis. Although Canada does not have country or
worldwide quotas, the government does establish annual targets. In 2005 and 2006,
Canada accepted approximately 260,000 and 250,000 new permanent residents,
respectively. An additional 100,000 persons were accepted annually as temporary
residents. Many of these persons were unskilled workers or students. New arrivals
as permanent and temporary residents total more than 1% of the entire Canadian
population. Asian countries, such as China, India, Pakistan, and the Philippines, are
heavily represented at the top of the list of countries from which Canada’s
immigrants come, but no one nation dominates. Iran is the country closest to the
Middle East that recently has been in the top ten. Security checks are conducted by
federal authorities. Because Quebec, however, has an agreement with the federal
government that allows it to select immigrants intending to settle in that province,
Quebec’s system adds a second screening process for its applicants. Quebec also has
addressed security concerns by adjusting its programs for recruiting immigrants. The
federal government and Quebec use points systems for assessing independent
applicants that recently were changed to attract more highly skilled and educated
immigrants. Canada already accepts a much higher percentage of independent
immigrants and a much lower percentage of family class immigrants than does the
United States.
One notable feature of Canadian immigration is that nearly three-quarters of the
persons accepted settle in the three largest cities: Toronto, Montreal, and Vancouver.
This tendency, combined with the high rate of immigration, has raised some concerns
about destructive “diaspora nationalism” emerging in these concentrated
communities. The 2005 bombings in London, which apparently were conducted by
persons who had lived most of their lives in the United Kingdom, as well as the 2006
arrests of a group of Muslims who had been raised in Canada and had planned attacks
in southern Ontario have fueled this concern. However, this problem is not unique
to Canada and opposition to immigration has not been voiced nearly as loudly or as
forcefully as it recently has been in parts of Western Europe. In fact, immigration
still generally is viewed as an opportunity for growth in what would otherwise be a
declining population.
The Canadian policy for asylum applicants is a far more contentious issue
within the country than immigration, not so much for its negative effects within
Canada, but because it generally is believed to invite fraud and abuse. Between 1989
and 2004, an average of about 30,000 refugee claims were presented annually. In
2001, this number rose to about 45,000 before falling back to approximately 39,000
53 Prepared by Stephen F. Clarke, Senior Foreign Law Specialist, Western Law Division,
Law Library of Congress.

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CRS-28
in 2002. In 2006, the number of refugees was approximately 32,500 and about 47%
of the applications were accepted. This number is higher than the corresponding
figure in the United States. Of particular concern to Canadian officials prior to 2005
was the fact that approximately 40% of the overall total claimants and some 70% of
port-of-entry claimants had entered Canada through the United States. There was
significant evidence that illegal migrants were abusing the U.S. Non-Immigrant Visa
system to access North America and the Canadian asylum system to stay in Canada.
Canada is attractive to these persons because it detains few undocumented refugee
claimants pending independent identification, and because the federal and provincial
governments grant immediate assistance to applicants who have yet to substantiate
their claims. The result has been that the majority of Canada’s refugee claimants
arrive in Canada without any documents and are allowed free entry into the country,
even though it is clear that many disposed of the documents they had before coming
to Canada. While Canadian officials do not routinely detain undocumented arrivals,
Canada has created new facilities for the detention for persons who may be viewed
as posing a security or flight risk.
A number of U.S. television programs that have portrayed the Canadian refugee
system as extremely liberal have received considerable attention in Canada. Most
of these segments have mentioned four high-profile cases of terrorists from the
Middle East who entered Canada as refugees with the intention of launching attacks
against U.S. targets. Among these examples was the case of Ahmed Ressam, who
was arrested four years ago while crossing the border with explosives that he planned
to set off at Los Angeles International Airport. Also highlighted have been the cases
of suspected terrorists who have remained in the country for many years while
fighting their way through a very lengthy appeal process. In 2002, the Supreme
Court of Canada ruled that two persons linked to terrorist organizations could be
deported to countries where they might face torture when security concerns so
require. One of these individuals was returned to Iran, but the other has continued
fighting his extradition to Sri Lanka.
American media coverage of the Canadian refugee system has elicited a wide
range of responses. While a number of commentators agree that the United States
has good reason to fear that Canada’s refugee policies can be easily employed by
terrorists to enter North America, others contend that terrorists are more likely to use
other means to enter both Canada and the United States. Many analysts point out that
there is no evidence that any of the September 11 hijackers had a Canadian
connection, and that the refugee system essentially has been used for “queue
jumping” by enterprising persons who might not qualify under Canada’s immigration
laws. Proponents of this view question how great the security risk to the United
States can be if a significant number of claimants are coming to Canada from this
country.
In December 2002, the United States and Canada signed a Safe Third Country
Agreement to allow immigration officials in both countries to require most persons
seeking asylum at a border crossing to go back and present the claims in their
respective countries. This type of Agreement had been called for in the Action Plan
to the Smart Border Declaration signed in the aftermath of the September 11 attacks
in the United States. Implementation of the Agreement was delayed by the lengthy

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CRS-29
and complicated process for drafting and approving appropriate regulations in the
United States, but it finally went into force at the beginning of 2005.
Although the Safe Third Country Agreement aims to limit asylum shopping and
the filing of multiple claims, it is limited in scope and subject to several major
exceptions. One major limitation is that it only covers the presentation of claims at
land border crossings. Airport and marine facilities are not covered because, as the
drafters of the Agreement have explained, authorities know that persons are in the
other country only in instances where they are seen crossing the border. However,
critics contend that this will simply encourage a would-be refugee claimant to sneak
into his or her country of choice illegally or fly into a country of choice in order to
present a claim. The Agreement also contains very broad exceptions for relatives,
including relatives of other asylum seekers, and it allows the parties to “examine any
refugee status claim made to that party where it determines that it is in the public
interest to do so.” Because the Safe Third Country Agreement generally is opposed
by refugee groups in both countries, it is likely that internal pressure will be put on
both countries to invoke this reserved right in particular cases.
Statistics show that the number of refugee claims presented at border crossings
in Canada declined by approximately 40% in the first half of 2005, and fewer than
20,000 total claims were filed for the entire year. Although this data would suggest
that the Safe Third County Agreement has had a dramatic impact, it also has been
noted that claims presented at airports, which are not subject to the Agreement,
initially were down about 25%. Thus, the Safe Third Country Agreement appears to
have gone into effect during a period in which the number of refugee claims already
was declining.
In February 2007, a group of refugee organizations challenged the legality of the
Safe Third Country Agreement in the Federal Court of Canada. These groups
contend that the United States does not fully comply with international conventions
and that it has flaws in its system. In the past year, Canada’s courts have struck down
part of the definition of terrorism in the Anti-Terrorism Act and the procedure for
detaining suspected terrorists under the immigration laws.
Status of the Issue. In recent years, Canada’s courts have extended many
rights and protections to refugee claimants, frustrating some attempts by the
government and quasi-judicial officers to eliminate abuses, enforce border security,
and combat terrorism.
Questions.
1. Could the Safe Third Country Agreement have had a broader application and will
it withstand judicial scrutiny on legal, including constitutional, grounds in Canada
and the United States?
2. Are the well-reported cases of terrorists and potential terrorists entering North
America through legal means a sign of a potentially much greater threat?
3. Why do Canadian and United States officials maintain different detention policies
in the case of undocumented refugee claimants?

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CRS-30
Canada and the WTO
Doha Development Agenda54
Issue Definition. A signatory to the Havana Treaty in 1947, Canada was one
of the founding members of the General Agreement on Tariffs and Trade (GATT).
Over the intervening half-century, Canada has become a leading trading economy and
has become increasingly involved in shaping the world trading system through
several rounds of GATT and, since 1994, World Trade Organization (WTO)
negotiations. Canada played a key role in facilitating the 2001 launch of the Doha
Development Round. The Doha Ministerial Declaration set forth objectives in
several negotiating areas such as agriculture, industrial tariffs, services, and the
special needs of developing countries in the international trading system.
Background and Analysis. Canada’s interest in the world trading system
can be partly attributed to its dependence on it. In the half-century since the signing
of the GATT, Canada has developed an export driven economy. In 1947, Canada
exported approximately 2% of its GDP; that figure was 32% of GDP in 2006.
Imports of goods represent 28% of GDP. It was recently estimated that one-third of
Canadian employment is directly dependent on international trade. The United States
is Canada’s largest trading partner, buying 79% of its merchandise exports and
supplying 65% of Canada’s goods imports in 2006. It must be noted, however, that
much of this trade relationship is due more to the Canada-U.S. Free Trade Agreement
of 1988 (which was incorporated into the North American Free Trade Agreement in
1994), than to multilateral trade liberalization. Recently, some commentators have
questioned the influence that Canada has on the WTO negotiations as well as the
relevance of those negotiations to Canadian trade flows.
The Doha Round negotiations are currently stalled. Four years into the
negotiations and after a string of missed deadlines for conclusion of the talks,
agreement on modalities — methodologies such as formulas for tariff reductions by
which negotiations are conducted — still elude the agriculture, industrial market
access, services, and other negotiating groups. The negotiations were suspended in
July 2006 over the lack of progress in the agricultural talks. Informal discussions
have now resumed, but no breakthrough has been made.
Agriculture. Canada and the United States broadly share common objectives
concerning agricultural negotiations begun in early 2000. As the fourth largest
agricultural exporter, Canada seeks to maximize reductions or elimination of trade
distorting domestic support and to improve market access for agricultural products.
Canada also supports the total elimination of export subsidies, which was agreed to
at the Hong Kong Ministerial in 2005. However, Canadian negotiators have resisted
attempts to include state trading enterprises (such as the Canadian Wheat Board) in
parallel negotiations on other trade-distorting export practices. Disciplines on these
entities are a priority for the United States.
54 Prepared by Ian F. Fergusson, Specialist in International Trade and Finance; Foreign
Affairs, Defense, and Trade Division of CRS.

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Non-Agricultural Market Access (NAMA). The United States and Canada
have similar goals for the NAMA talks. Canada’s main objectives in tariff
negotiations are to seek broad-based market access opportunities, especially among
developing countries where tariffs on non-agricultural products remain high. It
favors the reduction of tariff rates through a Swiss formula approach adopted at the
Hong Kong Ministerial. However, it has not advocated specific coefficients in the
talks. It has favored the negotiation of non-tariff barriers and, with the United States,
expanding the use of sectoral tariff elimination agreements, specifically on chemicals,
forestry products, non-ferrous metals, fisheries, fertilizers and energy equipment.
Services. Negotiations on amending the General Agreement on Trade in
Services (GATS) have been in progress since early 2000. Canada’s stated objective
is to target sector requests to maximize the opportunities of Canadian service
exporters, especially small and medium enterprises (SMEs). Canada also is
interested in providing additional labor mobility for its service professionals
overseas. Conversely, Canada is committed not to negotiate on liberalizing the
provision of services relating to its health care, education, or social services. Canada
has also declared that its cultural identity policies (including Canadian content
restrictions and media subsidies) will not be subject to the GATS, but instead it has
proposed the negotiation of a “New International Instrument on Cultural Diversity”
that would govern regulations concerning cultural industries.
Trade Remedies. The launch of negotiations at Doha to discipline, to clarify,
and to provide transparency in the use anti-dumping, subsidies, and countervailing
measures is a key priority for Canada. The government’s position in these
negotiations is to separate legitimate uses of trade remedy legislation from what it
considers disguised attempts at protectionism and has sought to impose more specific
disciplines and increased transparency in the use of trade remedy measures. In
addition, Canada has objected to the use of these remedies by the United States and
has been engaged in anti-dumping and countervailing duty disputes at the WTO over
softwood lumber and wheat, and the Byrd amendment. The U.S. position has sought
to reflect the negotiating mandate of trade promotion authority, i.e. not to undermine
U.S. trade remedy laws. The United States has focused on promoting transparency
in the administration of trade remedy laws, adherence to appropriate standards of
review in dispute settlement panels, and addressing underlying trade distorting
practices.
Questions.
1. What is the legislative process in Canada for approving trade agreements? Are
there legislative procedures analogous to Trade Promotion Authority, or fast-track
procedures, approved by the U.S. Congress in 2002?
2. Have recent U.S. antidumping and countervailing duty cases against Canadian
softwood lumber and wheat stiffened Canada’s resolve to press for additional
disciplines on trade remedies in the WTO negotiations? Given the general
opposition of Members of Congress to changes in U.S. trade remedy laws, what types
of disciplines can be agreed upon?

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North American Integration55
Issue Definition. The terrorist attacks on the United States in 2001 fueled a
wide-ranging debate in Canada over its relationship with the United States, including
the feasibility or desirability of furthering the process of North American integration.
While concerns in the United States over the U.S.-Canada border are focused
primarily on border security and immigration issues, the debate in Canada has
become much broader, encompassing such issues as sovereignty, the desirability and
feasibility of further economic integration with the United States, and even the
adoption of the U.S. dollar. This discourse is not unusual in Canada; questions
concerning its relationship with the United States continually loom large in policy
discussions. Recent initiatives, however, may spur the process of economic
integration.
Security and Prosperity Partnership (SPP). On March 23, 2005, the
leaders of the United States, Canada, and Mexico signed the Security and Prosperity
Partnership (SPP), a pledge to develop a series of security and economic cooperation
measures among the three countries of the North American Free Trade Agreement
(NAFTA). Ministerial working groups were established to develop concrete
proposals, the first set of which were announced in June 2005. Additional measures
were announced at the trilateral Cancun summit between Presidents Bush and Fox
and Prime Minister Harper in March 2006. This year’s trilateral summit will take
place in Canada in August 2007. The impetus for the establishment of the SPP has
been the effect on trade from the increase in security along the border following the
2001 terror attacks as well as the growing perception among some that NAFTA needs
to be reinvigorated in order to compete with the growing economic power of Asia.
Many of the security planks expand on the Smart Border Action Plan of 2001.
The “prosperity” rubric consists of a series of measures designed to enhance the
competitiveness of North American business to better meet the pressures of
globalization. Some of the goals include cooperation on regulatory harmonization
with the establishment of a trilateral Regulatory Cooperation Framework by 2007,
a goal that may be announced at the trilateral leadership summit this summer; the
reduction of redundant and duplicative testing (what Canadian International Trade
minister David Emerson called “the tyranny of small differences”); sectoral
cooperation on steel, energy, autos, and air transportation, protection of intellectual
property, and detection and deterrence against counterfeit and pirated goods.
Many of these initiatives reportedly were chosen because they could be
undertaken through the regulatory process and would not require legislation. Some
initiatives will be developed by institutional structures that already exist, such as the
North American Steel Trade Committee. Business groups in the United States and
Canada have generally supported this effort, and some have called for its expansion.
However, other groups have decried what they consider the undemocratic nature of
implementing regulatory changes without legislative approval and what they consider
the business-driven agenda of the initiatives. Some Canadians also fear that
55 Prepared by Ian F. Fergusson, Specialist in International Trade and Finance, Foreign
Affairs, Defense, and Trade Division.

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regulatory harmonization, given the wide disparity in population and economic
power of the two nations, would inevitably lead Canada to adopt U.S. standards and,
implicitly, the policies behind them.
More generally, some in Canada believe the lesson from September 11 is that
increased cooperation with the United States is both necessary and inevitable, given
the reality of Canadian trade flows and economic interdependence. Several long-
term economic options have received renewed attention, including a customs union,
a common market, or a monetary union. These concepts are not new; they have been
discussed in conjunction with “deepening”NAFTA. Consequently, these discussions
often involve Mexico as well.
Customs Union. The first step usually discussed regarding the further
integration of the North American economy is the creation of a customs union.
Members of a customs union commonly eliminate tariffs among themselves, and
erect common barriers against the rest of the world. Both the U.S. and Canada have
already eliminated all tariffs between each other under NAFTA, and have similar,
though not identical, tariff schedules with third countries. However, the continued
use of trade remedy laws against each other would be called into doubt. Although
customs duties would be paid at ports of entry at the perimeter of the customs union,
border agents would still enforce immigration, sanitary and phytosanitary, and
environmental laws, as a customs union does not imply a harmonization or mutual
recognition of each nation’s regulations.
Common Market or Economic Union. In addition to a common tariff
policy and free trade in goods and services, a common market would imply free
movement of capital and labor. At this point, harmonization of certain investment
and immigration issues would need to be agreed upon. A type of economic union
approaching that of the European Union would also require harmonized or mutually
recognized standards and regulations and perhaps some supranational institutions.
Although the United States and Canada share many developed country level
standards, this form of integration would require regulatory harmonization or mutual
standards recognition. For example, would the United States adopt the metric system
to fulfill its obligations to harmonize standards? Could the two nations adopt
common forestry practices and management policies that have been at the heart of
the softwood lumber dispute? These questions illustrate the extent to which North
American economic integration may affect the governance of the United States,
Canada, and possibly Mexico.
Monetary Union. The concept of monetary union took hold in Canada during
the 1990s and early 2000s when the Canadian dollar steadily depreciated against the
U.S. dollar. However, since 2003 the loonie (named after the bird on the C$1 coin)
has risen over 40% from 2002 levels to US$0.90 by May 2007. The loonie is
benefitting from record high prices for energy and other primary products. Hence,
talk of the desirability of monetary union has been muted. However, those who
support monetary union argue that it would force Canada to make the necessary
structural adjustments that would make it more competitive with the United States.
In addition, business would also reap significant savings in transaction costs
associated with the huge volume of bilateral trade. Opponents of monetary union
contend that it would lead to an unacceptable loss of political and economic

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CRS-34
sovereignty. According to them, monetary policy would be dependent on (or tied to)
actions of the U.S. Federal Reserve, with which Canada would have little influence.
Status of the Issue. The active pursuit of North American integration is not
a front-burner issue for either the United States or Canadian government. However,
the adoption of the SPP indicates that the three NAFTA countries are beginning to
think about the parameters of economic integration, and may be taking the first steps
towards the creation of a North American economic space.
Questions.
1. How does the Canadian public feel about closer economic ties with the United
States? Is there a perceptible difference on this issue among Canadian political
parties?
2. Has the loonie’s appreciation since 2002 hurt the Canadian manufacturing sector
that previously relied on a weak currency to maintain competitiveness?
3. Has the Security and Prosperity Partnership received much attention in Canada?
Has it proved controversial? Do you think Parliament and Congress should be more
involved in making these decisions?

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CRS-35
U.S. Imports of Canadian Softwood Lumber56
Issue Definition. The U.S. lumber industry has long argued that imports of
subsidized Canadian lumber were injuring U.S. producers. A 1996 agreement with
a fee on lumber imports above a specified level expired on March 31, 2001, and the
U.S. lumber industry filed antidumping and countervailing petitions to restrict
imports. In May 2002, determinations of Canadian subsidies, of dumping, and of
injury to the U.S. industry led to a duty of 29% on most Canadian softwood lumber
imported into the United States. Canada challenged these findings under NAFTA
and before the WTO. Negotiations led to a seven-year agreement with Canadian
export charges depending on U.S. lumber prices, and the United States revoked the
countervailing and antidumping orders. Recent U.S. interest group complaints have
asserted unfaithful implementation of the agreement.
Background and Analysis. U.S. lumber producers have long expressed
concerns about imports of subsidized Canadian lumber. The Department of
Commerce (DOC) has investigated the imports several times over the past two
decades. In 1981, it found that Canadian subsidies were de minimis (insignificant).
In 1986, its preliminary finding was subsidies of 15% of sale values; the expected
duty was supplanted by a Memorandum of Understanding (MOU), with Canada
imposing a 15% export tax on softwood lumber. Canada withdrew from the MOU
in 1991, arguing that the provinces had responded to the previous concerns. The next
investigation led to a 6.51% duty in 1992, but this duty was successfully challenged
under the U.S.-Canada Free Trade Agreement. In 1996, the United States and
Canada reached a five-year softwood lumber agreement which established a fee on
lumber imports from four Canadian provinces in excess of a specified level.
Tension between the United States and Canada over softwood lumber trade may
be inevitable. Both countries have extensive forest resources, but vastly different
population levels and development pressures; vast stretches of Canada are still
largely undeveloped, while less area in the United States (outside Alaska) remains
relatively pristine. These differences have led to divergent forest policies. In
Canada, 90% of the forests are owned by the provincial governments, which have
allocated and priced timber to encourage development of the extensive timber
reserves. In the United States, 58% of timberlands are privately owned, and private
markets dominate the allocation and pricing of timber. U.S. federal and other
government-owned forests are regionally important, but the timber is typically sold
in a competitive market.
U.S. lumber producers assert they have been injured by subsidies that have
given Canadian producers an unfair advantage in the U.S. market. Canadian
provincial stumpage fees (for the right to harvest trees) are asserted to be subsidized,
leading to lumber prices that are less than their fair market value. The provinces
generally use leases and administered fees to allocate and price timber. Administered
fees are unlikely to match market values, but determining whether the fees are below
56 Prepared by Ross W. Gorte, Natural Resource Economist and Senior Policy Specialist,
Resources, Science, and Industry Division, and Jeanne J. Grimmett, Legislative Attorney,
American Law Division.

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CRS-36
market values has been controversial, because of differences in tree species, sizes,
and grades; in measurement systems; in requirements on harvesters; in environmental
protection; and in other factors.
Log export restrictions in British Columbia are also alleged to be subsidies,
because they assure more supply (less competition for timber and thus lower costs)
for Canadian producers. Evidence from the U.S. Pacific Northwest, where private
logs can be exported but public timber cannot, indicates substantially higher prices
for exported logs.
Injuries to U.S. lumber producers are difficult to establish decisively, although
the U.S. International Trade Commission (ITC) has found injury every time it has
examined the issue. Canada’s share of the U.S. lumber market has risen
substantially, from less than 7% in the early 1950s to more than 35% since the mid-
1990s. Under the 1996 agreement, the quantity of imports continued to rise, but the
market share was relatively stable. The impact of restrictions on U.S. lumber prices
is not easily estimated, but restrictions have probably put upward pressure on prices.
Status of the Issue. The 1996 U.S.-Canada softwood lumber agreement
expired on March 31, 2001. The U.S. Coalition for Fair Lumber Imports filed
countervailing duty and antidumping petitions, asking the DOC to investigate
Canadian imports again. DOC issued final determinations on March 22, 2002, that
subsidies were 19.34% of sale value and average dumping margins were 9.67%. On
May 3, 2002, the ITC determined that the U.S. lumber industry was threatened with
material injured by Canadian imports. A duty averaging 27% was imposed on May
22, 2002.
Canada challenged each of the agency determinations under the North America
Free Trade Agreement (NAFTA) and in the World Trade Organization (WTO). The
NAFTA panels largely supported the Canadian positions. The WTO proceedings
resulted in mixed decisions. Canada was also concerned that the US$5 billion in
estimated duties on softwood lumber collected by the United States would eventually
be distributed to U.S. lumber producers under the Continued Dumping and Subsidy
Offset Act (Byrd Amendment). Canada obtained a U.S. court decision, however,
holding that the Byrd Amendment did not apply to Canadian imports.
On April 26, 2006, a tentative agreement between Canada and the United States
resolving the dispute was announced. The United States revoked the countervailing
and antidumping duty orders and returned about US$4 billion to the importers of
record. The remaining deposits (about US$1 billion) were split evenly between the
members of the Coalition for Fair Lumber Imports and jointly agreed-upon
initiatives. Canada is collecting export charges ranging up to 15%, depending on a
weighted average lumber price, or up to 5% with volume restraints. A surge
mechanism would raise export charges if a Canadian region’s exports exceed its
allocated share by more than 10%. Lumber from logs harvested in the Atlantic
Provinces, Yukon, Northwest Territories, or Nunavut is exempt from the export
changes. Disputes are to be resolved through a binding settlement, using non-North
American arbitrators. The agreement is for seven years, with an optional two-year
renewal. Some U.S. interest groups have questioned whether Canada is faithfully
implementing the export charges.

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Questions.
1. The dispute over U.S. imports of Canadian lumber has persisted for more than 25
years. Do Canadian producers have a significant cost advantage because of Canadian
timber practices and/or subsidies? Should Canadian practices be modified to
enhance competition for timber? Do the systems and situations vary sufficiently to
warrant different responses to each Canadian province? What might be the
environmental consequences of various possible changes?
2. The new seven-year agreement terminated the duties, returned most of the money
collected, and established price-dependent export charges on Canadian lumber. What
changes are needed in the next seven years to assure that the recent countervailing
and antidumping duty process — with NAFTA and WTO challenges and litigation
— is not repeated when the agreement expires? What happens if some of the
provinces make appropriate changes and others do not?
3. What oversight mechanisms exist to assure faithful implementation of the export
charges? Are there means of avoiding charges by trans-shipping lumber from the
producing province through an exempt process? How can such methods of avoiding
export charges be prevented?

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CRS-38
Wheat Trade57
Issue Definition. U.S. trade officials and northern-tier wheat producers have
long expressed concerns that Canadian wheat trading practices, both import and
export, are inconsistent with Canada’s international trade obligations. U.S. concerns
have been exacerbated by the monopoly powers of the Canadian Wheat Board
(CWB). In accordance with Canadian law, the CWB has the exclusive right to
purchase and sell western Canadian wheat (durum and nondurum) and barley for
domestic human consumption and for export. U.S. trade officials and wheat
producer groups contended that Canadian wheat trading practices, particularly the
export practices of the CWB, were inconsistent with Canada’s WTO obligations and
disadvantage U.S. wheat exporters in Canadian and international markets. U.S. trade
officials also contended that Canadian wheat entering the U.S. market was being
supported by various subsidies and that these wheat imports have been harmful to
U.S. producers and that the Canadian government had certain rules and regulations
in place that discriminated against imported grains at grain elevators and within
Canada’s rail transportation system.
Canadian officials have countered that the CWB operates as a valid state trading
enterprise (STE) under WTO rules. Furthermore, Canada maintained that its import
practices and the CWB wheat export practices comply fully with international trade
rules and its WTO obligations, and that Canada does not subsidize its wheat exports.
In addition, U.S. wheat millers and pasta manufacturers have expressed a strong
interest in maintaining their access to Canadian grain and oppose trade restrictions
that might limit their access.
U.S. allegations against Canadian wheat trading practices have led to two major
investigations by U.S. agriculture and international trade authorities against wheat
imports from Canada, as well as the trading practices of the CWB. First, the charges
that Canadian wheat entering the U.S. market was being supported by various
government subsidies and that these wheat imports have had a large negative impact
on local grain prices were investigated under anti-dumping (AD) and countervailing
(CV) duty investigations by the U.S. International Trade Commission (ITC) starting
in 2001. Second, U.S. charges concerning the trading practices of the CWB and the
treatment of wheat imports by Canada were pursued under a WTO Dispute
Settlement Case (DS276) that was initiated in December 2002. In response to the
U.S. trade actions, Canada brought its own charges against U.S. claims within the
NAFTA dispute settlement framework.
Background and Analysis. The United States and Canada are both
important producers, traders, and consumers of major grain crops, including wheat.
The United States is the world’s leading exporter of wheat (totaled across the major
wheat classes), while Canada is the world’s leading exporter of hard red spring
(HRS) and durum wheat. HRS is a crucial ingredient in the production of leavened
bread, while durum wheat is used to make pasta.
57 Prepared by Randy Schnepf, Specialist in Agricultural Policy, Resources, Science and
Industry Division.

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U.S. imports of wheat and wheat flour are historically small, averaging about
3% of total U.S. supplies each year, and are generally related to specific end-use
needs. About 70% of U.S. wheat imports originate from Canada, mostly of durum
and HRS wheat. Unexpected growth in U.S. imports of spring and durum wheat
from Canada occurred in the early 1990s; these imports grew from about 611,000
metric tons (mt) in 1989 to 3 million mt in 1993/1994 and have averaged over 2.2
million mt since. Despite their small volume relative to total supply, this growth has
been viewed as problematic by producers in U.S. border states, especially when U.S.
prices are low, as during the 1998-2001 period. Trade liberalization following the
1989 FTA (subsequently incorporated into NAFTA) has undoubtedly contributed to
the expanded wheat trade. However, not all of the change in U.S.-Canadian
agricultural trade can be attributed to the FTA or to any other single factor. Weather,
policy changes, and world supply and demand conditions are some of the influential
factors. Exchange rates have also been important. Prevailing exchange rates
between the Canadian and U.S. dollars for most of the 1990s made Canadian imports
cheaper for U.S. buyers and U.S. farm products more expensive for Canadian buyers.
On October 3, 2003, the ITC announced a positive injury finding and imposed
punitive duties on Canadian HRS wheat imports of 14.16% (5.29% CV and 8.87%
AD duties), but no duties were imposed on Canadian durum imports. Canada
appealed the ITC’s findings under NAFTA dispute settlement provisions. On March
10, 2005, the NAFTA panel recommended removal of the AD portion of the punitive
duty. On June 7, 2005, the NAFTA panel ordered the ITC to revisit its material
injury findings. Finally, in October 2005, the ITC, pursuant to the NAFTA panel’s
review remand, reversed its earlier finding and issued a new determination that there
was no injury or threat of injury. This decision was upheld on appeal to the NAFTA
panel by the North Dakota Wheat Commission, and both the AD and CV duties were
removed in March 2006. As a result, Canadian Durum and HRS may freely enter
U.S. markets.
U.S. charges concerning the trading practices of the CWB and the treatment of
wheat imports by Canada were also pursued under a WTO Dispute Settlement Case
(DS276) that was initiated in December 2002. On April 4, 2004, a WTO dispute
settlement panel issued a mixed final ruling. Contrary to U.S. charges, the Panel
concluded that the CWB’s trading practices did not violate WTO rules for State
Trading Enterprises (STEs). However, the Panel found that certain Canadian grain
marketing practices were not in compliance with WTO rules. A Canadian
government spokesman claimed that the ruling upheld the Canadian position that the
CWB operates as a valid STE under WTO rules. This initial panel ruling regarding
the CWB was upheld under appeal by the United States (August 30, 2004). With
respect to the WTO ruling on Canada’s treatment of imported grains, Canada was
obligated to remove regulatory hurdles on imports of U.S. wheat. As a result,
Canada passed legislation (May 19, 2005) that rectified its grain import and
marketing system practices (effective August 1, 2005) to bring them into compliance
with the WTO Panel’s recommendations.

Status of the Issues. Presently, Canadian HRS and durum wheat may freely
enter the United States. Meanwhile, the changes effected upon the Canadian grain
marketing system pursuant to the WTO recommendations could result in increased
marketing opportunities for U.S. wheat into niche markets in Canada. In addition,

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some analysts suggest that the ruling will be helpful to American farmers and
elevators that may at times want to ship wheat west on the Canadian rail system since
now Canadian railways will have to haul U.S. wheat for the same price as Canadian
wheat. U.S. wheat producer groups and the USTR remain very disappointed in the
WTO Panel’s ruling with respect to the CWB and are likely to aggressively pursue
the elaboration of greater disciplines on STEs like the CWB in ongoing and future
WTO trade negotiations.
Questions.
1. How will the government of Canada respond to the growing list of external, as
well as internal, charges being leveled against the CWB? Are there ways in which
the CWB could become more transparent in its operations so as to reduce
informational uncertainties about its operations?
2. How flexible will Canada be in negotiating greater discipline and more
transparency in the operations of STE’s such as the CWB in on-going WTO trade
negotiations, particularly if the quid pro quo is reduced use of export subsidies by
grain-export competitor nations?

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Corn Trade58
Issue Definition. Since 2000, U.S. corn exports to Canada have risen
dramatically from previous levels, while at the same time U.S. government program
payments to the corn sector have also grown. The increases in both U.S. corn
program payments and imports of U.S. corn has drawn the attention and ire of the
Canadian Corn Producers — a coalition comprised of the Ontario Corn Producer’s
Association, the Fédération des producteurs de cultures commerciales du Québec,
and the Manitoba Corn Growers Association. In 2005, Canadian corn growers filed
a domestic trade remedy complaint against U.S. corn imports; however, Canada’s
International Trade Tribunal (CITT) ultimately ruled in favor of the United States.
Canadian corn producers continued to press their concerns with the Canadian
government about perceived unfair subsidization of U.S. corn. In response, in early
2007 the Canadian government requested consultations with the United States to
discuss several allegations against U.S. commodity subsidies under the auspices of
the World Trade Organization’s dispute settlement process. However, in May 2007
Canada announced that it was temporarily suspending its WTO case against U.S.
corn pending the outcome of on-going Doha Round negotiations.
Background and Analysis. The United States is the world’s leading
producer and exporter of corn. Since 1980, U.S. corn production has accounted for
over 40% of world production, while U.S. corn exports have represented over two-
thirds of world corn trade. Canada is also an important producer and consumer of
corn. However, Canada’s average annual corn production of 8.8 million metric tons
(mt) since 2000 is substantially smaller than U.S. average production of nearly 260
million mt. Although grown widely throughout the world, corn grows best in
temperate conditions with deep, fertile soils such as in the U.S. Corn Belt. Corn’s
agroclimatic requirements, coupled with Canada’s northerly latitudes, limit Canada’s
corn planting to the more southerly regions of Ontario and Quebec. As a result,
growth in Canada’s corn production has been limited almost entirely to yield growth.
In contrast, strong steady domestic demand for corn, which has been driven by the
livestock (dairy, swine, and poultry) and ethanol sectors, has outpaced domestic
production and made Canada a net importer of corn, primarily from the United
States, since the early 1990s.
The elimination of tariffs on corn trade between the United States and Canada,
first under the U.S.-Canada Free Trade Agreement (FTA) and later under NAFTA,
has facilitated corn imports into Canada from the United States and strengthened the
integration of the North American livestock feeding industry. Since 1989, over 99%
of Canada’s corn imports have come from the United States. During the 1990s, U.S.
corn exports to Canada averaged less than 1 million mt per year; since 2000, they
have averaged almost 2.8 million mt per year. The surge in imports of U.S. corn
occurred at a time when U.S. government program payments to the corn sector were
also growing. During the 1990s, U.S. corn program payments averaged $2.8 billion
per year; since 2000, they have averaged nearly $5 billion per year.
58 Prepared by Randy Schnepf, Specialist in Agricultural Policy, Resources, Science and
Industry Division.

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Status of the Issues. In light of these circumstances, Canadian corn growers
claimed that the United States was subsidizing and dumping corn into the Canadian
market. On September 16, 2005, the Canadian Corn Producers filed a domestic trade
remedy complaint under Canada’s Special Import Measures Act (SIMA) for the
alleged “injurious subsidization and dumping of imports of U.S. corn.” This anti-
dumping (AD) and countervailing (CV) duty case sought legal action for alleged
unfair subsidization and dumping of U.S. corn in Canadian markets. Canada’s
International Trade Tribunal (CITT) ultimately ruled in favor of the United States on
the 2005 AD/CV duty case.
In response, the Canadian corn producers pressed the Canadian government for
a change of venues to address their perceived concerns over unfair subsidization of
U.S. corn. On January 8, 2007, Canada requested WTO consultations with the
United States under Article 4.4 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (DSU) concerning three separate allegations
involving certain aspects of U.S. commodity programs in general, and the U.S. corn
program in particular. This action by Canada represented the first step in instituting
a WTO dispute settlement case with the United States — an official dispute
settlement case number was assigned (DS357) and the explicit rules and timetables
of the WTO DSU process were set in motion. Since Canada’s initial request for
WTO consultations, several other WTO members — including Argentina, Australia,
Brazil, the European Communities (EC), Guatemala, Nicaragua, Thailand, and
Uruguay — have requested to join the consultations as interested third parties.
In making its charges, Canada clearly seeks to build on Brazil’s successful
challenge of various provisions of the U.S. cotton program (WTO dispute settlement
case DS267). First, Canada contends that U.S. corn subsidies have caused serious
prejudice to Canadian corn producers in the form of market price suppression in
Canadian corn markets during the 1996 to 2006 period. Second, Canada argues that
the U.S. export credit guarantee program operates as a WTO-illegal export subsidy.
Third, Canada claims that U.S. fixed direct payments are not green-box compliant
and should therefore be included with U.S. amber box payments, in which case the
United States would be in violation of its $19.1 billion amber box spending limit for
1999, 2000, 2001, 2004, and 2005. However, on May 2, 2007, the Canadian
International Trade Minister announced that the Canadian government would hold
off on taking any further action in its WTO dispute settlement proceeding against
U.S. corn subsidies until at least the end of the year pending the outcome of current
Doha Round trade negotiations.
If Canada’s WTO case against U.S. corn programs is restarted and successfully
litigated, it could affect all U.S. agricultural policy since the charges against the U.S.
export credit guarantee and direct payment programs extend beyond corn to all major
program crops. Should any eventual changes in U.S. farm policy be needed to
comply with a WTO ruling in Canada’s favor, such changes would likely involve
action by Congress to produce new legislation. Congress will be revisiting U.S. farm
legislation this year and could potentially address some of the issues raised by
Canada’s WTO challenge. U.S. Secretary of Agriculture, Mike Johanns, who has
been advocating that a new Farm Act should be designed to make U.S. farm policy
be “beyond challenge,” has recently proposed changes to U.S. commodity programs

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that, if accepted in a new Farm Act, potentially could alleviate many of Canada’s
concerns while minimizing the likelihood of future WTO challenges.
Questions.
1. If the ongoing Doha Round continues to drag on with no resolution in sight or
proves entirely unsuccessful, at what pont will Canada consider restarting its dispute
settlement case against the U.S. corn sector?
2. What effect, if any, will Canada’s WTO case have on the ongoing debate over the
formulation of a new U.S. farm bill?

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CRS-44
Cattle and Beef Trade59
Issue Definition. The U.S. and Canadian cattle and beef industries continue
to be affected by discoveries of Bovine Spongiform Encephalopathy (BSE or “mad
cow” disease) in both Canada and the United States, the most recent (and the 9th
Canadian case) in British Columbia on May 2, 2007. Before this and subsequent
incidents, the United States exported about 10% by value of its beef primarily to
Japan, Korea, Mexico, and Canada, while Canada exported about a third of its
slaughter cattle and 50% of its beef exports, mainly to the United States. While some
U.S. producers have endeavored to keep the border closed to Canadian cattle and
beef, U.S. feedlot owners and meat packers have pressured the U.S. Department of
Agriculture (USDA) to readmit cattle imports from Canada. Some restrictions on
Canadian imports have been lifted, and the United States is importing beef from
cattle under 30 months old as well as younger live animals. Both Canadian producers
and U.S. feedlot operators and packers are awaiting the publication of new U.S.
regulations (the comment period for which closed on March 12, 2007) that would
permit imports of older Canadian cattle and the products derived from them.
The United States continues its focus on reopening foreign markets, especially
Japan and Korea, to U.S. beef. The resumption of U.S. beef trade to both those
countries was interrupted because some U.S. shipments did not pass new inspection
requirements. Both the United States and Canada are looking to a determination by
the World Animal Health Organization, expected in mid-May 2007, that both
countries are Controlled Risk countries for BSE. The controlled risk classification
would be an important step in helping to reestablish U.S. and Canadian participation
in international beef and cattle trade. The prospects of a U.S.-Korea Free Trade
Agreement (FTA), already negotiated but not approved by Congress, and a Canadian-
Korean FTA, being negotiated, could be affected by the pace of resumption of beef
trade with Korea.
Background and Analysis. Canada’s exports of live cattle to the United
States averaged 1.3 million head in 2000-2002 according to USDA reports. The
immediate closure of the U.S. border to Canadian live cattle on May 20, 2003 dealt
a severe blow to the Canadian cattle/beef industry as prices for live cattle declined
sharply resulting in substantial income losses. The price of Alberta fed steers, for
example, which averaged C$110.89/cwt (live) during the first five months of 2003
dropped to $C37.80 by July of that year. The border was re-opened in August 2003
to imports of boneless beef from younger animals, but remained closed to live cattle
imports. A Minimal Risk Rule for BSE, first proposed by USDA in November 2003,
would have restored most of the live cattle trade, but implementation of the rule was
delayed when a Montana judge issued a temporary restraining order to halt the
Canadian imports. The rule finally went into effect on July 18, 2005 and, during
2006, live cattle imports totaled over one million. In 2002, the last full year before
the first Canadian case, there were 1.7 million cattle exports from Canada.
59 Prepared by Charles E. Hanrahan, Senior Specialist in Agricultural Policy, Resources,
Science, and Industry Division.

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The Canadian government responded to the closure of the U.S. border to live
cattle by introducing financial assistance programs for ranchers while the Canadian
industry (meat processors) invested in increased slaughter capacity to relieve pressure
from the build-up of the cattle inventory. Canadian government initiatives have
included establishing a loan loss reserve to encourage lenders to support projects to
increase slaughter capacity; streamlining inspections of new slaughter facilities by
the Canadian Food Inspection Agency (CFIA); providing additional resources for
CFIA inspection activities; and establishing set-aside programs for fed and feeder
cattle to help maintain cattle prices before additional meat processing capacity
becomes available. Private investment to increase slaughter capacity includes new
facilities in Alberta, Manitoba, and Quebec. These investments include the purchase
of a modular U.S. packing plant and its installation in Manitoba. A Canadian
subsidiary of Cargill, Inc. also has invested in increased slaughter capacity in Canada.
One consequence of these investments, according to industry analysts, is that some
of the employment and value-added associated with meat processing of Canadian
cattle has shifted from the United States to Canada.
For the United States, the major industry and policy concern has been the effort
to re-open the export market for beef, especially with Japan and Korea. The value
of total U.S. beef exports (beef, veal, variety meats) in 2003 was $3.9 billion
according to USDA. Japan imported about 37% of that total. South Korea was the
second largest market with 24%; Mexico and Canada accounted for 20% and 10%,
respectively. In both Japanese and Korean markets, Australian beef has replaced
U.S. product. Canada, by contrast, exported more than a third of its slaughter weight
live cattle and nearly 50% of its beef. In both cases, about 90% of these exports went
to the United States. The world’s second largest exporter of beef in 2002, the United
States fell to sixth in global exports in 2006. Canada, which was the world’s fourth
largest exporter in 2002, fell to seventh place in 2006.
In late 2003, prior to the first BSE event in the United States, U.S. domestic
cattle prices were at record high levels. Prices for live cattle declined right after the
first BSE case but had substantially recovered by January 2004. A decline in cattle
inventories, in part because of drought in cattle country, strong domestic demand for
beef, and, according to some industry analysts, the prohibition of live cattle imports
from Canada, kept prices relatively high during much of 2004. In contrast to Canada,
where economic losses have been concentrated in live cattle markets, most of the
economic losses in the United States are due to the closing of world markets to U.S.
beef exports. Estimates of U.S. beef export losses range from the U.S. Meat Export
Federation’s figure of $2.8 billion annually to Kansas State University’s high of $4.7
billion.
A major component of both U.S. and Canadian strategy has been to work
through the World Animal Health Organization (the Organisation Internationale des
Epizooties or OIE) to establish that both countries have undertaken measures (e.g.,
prohibitions of the use of so-called specified risk materials in livestock feed) to
control the risks of BSE occurrence. In March 2007, the scientific committee of the
OIE issued a preliminary recommendation that both the United States and Canada
could be categorized as Controlled Risk countries for BSE. A final determination
will be made at OIE’s General Assembly meeting in mid-May 2007. The Controlled

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Risk classification is expected to be an important step in helping to reestablish U.S.
and Canadian participation in international beef and cattle trade.
Status of the Issue. Industry analysts identify several factors that could
preclude live cattle imports of Canadian origin from reaching pre-BSE levels. These
include the status of shipping capacity by Canada’s trucking industry, hit hard by the
U.S. import ban; high fuel prices that increase the cost of truck transport; a stronger
Canadian dollar that could reduce incentives to sell into the U.S. market; increased
Canadian slaughter capacity; reduced U.S. demand for slaughter cattle due to closure
of U.S. plants that relied on Canadian cattle; and possible continued pursuit of legal
avenues by some U.S. cattlemen to block cattle imports from Canada. The
resumption of U.S. beef trade with key markets such as Japan and Korea has been
stymied because of some shipments containing traces of banned cattle parts (Japan)
or bone fragments (Korea). As a result of the Japanese and Korean embargoes of
U.S. beef imports, Australia has effectively replaced the United States as the major
supplier of beef to those markets. Industry analysts expect that, even with
resumption of Japanese imports of U.S. beef, imports of Australian beef would
remain at record high levels for some time.
Many in Congress have linked further opening of the Korean market for U.S.
beef to a favorable consideration of the recently negotiated U.S.-Korean Free Trade
Agreement (FTA). Korea’s acceptance of the expected final determination by the
OIE that the United States is a controlled risk country for BSE could not only
facilitate its resumption of beef trade with the United States but also remove a thorny
issue in congressional consideration of the U.S.-Korea FTA. Canada also is
negotiating an FTA with Korea. Korean openness to Canadian beef imports could
also be factor in how that potential agreement is viewed.
Questions.
1. What has been the effect of Canada’s strategy of increasing slaughter and meat
processing capacity and diversifying beef export markets away from the United
States? What are the economic implications of this strategy for the U.S. cattle and
beef industry?
2. What are the prospects that U.S. beef exports to Japan, Korea, and other Asian
markets would attain pre-BSE levels as those countries open their markets to U.S.
beef? What additional steps might the industry and the U.S. government take to
promote the reestablishment of U.S. product in Asian beef markets?

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CRS-47
Waste Issues60
Issue Definition. Since 1991, the Canadian province of Ontario has shipped
substantial amounts of solid waste to the United States for disposal. The issue has
received additional attention since late 2002, when Toronto announced it would close
its last landfill and begin shipping all of its waste to Michigan. In recent months,
Toronto has agreed to purchase a landfill in Ontario and to direct all of its
municipally managed waste there by 2010, but privately collected waste, which
makes up most of Canada’s shipments to the United States, would not necessarily be
affected.
Some of the communities on the receiving end of such waste have pressured
Congress for legislation to allow them to restrict out-of-state and out-of-country
waste from disposal. Whether Congress should allow such waste flows to be limited
or should continue to follow a policy of free trade in waste management services is
the issue.
On April 24, 2007, the House passed H.R. 518, which would authorize states
to restrict importation of solid waste from Canada and other foreign countries. There
has been no action in the Senate. Canada views this legislation as inconsistent with
U.S. obligations under NAFTA and the World Trade Organization (WTO).
Background and Analysis. Canada and the United States have open
borders for waste shipments, and in general, waste has flowed across the border in
both directions without incident. The United States does not report data regarding
such shipments on a regular basis, but information is available from Environment
Canada and from some U.S. states. Available data distinguish hazardous waste from
other solid waste. The United States appears to be a net exporter to Canada of
hazardous waste, but is a net importer of non-hazardous solid waste.
Hazardous Waste. Since 1986, Canada and the United States have had a
bilateral agreement governing hazardous waste exports. This agreement requires
both countries to notify each other and provide information concerning the types and
quantities of waste to be exported. Consequently, data are available on trans-
boundary shipments of hazardous waste. According to Environment Canada, the
Canadian environmental agency, Canada imported 476,416 metric tons of hazardous
waste and hazardous recyclable materials in 2005, almost entirely from the United
States. Exports of hazardous waste and hazardous recyclable materials from Canada
(mostly to the United States) were 327,746 metric tons. Canada’s imports of
hazardous waste have exceeded its exports in each of the last eight years for which
data were available. Michigan, New York, and Ohio were among the leading sources
of U.S. hazardous waste exports.
Non-Hazardous Solid Waste. There are no federal notification or reporting
requirements for shipments of non-hazardous waste, including municipal solid waste
(MSW), construction and demolition (C&D) waste, medical waste, and non-
60 Prepared by Jim McCarthy, Specialist in Environmental Policy; Resources, Science, and
Industry Division.

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CRS-48
hazardous industrial waste, nor is there any administrative authority to restrict
imports. (The bilateral hazardous waste agreement was amended in 1992 to require
notification prior to shipments of municipal solid waste, but, for lack of legislative
authority, the amendment was never implemented.) It is the shipments of municipal
solid waste that have proven controversial.
Although there are no federal notification or reporting requirements for these
wastes, many state governments do require the operators of solid waste management
facilities to report the origin of waste received for disposal. According to these data,
the Canadian province of Ontario has shipped major quantities of such waste
(principally MSW and C&D waste) to the United States (particularly Michigan) in
recent years. In FY2006 (October 2005-September 2006), Michigan reported that it
received 12.1 million cubic yards (about 4 million tons) of non-hazardous waste from
Canada. Imports from Canada to Michigan have increased 80% since fiscal 2002.
As noted, in January 2003, the City of Toronto closed its last remaining landfill and
began shipping all of its solid waste to Michigan.
Although Canadian waste imports continue to grow, the City of Toronto has
implemented a number of recycling/diversion programs that have reduced its
shipments to Michigan and has committed to the elimination of such shipments by
2010. The city says that it has already made substantial progress in reaching its goal
and now sends fewer than 100 trucks of waste per day, down from a peak of 142 in
2003. According to the city, Canada’s shipments to Michigan are still growing,
however, because private haulers have increased their shipments from industrial,
commercial, and institutional sources. Private haulers account for 75% of the
shipments to Michigan, according to the city.
Status of the Issue. In the present Congress, several bills have been
introduced concerning interstate and international shipments of waste. The most
prominent of these, H.R. 518 (Dingell), was passed by the House, April 24, 2007.
The bill would implement the bilateral Agreement Concerning the Transboundary
Movement of Hazardous Waste between the United States and Canada, as amended
in 1992 to deal with municipal solid waste shipments between the two countries. It
would also authorize states to restrict imports of foreign MSW if they do so prior to
the bilateral agreement’s implementation. Under the latter provision, states would
have a window of up to 24 months after the bill were enacted to impose restrictions
of their choosing on the receipt of foreign MSW, and those regulations could remain
in effect as long as the state desires. Michigan has already passed legislation to ban
delivery and acceptance for disposal of MSW generated outside the United States,
once Congress authorizes such prohibitions.
Whether such legislation is consistent with U.S. trade obligations under NAFTA
and the WTO is an issue raised by the Canadian government and some in the waste
management business. If H.R. 518 were enacted, opponents of the bill are considered
likely to challenge its provisions in court.
In the last Congress, the Senate version of H.R. 2360, the Department of
Homeland Security FY2007 appropriations bill, would also have affected Canadian
waste imports. An amendment submitted by Senator Stabenow provided for
inspections of international shipments of MSW, and required the Secretary of

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Homeland Security to levy a fee (estimated at $420 per truckload) to cover the
approximate cost of such inspections. A separate amendment, introduced by Senator
Levin, would have required that the Secretary of Homeland Security deny entry into
the United States to trucks carrying MSW unless he certifies to Congress that the
methodologies and technologies used by the Bureau of Customs and Border
Protection to detect the presence of chemical, nuclear, biological, and radiological
weapons in municipal solid waste are as effective as those used to screen for such
materials in other items of commerce entering the United States in commercial motor
vehicles. These provisions were approved by the Senate, but not included in the
enacted bill. Senators Levin and Stabenow agreed, in an exchange of letters with the
Ontario Minister of the Environment, not to pursue the amendments or similar future
provisions in return for Ontario eliminating shipments of municipally managed solid
waste to Michigan by the end of 2010. However, because waste handled by private
waste management companies was not covered by the agreement, Canadian waste
shipments to the United States may continue to be substantial.
Questions.
1. While the United States has remained open to solid waste shipments from Canada,
there appears likely to be a continuing imbalance in such shipments, even after
implementation of the Levin-Stabenow Ontario commitments. What steps can
Canada take to address this imbalance or mitigate its impacts? How likely is it that
such steps will lead to significant reductions in Canadian waste shipments to the
United States?
2. Many landfill operators have reached what are called “host community
agreements” with local governments, under which the local government receives
financial benefits or agreed services in return for accepting out-of-area waste. Should
waste imports be limited to communities in which the landfill owner or operator has
negotiated a host community agreement with the local government? If so, should the
agreement meet some minimum standards (e.g., specifically authorizing waste
imports, setting minimum requirements for host community fees, etc.)?

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CRS-50
Electric Reliability61
Issue Definition. Reliability of electricity supply is a significant concern in
both Canada and the United States. As was shown during the 2003 blackout, both
countries are interconnected, and operational control issues in one country can affect
the electric system in both countries. The Energy Policy Act of 2005 (P.L. 109-58)
requires the formation of an Electric Reliability Organization (ERO) with enforceable
standards and mandatory membership. The Federal Energy Regulatory Commission
(FERC) has selected the North American Electric Reliability Corporation (NERC)
as the ERO and has approved 83 of the ERO’s 107 proposed reliability standards.
NERC is an industry organization whose membership had been voluntary prior to
enactment of the Energy Policy Act of 2005. Its mission is to ensure that the bulk
power system is reliable, adequate, and secure. The ten regional reliability councils
of NERC account for virtually all the electricity supplied and used in the United
States, Canada, and a small portion of Mexico. At issue is whether the provincial
and federal governments of Canada will enforce approved reliability standards.
Background and Analysis. There are three components to electric power
delivery: generation, transmission, and distribution. Electric generators need to move
their power to their ultimate customers through the transmission system, crossing
state and international borders. The current system allows for power transfers within,
but not between, three major regions of the United States, Canada, and parts of
Mexico: the area west of the Rockies (Western Interconnection), Texas, and the
Eastern Interconnection. Because of these international interconnections, operational
control issues in one country may affect the reliability of the power supply in the
neighboring country.

The United States is a net importer of electricity from Canada. In 2005, net
imports of electricity from Canada were 23.6 terawatt-hours [1 terawatt-hour=1012
watt-hours], which decreased to 17.4 terawatt-hours in 2006. During 2005 (the latest
published data), total sales to ultimate consumers of electricity in the United States
were 3,661 terawatt-hours.
On September 15, 2006, the National Energy Board of Canada entered into a
Memorandum of Understanding recognizing NERC as the ERO for jurisdictional
transmission lines. This allows the National Energy Board to promote ERO
standards for international transmission lines but not for lines located within
Canada’s borders.
Transmission Constraints. Power transfers between the United States and
Canada are limited by the physical infrastructure of the transmission system and its
operation. One method to improve reliability is to increase transmission capacity.
In May 2003, the National Energy Board of Canada conditionally approved New
Brunswick Power’s application for a new 345-kilovolt international power line that
will cross at the Maine border. Bangor Hydro (Maine) and New Brunswick Power
are currently in the construction phase and the line is expected to be in-service by
61 Prepared by Amy Abel, Specialist in Energy Policy, Resources, Science, and Industry
Division.

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December 2007. Sea Breeze Power Corporation has applied for a Presidential Permit
for the construction of a 550-megawatt high voltage transmission line. The proposed
line would extend from Vancouver Island to the Olympic Peninsula in Washington
state. Sea Breeze Power Corporation obtained the necessary permits from the
National Energy Board of Canada on September 7, 2006.
Three types of constraints limit the transfer capability within the existing
transmission system: thermal constraints, voltage constraints, and system operating
constraints. Thermal constraints limit the capability of a transmission line or
transformer to carry power because the resistance created by the movement of
electrons causes heat to be produced. Overheating can lead to two possible
problems: The transmission line loses strength, which can reduce the expected life
of the line, and the transmission line expands and sags between the supporting
towers. This presents safety issues as the lines approach the ground as well as
reliability concerns. Voltage can be likened to the pressure inside the transmission
system. Constraints on the maximum voltage levels are set by the design of the
transmission line. If voltage levels exceed the maximum, short-circuits, radio
interference, and noise may occur. Low voltages are also a problem and can cause
customers’ equipment to malfunction and can damage motors. System operating
constraints refer to reliability and security. Maintaining synchronization among
generators on the system as well as preventing the collapse of voltages are major
aspects of the role for transmission operators. ERO standards require utilities to be
able to handle any single outage through redundancy in the system. Reducing the
constraints on the system through technology improvements is one way to increase
the transfer capability over existing lines.
Status of the Issue. The Energy Policy Act of 2005 provides for an Electric
Reliability Organization (ERO) to develop and enforce mandatory reliability
standards. FERC issued a final rule on the certification of the ERO on February 2,
2006. The rulemaking included provisions for the approval and enforcement of
mandatory electric reliability standards. On April 4, 2006, NERC filed its application
to become the ERO in both the United States and Canada. FERC approved NERC
as the ERO on July 20, 2006.
Questions.
1. NERC has applied to be the ERO to the provinces of British Columbia, Alberta,
Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, and Nova Scotia as well
as to the National Energy Board. Will Canadian regulators approve and enforce
identical standards? Without identical standards and enforcement, the reliability of
the electric power system could be reduced.
2. Encouraging investment to improve reliability has not been a goal of electric
regulatory restructuring. In a more competitive electric market, utilities minimize
unnecessary expenses. For example, FirstEnergy implemented cost saving measures
by reducing the frequency of tree trimming activities, contributing to the blackout of
2003. Compliance with reliability standards may involve new capital investment
and/or expenses. Will regulators in both the U.S. and Canada approve recovery of
these costs?

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CRS-52
Natural Gas Pipeline from Alaska62
Issue Definition. In October 2004, Congress approved the Alaska Natural
Gas Pipeline Act (ANGPA), which authorizes, in principle, a pipeline to carry natural
gas from Alaska’s North Slope, establishes rules governing its construction, and
authorizes federal guarantees on pipeline project loans. In 2006, the then-Governor
Murkowski of Alaska and the three North Slope oil producers and the state of Alaska
agreed on a contract to build the pipeline. But the contract never received the
necessary approval of the state legislature, and a new governor, Sarah Palin, took
office in December 2006. She has called for a new contract with a firm or
consortium of firms, to build the pipeline, in accordance with new legislation that has
been introduced in the legislature.
The destination of the gas is expected to be markets in the lower 48 states. A
proviso of ANGPA effectively prevents the pipeline from passing through or near the
Mackenzie Delta gas fields in northwest Canada. This prohibition appears likely to
limit the potential gas throughput inasmuch as Canada is moving to construct its own
pipeline from the Mackenzie Delta fields. It is the sense of Congress, as stated in
ANGPA, that there is sufficient demand for gas from both projects. Also, if the
Mackenzie pipeline is built, it appears at this time that all the gas from that project
would be used to operate the oil sands projects in northern Alberta.
Background and Analysis. Alaskan natural gas is a major potential U.S.
energy resource that has been hardly tapped. The Alaska Department of Natural
Resources estimates recoverable gas reserves in the North Slope oil fields at about
30 trillion cubic feet (tcf), which is the energy equivalent of about 5.3 billion barrels
of oil. Natural gas is believed to be under the Arctic National Wildlife Refuge
(ANWR) as well, although seemingly not as much as already discovered in the rest
of the North Slope. The already discovered natural gas resource has not been
developed because of a lack of a cost-effective means of transportation to major
markets; estimated costs of construction have precluded serious consideration of
transporting the gas by pipeline. Most of the gas produced so far on Alaska’s North
Slope — 80% of the 8-9 billion cubic feet produced annually — has been reinjected
into the ground. The small amounts produced are used for operations in conjunction
with oil production and transportation, such as powering oil through pipelines.
Construction of a pipeline to transport natural gas to North American markets
and/or a warm-water port for shipping liquefied natural gas (LNG) could enhance
North Slope oil and gas economics and the commercial promise of ANWR. Recent
steep increases in gas prices and projections of continued high prices have suggested
improvement in the relationship between market prices and the combined cost of
known North Slope gas resources and of pipeline transportation. Potential
profitability of the authorized pipeline is enhanced by the $18 billion in loan
guarantees approved by Congress for the project, estimated in 2004 to cost as much
as $20 billion. Since then, however, the rising costs of steel, other material and
construction labor have driven estimated costs of the pipeline to a range of $25-30
62 Prepared by Stephen Cooney, Industry Specialist, Resources, Science, and Industry
Division.

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CRS-53
billion. The LNG alternative, a possibility considered by the state of Alaska, has so
far not found favor with the North Slope producers.
Congress had previously created a statutory framework for an Alaska natural gas
pipeline in the mid-1970s. Legislative authority for designation of the route, and for
the U.S. role in the approval, construction and operation of such a pipeline, were
established in the Alaska Natural Gas Transportation Act of 1976 (15 USC 719 et
seq.). Under that authority, still in force, a gas pipeline would parallel the existing
Alaska oil pipeline from the North Slope to Fairbanks, then head southeastward
along the Alaska Highway and into Canada via the Yukon Territory, British
Columbia, and Alberta. This, the Alaska Natural Gas Transportation System
(ANGTS), was approved by the U.S. and Canadian governments. Phase I of the
ANGTS pipeline was completed in the early 1980s and is in operation. Its two legs,
stretching from a collecting point in Alberta in the directions of the U.S. West Coast
and the Midwest, respectively, deliver one-third of Canada’s total annual gas exports
to the United States. The construction of the third leg, connecting North Slope to the
“prebuilt” network, has never been started.
Alaska has enacted separate legislation that bans construction of a gas pipeline
in northern state waters, while supporting a pipeline to the south. Under the shorter,
less costly, northern route, wellhead prices (determined by subtracting transportation
cost from market price) would be higher, and royalties to the state would be higher
(the gas resources are state-owned). But state officials see greater gain through the
income multiplier effect of construction within the state and Alaskan communities’
greater access to the gas supplies. There are some questions concerning who will
construct and operate the Canadian portion of the pipeline originating in Alaska, but
the Canadian government has promised that these issues will not impede completion
of the project. The U.S.-authorized pipeline likely would not enter service for ten
years after an initial construction contract is approved.
Canada supports a natural gas pipeline that would travel from the North Slope
through Canada and has opposed any unilateral selection of routes by the United
States. The Canadian government believes that the private sector is best suited to
decide the route, subject to regulatory and environmental review procedures. Canada
has an interest in selling more oil and natural gas to meet U.S. energy needs. Both
the Canadian government and the Bush Administration opposed supporting
development of a pipeline by setting a government-guaranteed price floor under gas
delivered from Alaska, and such a provision was not included in the ANGPA
legislation.
Negotiations are continuing in Canada on the plan to build the Mackenzie
Valley gas pipeline, which is intended to carry natural gas from inside the Arctic
Circle to northern Alberta, where it would flow into the existing natural gas
transportation system. A joint review panel has been established under the auspices
of the Canadian National Energy Board, for the purpose of determining the feasibility
of the Mackenzie project. Among the subjects it is considering are the participation
and compensation of aboriginal peoples in Canada along the route of the pipeline.
A final report is due to the National Energy Board by mid-2007. The Board will then
make a final recommendation to the Canadian government.

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Status of the Issue. Both the United States and Canada are moving toward
the construction of natural gas pipelines built from their respective Arctic regions that
will partly compete with each other for markets in the Lower 48 states and in
southern Canada. At this time, the Canadian government would appear to be more
advanced than the U.S. government and the state of Alaska in terms of reaching a
final decision. As the Mackenzie route is technically less difficult than that from
Alaska, it also seems that the Canadian project could be completed more quickly and
sooner than the Alaska natural gas pipeline, if Canada decides to go ahead with the
project.
Questions.
1. How close is Canada to actually making a decision to go ahead on the Mackenzie
pipeline?
2. Will the Canadian project begin construction long enough before the U.S. project
begins so as to minimize competition between the projects for inputs such as labor
and steel?
3. To what extent might the partly competing natural gas pipelines, once completed,
diminish the economic viability of each other?

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CRS-55
Northern Energy Development63
Issue Definition. Should the United States proceed to develop energy
resources thought to be in the coastal plain of the Arctic National Wildlife Refuge
(ANWR)? And if it chooses to do so, how would Canadian interests, especially
those of the Gwich’in people who live on both sides of the Alaska/Yukon boundary,
be affected? Canada opposes ANWR development, arguing a need to protect the
calving grounds of a caribou herd heavily used by Gwich’in in both countries.
Background and Analysis. A major element of the energy debate in the
109th Congress was whether to approve energy development in the Arctic National
Wildlife Refuge (ANWR) in northeastern Alaska, and if so, under what restrictions,
or whether to continue to prohibit development to protect the area’s biological
resources. ANWR is an area rich in fauna, flora, and oil potential. Development
proponents argue that ANWR oil would reduce U.S. energy markets’ exposure to
recurring crises in the Middle East, create many jobs in Alaska and elsewhere, boost
North Slope oil production, and extend the economic life of the Trans Alaska
Pipeline System. They maintain that ANWR oil could be developed with minimal
environmental harm, with a footprint limited to 2,000 acres of the 19 million acre
Refuge. Opponents argue that intrusion on this ecosystem cannot be justified on any
terms; that it should be designated as wilderness; that oil found (if any) would
provide little energy security and could be replaced by cost-effective alternatives; and
that job claims are exaggerated. With the change in control of the House and Senate,
chance of action on ANWR development appears much reduced. At the same time,
prospects of legislation to protect the area as statutory wilderness are also dim, due
to the likelihood of a Senate filibuster and presidential veto.
Global warming has added a new factor to the debate in recent years. If the
Arctic Ocean becomes navigable in the summer, northern oil and gas may be more
readily transported to lucrative markets in the North Atlantic. This reduced cost
would make marginal finds in either country more profitable and lead to increased
industry interest.
Canada opposes energy development in ANWR primarily because it might
disturb calving of the Porcupine Caribou Herd (PCH). The PCH is covered under the
Agreement Between the United States of America and Canada on the Conservation
of the Porcupine Caribou Herd, which entered into force on July 17, 1987. The
objective of the agreement is to conserve the herd for customary, traditional uses by
peoples on both sides of the international boundary, with disputes to be settled by
consultation between the parties. Since it was an executive agreement, no
implementing legislation was required. The U.S. agency primarily responsible for
implementing the agreement is the Fish and Wildlife Service.
The range of the PCH is centered on the Porcupine River in the United States
and Canada; the herd winters south of the Brooks Range in both nations. The herd
of about 130,000 animals provides the staple diet of Gwich’in hunters in Alaska, the
63 Prepared by M. Lynne Corn, Specialist in Natural Resources Policy; Resources, Science,
and Industry Division.

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CRS-56
Yukon, and the Northwest Territories. It is also the source of cultural tradition and
a focus of religious ceremonies. Fearing that oil development in the herd’s most
frequent calving ground in ANWR’s coastal plain area might jeopardize their
livelihood and even their culture, the Gwich’in on both sides of the border have
vigorously opposed development. Indeed, the concern over the PCH has invigorated
cross-border contacts between Gwich’in for more than a decade.
Under current law, Alaskan Gwich’in would receive relatively little economic
benefit from development, successful or otherwise. (Canadian Gwich’in would
receive no direct economic benefit; there are no known reports of indirect benefits.)
In contrast, Inuit Natives (primarily from Barrow and Kaktovik) along Alaska’s
North Slope would receive tax revenues, as well as bonus, royalty, and rent payments
if successful development took place on Native-owned subsurface lands within
ANWR. As a result of their experience with Prudhoe Bay development, and of its
effects on the smaller Central Arctic Herd (CAH), many Inuit feel that ANWR
development can proceed without significant risk to the PCH. Other Alaskan Inuit
are more cautious, with villagers such as some in Nuiqsut, west of ANWR, arguing
that a nearby existing development has not generated expected levels of employment
or dividends, while exacerbating social problems or driving a local caribou herd
farther away.
The Canadian portion of the PCH calving ground is protected in Ivvavik
National Park. While some energy exploration has taken place in the Canadian
portion of the calving area, Canadians argue that that activity occurred only before
the government was aware of the importance of the area to the PCH. Indeed, some
Canadian industry officials have complained of government hostility to development
in the northern areas of the country, based on what they perceive as overzealous
environmental concerns. Critics note that the Canadian part of the calving area was
protected not only after the area’s importance to caribou was known, but also after
it was known to lack commercial energy resources. Canada is proceeding with
development plans farther east, in the Mackenzie River Delta.
Status of the Issue. Canadian Prime Ministers have raised the issue of
development in the PCH calving range on several occasions over the years, and their
government has sent numerous position papers to various U.S. agencies and
departments. In first session of the 109th Congress, several attempts were made to
pass ANWR development legislation, but none succeeded. To date, no ANWR
development legislation has been introduced in the 110th Congress; a bill (H.R. 39)
has been introduced to designate the area as wilderness. The Alaska delegation and
the Bush Administration remain strong proponents of ANWR development.
Questions.
1. How can one reconcile the opposition of the Canadian government to energy
development in ANWR (where the PCH calves in most years) to its support of an
“over-the-top” natural gas pipeline? Would the pipeline be sited to avoid the areas
that the PCH tends to use for calving in the years when it does not reach ANWR in
time for calving?

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2. What energy activities are going on currently in the northern Yukon and the
Northwest Territories? What activities have occurred in the last two years? How do
these activities affect calving grounds, migration routes, and wintering areas in
Canada? Are there any known effects on the PCH?
3. If Congress were to decide to open ANWR to development, are there specific
mitigation practices that Canada is seeking for the protection of caribou? For the
protection of other marine or terrestrial species?
4. Is Canada planning for increased industry activity in the Arctic in the coming
decades? Have natural resource companies (i.e., energy, mining, and others) become
more active in recent years? Is any other industry already showing signs of increased
interest, and if so, how and where? How have development practices changed in
light of melting permafrost and other climate-related impacts?

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CRS-58
Great Lakes Restoration64
Issue Definition. The Great Lakes are recognized by many as an international
natural resource that has been significantly altered over the last two centuries. In
response, the federal governments of the United States and Canada, and the state and
provincial governments in the Great Lakes basin have implemented several
restoration activities. After several years of restoration activities, some contend that
efforts are not progressing and are loosely organized. Some specific concerns include
the slow rate of cleaning up toxic sediments in this ecosystem, and the potential
negative consequences of new proposals to withdraw large volumes of water from
the Great Lakes for consumption.
Background and Analysis. The Great Lakes watershed is the largest system
of fresh surface water in the world. The watershed covers approximately 300,000
square miles and is shared by eight U.S. states (Illinois, Indiana, Michigan,
Minnesota, New York, Ohio, Pennsylvania, and Wisconsin) and one Canadian
province (Ontario). The Great Lakes contain nearly 90% of the surface freshwater
of the United States and 20% of the surface freshwater of the world. An estimated
40 million people rely on the Great Lakes basin to provide jobs, drinking water, and
recreation, among other things. In the last several decades, agricultural activity
throughout the basin, and urban and industrial development concentrated along the
shoreline, have degraded water quality in the Great Lakes, posing potential threats
to wildlife populations, human health, and the Great Lakes ecosystem. Development
has also led to changes in terrestrial and aquatic habitats, the introduction of non-
native species, the contamination of sediments, and the listing of more than 50
threatened or endangered species in the basin.
The Great Lakes Strategy. In 2004 a federal Great Lakes Interagency Task
Force was created to provide strategic direction for Great Lakes policies on
restoration and to form a regional collaboration of stakeholders interested in restoring
the Great Lakes ecosystem. The latter purpose was accomplished with the creation
of the Great Lakes Regional Collaboration. The Collaboration, which consists of
over 1,500 stakeholders, released the Great Lakes Regional Collaboration Strategy,
a plan based on implementing a series of recommendations for actions and activities
to start the restoration of the Great Lakes ecosystem over the next five years. The
Strategy encompasses eight issue areas: aquatic invasive species, fish and wildlife
habitat (habitat/species), coastal health, contaminated sediments, nonpoint source
pollution, toxic pollutants, indicators and information, and sustainable development.
The total cost of implementing the Strategy is estimated to be $20 billion over five
years. The implementation of the Strategy relies on existing authorities, programs,
and funding at federal, state, and local levels of government, as well as some new
actions that may require enacting new federal legislation. The Strategy aims to
improve coordination among stakeholders and relies on the shared resources of all
collaborators.
64 Prepared by Pervaze Sheikh, Analyst in Environment and Natural Resources Policy,
Resources, Science, and Industry Division.

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CRS-59
Restoring Areas of Concern the Great Lakes. The Great Lakes Legacy
Act of 2002 (Legacy Act; P.L. 107-303) was enacted to address sediment
contamination in Areas of Concern (AOCs) within the Great Lakes ecosystem. Areas
of concern are geographical areas within the Great Lakes that represent the most
degraded portions of the ecosystem. AOC’s contain contaminated sediment,
wastewater, and other non-point source pollution. In 1987, the United States and
Canada identified 43 Areas of Concern (AOC) in the Great Lakes basin. Twenty-six
AOCs are in U.S. waters, 12 in Canadian waters, and 5 shared by both countries. The
act authorizes $50 million annually in appropriations for FY2004-FY2008 for
contaminated sediment remediation projects in AOCs in the United States. From
FY2004-FY2007, there has been approximately $91 million appropriated to all
programs authorized under the Legacy Act, less than half the authorized amount.
The act also authorizes funding for research and development of remediation
technologies, and public outreach and education about remediation. The Great Lakes
National Program Office (GLNPO) in the Environmental Protection Agency (EPA)
administers the selection and funding of projects authorized under the Legacy Act.
According to the EPA, six projects are currently being evaluated, two projects are
underway, and three projects have been completed under the Legacy Act. No AOCs
have been delisted in the United States and two have been delisted in Canada.
Water Withdrawals From the Great Lakes. Several laws, policies, and
governing bodies regulate the use, withdrawal, and diversion of water from the Great
Lakes basin; however, the concern over domestic and international demand for Great
Lakes water has prompted officials from the United States and Canada to reevaluate
these laws and policies. The Council of Great Lakes Governors (CGLG) — a
partnership of the governors of the eight Great Lakes states and the Canadian
provincial premiers of Ontario and Quebec — was tasked with creating a new
common conservation standard to manage water diversions, withdrawals, and
consumptive use proposals. In 2005, the CGLG released (1) the Great Lakes-St.
Lawrence River Basin Sustainable Water Resources Agreement (Agreement) and (2)
the Great Lakes-St. Lawrence River Basin Water Resources Compact (Compact).
These water management proposals ban new and increased diversions of water
outside the Great Lakes Basin with only limited, highly regulated exceptions, and
establish a framework for each state and province to enact laws protecting the Basin.
The Compact needs to be approved by each state legislature, as well as the U.S.
Congress, to achieve full force and effect as an interstate compact. Each of the Great
Lake states are considering the Compact; Minnesota is the only state to approve the
Compact. The Canadian federal government and the provinces of Ontario or Quebec
are not parties to the Compact; however, the provinces are signatories to the related
international state-provincial Agreement.
Status of the Issue. Several bills have been introduced in the present
Congress that address restoration of the Great Lakes ecosystem. None of the bills
authorize the implementation of the Strategy, nor authorize funding for restoration
prescribed by the Strategy. The Great Lakes Collaboration Implementation Act (H.R.
1350 and S. 791), introduced March 6, 2007, is the most prominent restoration bill.
This bill would authorize appropriations to conduct research, provide for detection
and prevention of aquatic non-native species around the country, address water
quality in the Great Lakes, and ocean monitoring. The bill would authorize $150
million annually from FY2008-FY2012 for cleaning up AOCs in the U.S. through

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CRS-60
the Great Lakes Legacy Act, and authorize duties and activities for the Great Lakes
Interagency Task Force and the Great Lakes Regional Collaboration. Other bills
address invasive species in the Great Lakes, migratory birds, and specific projects
that may restore portions of the Great Lakes ecosystem. Water withdrawals
guidelines for the Great Lakes as prescribed in the Compact and Agreement have not
been addressed in the present Congress.
Questions.
1. Given that the boundaries of the Great Lakes ecosystem extends across the United
States and Canada, what major efforts are being done in Canada to restore the Great
Lakes? Is Canada considering a comprehensive restoration plan that may involve
binational participation?
2. What efforts are being done to clean-up AOCs in Canada, and have they been
successful? Is there scientific, technical, or programmatic collaboration between the
U.S. and Canada in cleaning up AOCs shared by both countries?
3. The Compact and resulting water withdrawals could potentially affect the
environment and the economies of, and relationship between, Canada and the United
States. What is the Canadian position on the Compact and Agreement? Is Canada
considering similar measures to govern its use of Great Lakes water? Would a
parallel Compact in Canada be considered at some time?

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CRS-61
Status of Polar Bears65
Issue Definition. The United States has proposed listing of polar bears as
“threatened” under the Endangered Species Act (ESA; 16 U.S.C. §§1531 et seq.).
Under 1994 amendments to the Marine Mammal Protection Act (MMPA; 16 U.S.C.
§§1361 et seq.), U.S. citizens may obtain permits to import sport-harvested polar bear
trophies from Canada. In Canada, Native hunters are permitted to allocate a limited
portion of the subsistence harvest to sport hunters. However, an ESA listing as
“threatened” triggers an automatic listing as “depleted” under the MMPA, a listing
that would prevent U.S. citizens from importing polar bear products. Such an import
ban, effectively stopping U.S. polar bear hunting in Canada, might compromise
successful Canadian community-based conservation programs.
Background and Analysis. Polar bears depend on Arctic sea ice, which
most scientists acknowledge will be affected by climate warming causing, at
minimum, an earlier annual or seasonal thaw and a later freeze of coastal sea ice.
Globally, less than one-third of the 19 known or recognized polar bear populations
are declining, more than one-third are increasing or stable. The remaining third have
insufficient data available to estimate population trends and their status has not been
assessed. Two polar bear populations occur within U.S. jurisdiction.
Polar bears are affected by climate change, contaminants, and subsistence and
sport hunting. Environmental organizations have voiced public concern that polar
bear populations are threatened by climate change. Scientists have confirmed that,
in recent decades, the extent of Arctic sea ice has declined significantly as the result
of climate warming: annual ice break-up in many areas is occurring earlier and
freeze-up later. Arctic sea ice is experiencing a continuing decline that may not
easily be reversed, and some models project that Arctic sea ice could disappear
completely by the second half of this century. In addition, three groups of
contaminants are implicated as potentially threatening polar bears — petroleum
hydrocarbons, persistent organic pollutants, and heavy metals. The United States
allows limited subsistence harvest of polar bears by Alaska Natives. In Canada,
Native hunters are permitted to allocate a limited portion of the subsistence harvest
to sport hunters. Under 1994 amendments to the MMPA, U.S. citizens may obtain
permits to import sport-harvested polar bear trophies from Canada.
Status of the Issue. The Fish and Wildlife Service (FWS) has proposed
listing polar bears as a threatened species under ESA, acknowledging the increasing
threats to their existence. The FWS listing decision must be based solely on the best
available scientific and commercial information regarding five factors: habitat
destruction, overutilization, disease or predation, inadequacy of other regulatory
mechanisms, and other natural or manmade factors.
65 Prepared by Eugene H. Buck, Specialist in Natural Resources Policy; Resources, Science,
and Industry Division.

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CRS-62
Questions.
1. What are the current programs in joint cross-border management through the
Inuvialuit-Inupiat Polar Bear Management Agreement for the Southern Beaufort Sea
between Alaska and Canada?
2. What is the status of Canada’s Committee on the Status of Endangered Wildlife
in Canada (COSEWIC) review on the status of the polar bear in Canada?
3. How might halting U.S. participation in Canadian conservation hunting programs
affect Canadian community-based conservation programs?

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