Canada-U.S. Relations
Carl Ek, Coordinator
Specialist in International Relations
Ian F. Fergusson, Coordinator
Specialist in International Trade and Finance
April 5, 2012
Congressional Research Service
7-5700
www.crs.gov
96-397
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Canada-U.S. Relations
Summary
Relations between the United States and Canada, though generally close, have undergone changes
in tenor over the past three decades. During the 1980s, the two countries 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 continued to be cordial. In early 2006, a minority Conservative
government assumed power in Ottawa. It was regarded as being more philosophically in tune
with the George W. Bush Administration than the Liberals had been; some observers believe that
this compatibility helped facilitate bilateral cooperation. This cooperation has continued with the
election of President Obama in November 2008, despite the differences in the two leaders’
governing philosophies.
The two North American countries continue to cooperate widely 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 have been relatively few, but sometimes sharp, as was the case in policy toward Iraq.
Since September 11, the United States and Canada have cooperated extensively on efforts to
strengthen border security and to combat terrorism, particularly in Afghanistan. Both countries
were also active participants in the U.N.-sanctioned NATO mission in Libya.
The United States and Canada maintain the world’s largest bilateral trading relationship, one that
has been strengthened over the past two decades by the approval of two major 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 intellectual
property rights. The most recent clash centered around the Buy America provision of the 2009
economic stimulus law. However, these disputes affect but a small percentage of the total goods
and services exchanged. In recent years, energy has increasingly emerged as a key component of
the trade relationship. In addition, the United States and Canada work together closely on
environmental matters, including monitoring air quality and solid waste transfers, and protecting
and maintaining the quality of border waterways.
Many Members of Congress follow U.S.-Canada environmental, trade, and trans-border issues
that affect their states and districts. In addition, because the countries are similar in many ways,
lawmakers in both countries study solutions proposed across the border to such issues as federal
fiscal policy and federal-provincial power sharing.
This report begins with a short overview of Canada’s political scene, economic conditions,
security and foreign policy, and environmental initiatives, focusing particularly on issues that may
be relevant to U.S. policymakers. This country survey is followed by several summaries of
current bilateral issues in the political, international security, trade, and environmental arenas. The
questions following each summary are designed as potential inquiries to Canadian officials to
promote thought and discussion among policymakers.
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Contents
Overview.......................................................................................................................................... 1
Canada’s Domestic Scene.......................................................................................................... 3
Background and Current Political Situation........................................................................ 3
National Unity..................................................................................................................... 6
Foreign and Security Policy Issues............................................................................................ 7
U.S.-Canada Foreign and Security Policy Issues ................................................................ 8
Economic and Trade Issues ..................................................................................................... 18
Budget Policy .................................................................................................................... 18
Energy ............................................................................................................................... 20
Bilateral Trade Issues ........................................................................................................ 20
Environmental Issues............................................................................................................... 23
Canada and Afghanistan ................................................................................................................ 24
Issue Definition ....................................................................................................................... 24
Background and Analysis ........................................................................................................ 25
Status of the Issue.................................................................................................................... 26
Questions ................................................................................................................................. 26
Canada’s Arctic Sovereignty Claim............................................................................................... 26
Issue Definition ....................................................................................................................... 26
Background and Analysis ........................................................................................................ 27
Status of the Issue.................................................................................................................... 28
Questions ................................................................................................................................. 28
Inter-American Cooperation .......................................................................................................... 29
Issue Definition ....................................................................................................................... 29
Background and Analysis ........................................................................................................ 29
Organization of American States....................................................................................... 30
Haiti................................................................................................................................... 30
Status of the Issue.................................................................................................................... 31
Questions ................................................................................................................................. 31
Border Security Issues ................................................................................................................... 32
Issue Definition ....................................................................................................................... 32
Background and Analysis ........................................................................................................ 32
Status of the Issue.................................................................................................................... 34
Questions ................................................................................................................................. 35
Border Security: Trade and Commercial Concerns ....................................................................... 35
Issue Definition ....................................................................................................................... 35
Background and Analysis ........................................................................................................ 35
Action Programs and Initiatives........................................................................................ 36
Status of the Issue.................................................................................................................... 37
Questions ................................................................................................................................. 38
Canada’s Free Trade Agreement Agenda....................................................................................... 38
Issue Definition ....................................................................................................................... 38
Background.............................................................................................................................. 39
Status of the Issue.................................................................................................................... 40
Questions ................................................................................................................................. 40
North American Cooperation on Competitiveness and Security ................................................... 41
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Issue Definition ....................................................................................................................... 41
Background and Analysis ........................................................................................................ 41
Status of the Issue.................................................................................................................... 43
Questions ................................................................................................................................. 43
Canada’s Financial System ............................................................................................................ 43
Issue Definition ................................................................................................................. 43
Background and Analysis.................................................................................................. 43
Questions........................................................................................................................... 45
U.S. Imports of Canadian Softwood Lumber ................................................................................ 46
Issue Definition ....................................................................................................................... 46
Background and Analysis ........................................................................................................ 46
Status of the Issue.................................................................................................................... 47
Questions ................................................................................................................................. 48
Canada’s Supply Management Programs for Dairy, Poultry, and Eggs......................................... 49
Issue Definition ....................................................................................................................... 49
Background and Analysis ........................................................................................................ 49
Status of the Issue.................................................................................................................... 50
Questions ................................................................................................................................. 51
Country of Origin Labeling ........................................................................................................... 51
Issue Definition ....................................................................................................................... 51
Background and Analysis ........................................................................................................ 51
Status of the Issue.................................................................................................................... 52
Questions ................................................................................................................................. 53
The Canadian Steel Sector............................................................................................................. 54
Issue Definition ....................................................................................................................... 54
Background and Analysis ........................................................................................................ 54
Status of the Issue.................................................................................................................... 56
Questions ................................................................................................................................. 57
Intellectual Property Rights ........................................................................................................... 57
Issue Definition ....................................................................................................................... 57
Background and Analysis ........................................................................................................ 57
Status of the Issue.................................................................................................................... 59
Questions ................................................................................................................................. 59
Electric Reliability, Trade, and Access to Renewable Power ........................................................ 60
Issue Definition ....................................................................................................................... 60
Background and Analysis ........................................................................................................ 60
Reliability.......................................................................................................................... 61
Trade and Renewable Energy Development ..................................................................... 62
Status of the Issues ............................................................................................................ 63
Questions ................................................................................................................................. 63
U.S. Energy Security and Canadian Oil Sands .............................................................................. 63
Issue Definition ....................................................................................................................... 63
Background and Analysis ........................................................................................................ 64
Status of the Issue.................................................................................................................... 65
Questions ................................................................................................................................. 65
Keystone XL Pipeline.................................................................................................................... 65
Issue Definition ................................................................................................................. 65
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Background and Analysis.................................................................................................. 66
Status of the Issue.............................................................................................................. 67
Questions........................................................................................................................... 67
Contacts
Author Contact Information........................................................................................................... 68
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Canada-U.S. Relations
Overview1
Relations between the United States and Canada, though generally cordial, have undergone
several 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 1989 U.S.-Canada Free Trade Agreement, and the 1994 North American
Free Trade Agreement. To many Canadians, however, Ottawa seemed at times to have drawn a bit
too close to Washington, DC, 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. In an interview that year, 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.” Many believe,
however, that this initial show of mild reserve was intended for domestic consumption, and that
Canada and the United States in fact continued to enjoy excellent relations. Chrétien and
President Bill 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.2
In February 2001, President George W. Bush met with Chrétien. The two leaders discussed
energy, missile defense, and trade. After September 11, however, economic and environmental
issues often took a back seat to joint efforts to improve security, both at home and abroad. Canada
became involved in the crisis at the outset, and has cooperated closely with the United States in
efforts to combat international terrorism.
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 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. But it was over security-related matters, particularly defense spending, Iraq, and
missile defense, that the two governments had their sharpest differences. Despite these
controversies, Canada and the United States continued to work 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 NATO-led coalition in Afghanistan.
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, DC, Martin
and Bush met once more and talked about a variety of issues, from terrorism to the “mad cow”
1 Prepared by Carl Ek, Specialist in International Relations; and Ian F. Fergusson, Specialist in International Trade and
Finance, 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. “Don’t Take Canada For Granted.” By Tad Szulc. Parade Magazine. February 20, 1994.
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crisis. In November 2004, during President Bush’s first official visit to Canada, missile defense,
border security, and global “hot spots” were on the agenda. 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.3
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 believed that Harper’s government
was 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 still arose on certain issues, particularly those that
touched upon matters of perceived sovereignty. For example, on January 26, 2006, days before
his inauguration, Harper sharply took exception to comments made earlier by the U.S.
Ambassador to Canada 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.4
The election of Barack Obama in November 2008 signaled a new chapter in U.S.-Canada
relations. Unlike President Bush, Obama has been quite popular in Canada—a January 2009
public opinion poll put the new American president’s approval rating in Canada at 86%; Obama
has enjoyed continued popularity among Canadians—an October 2011 survey showed that 51%
of Canadians believed Obama had done at least a “good” job, while another 30% said his
performance had been “fair.”5 Some believe that this favorable view may be facilitating the
Harper government’s cooperative efforts with the United States. In addition, although Harper has
a more conservative orientation than Obama, many observers believe both leaders are pragmatic
in their approach to solving public policy problems, and that the bilateral relationship will
continue to be collaborative and productive. On February 19, 2009, renewing a tradition broken
in 2001 by President Bush, President Obama made Canada his first official foreign visit. He and
Harper focused on trade, climate change, and Afghanistan, among other issues; in September
2009, Harper met with Obama at the White House. Harper traveled to Washington to meet with
Obama again in February and December 2011; the two leaders agreed to the establishment and
implementation of a U.S.-Canada Regulatory Cooperation Council and issued a Declaration on a
Shared Vision for Perimeter Security and Economic Competitiveness. Prime Minister Harper was
in Washington again in April 2012 to attend a North American summit meeting with President
Obama and Mexican President Felipe Calderon.6
3 “Bush Launches Bid To Repair US-Canada Ties.” Agence France-Presse. November 30, 2004.
4 “Harper Tells U.S. To Butt Out On Plans For Defending Canada’s Arctic.” Canadian Press. January 26, 2006.
5 If Things Don’t Work Out Next Year, Obama Could Always Come North: Poll. Canadian Press. October 18, 2011.
6 “Obama Makes Overtures to Canada Prime Minister.” New York Times. February 20, 2009. “Obama’s Popularity
Higher Than Ever In Canada: Poll.” National Post. September 20, 2009. “Obama May Be Slapped By U.S. Electorate,
but Canada Still Claps: Poll.” The Canadian Press. November 4, 2010. “PM and U.S. President Obama Announce
Shared Vision For Perimeter Security and Economic Competitiveness Between Canada and the United States.” Web
site of the Canadian Prime Minister’s Office. February 4, 2011.
http://www.pm.gc.ca/eng/media.asp?category=1&featureId=6&pageId=26&id=3931
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Canada’s Domestic Scene
Background and Current Political Situation
The Liberal Party, which took power from the Conservatives in 1993, was by 2003 being
commonly referred to as “Canada’s natural ruling party.”7 Maintaining a Liberal majority
appeared to be a safe bet at that time, but in early 2004 the “sponsorship scandal” erupted.
Canada’s Auditor General issued 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.8
The Liberals’ standing in the polls plummeted, and the opposition parties strengthened. To the
right of the Liberals, two conservative parties had merged under a 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 June 2004 elections, the Liberals, despite losing seats in the House of Commons, won a
plurality and formed a minority government. In November 2005, the Liberals lost a confidence
vote, and snap elections were held on January 23, 2006. This time, the Conservatives won a
plurality, and governed until May 2011 as a minority. Some analysts cautioned that the Tory
victory did not necessarily represent a “paradigm shift” to the right in Canadian politics; they
noted that the Conservative party won only 37% of the popular vote. Because past minority
governments have been relatively short-lived, Harper kept one eye on the next elections. In
addition, Harper relied upon the ad hoc support of the other three parties to ensure passage of the
various items on his legislative agenda. Many believe that is why he advocated fairly centrist
policies.9
However, Harper has been willing to challenge public opinion over Afghanistan, where the
Liberal government deployed troops in 2002. In 2006, 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. But as Canadian operations shifted
from peacekeeping to counter-insurgency and casualties mounted, public support diminished.
Canadian troops ended their combat role there in July 2011.
Canada’s October 2008 elections did little to change the makeup of parliament. The
Conservatives, who reportedly anticipated a weakening in future support, called the elections in
hopes of capturing a majority. However, the Tories emerged only with a somewhat stronger
plurality.
In November 2008, a budget bill put forward by the Conservatives precipitated a political crisis;
the spending plan proposed, among other things, the elimination of federal funding for political
7 “Welcome To Their Nightmare: Finally, a Reason To Start Paying Attention To Politics Once Again.” Globe and
Mail. December 8, 2003.
8 “Canada: Martin on the Ropes in Funding Scandal.” Oxford Analytica. February 25, 2004. February 23, 2004.
“Canada’s Premier Acts to Counter Scandal.” By DeNeen L. Brown. Washington Post. February 17, 2004.
9 “Interview: Stephen Harper.” Maclean’s. March 6, 2006. “Conservatives To Govern From Political Center.” Oxford
Analytica. January 24, 2006. “Harper’s Five Easy Pieces.” Economist. April 8, 2006.
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parties. The opposition parties, which would have been severely affected by the plan, rebelled and
were poised to vote down the government—ostensibly because Harper had failed to put forward a
stimulus package that would respond to the economic downturn. Harper withdrew his proposals
and, to avoid the no-confidence motion, prorogued (suspended or recessed) the session of
parliament until January 2009; the shutdown was sharply criticized by many.10
During this time, the Liberal party named public intellectual Michael Ignatieff as their new leader.
Some believed that when Parliament returned in January, he would seek to bring down the
government and force new elections. However, he declined to do so, reportedly choosing instead
to support the government’s stimulus program (see below) and to consolidate the party’s strength
rather than challenge the Conservatives immediately.11
In the fall of 2009, many believed the Harper government might face a no-confidence vote,
particularly when public criticism was touched off by questions over how forthcoming the
government had been during inquiries over official knowledge about the turnover by the
Canadian military to Afghan authorities of prisoners who were subsequently abused and
reportedly tortured. On December 30, 2009, Harper prorogued parliament until early March.
Harper’s spokesperson explained the move as one necessary to give the government the time to
“recalibrate” and “consult” over its budgetary policies. However, other observers argued that
Harper sent the legislature home in order to avoid confrontation over the detainee controversy.
The second prorogation in roughly a year’s time prompted harsh criticism by the opposition
parties, as well as scattered protests around the country.12
However, an uptick in the economy helped Harper, whose party also benefited from a “bounce”
from the success of the Vancouver Winter Olympics. In addition, the government’s handling of
aid to Haiti in the wake of the January 2010 earthquake earned praise. On the negative side of the
ledger, Harper was faulted for two seemingly unnecessary prorogations, and also for not carrying
out the institutional changes (including reform of the Senate and of the electoral process) that he
promised during his late 2005 campaign and early in his tenure.
Some analysts in 2010 believed that the political stalemate might permit the Harper government
to serve until the next general federal elections, set for October 2012. However, on March 25,
2011, the Conservatives lost a no-confidence vote presumably over a contempt of parliament
ruling that the government had underestimated the costs of prison construction and of military
fighter aircraft procurement; however, some observers maintain that the budget was the main
point of contention.13
Canada’s most recent elections were held on May 2, 2011; it was the fourth time Canadians had
gone to the polls in seven years. But unlike the last three elections, which returned minority
governments, this one resulted in significant changes for all of the national parties: first of all, the
Conservatives managed to capture a comfortable majority of 166 seats in the 308-seat
10 “Canadian Leader Shuts Parliament To Avoid No-Confidence Vote, Angering Many.” New York Times. December 6,
2008.
11 “The Liberals Try a New Leader,” The Economist, December 13, 2008.
12 “Harper Goes Prorogue.” The Economist. January 9, 2010. “Improved Poll Numbers Not Enough To Entice Ignatieff
Into Spring Election.” Canadian Press. January 28, 2010. “Conservatives Secure 10-Point Lead: Poll.” National Post.
April 12, 2010. “Stalled Institutional Reform Hurts Harper.” Oxford Analytica. March 9, 2010. “Stimulus Has Boosted
Growth, Harper.” Oxford Analytica. April 14, 2010.
13 “Canada: Country Report.” Economist Intelligence Unit. April, 2011. p. 11.
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parliament—and a majority of seats in Québec—up from 144. In second place was the NDP,
which wound up with 103 seats, almost triple the 36 they had held before. The Liberals won just
34 seats, down from 77, making them the third-largest party for the first time in the nation’s
history. The separatist BQ was reduced from 48 down to just 4 seats—causing it to fall below the
threshold for official party status. Finally, the Green Party managed to win a seat—another first.14
In explaining the results, observers note that many Canadians reportedly had become comfortable
with Harper’s personality and leadership style. In addition, Harper has generally avoided divisive
social issues and has instead succeeded in positioning his party more toward the center—a
technique that had been used by the Liberals between 1993 and 2006. Harper’s trump card,
however, was the economy (see below). Since the mid-1990s, both Liberal and Conservative
governments had run budgetary surpluses, leaving the government in a good position to introduce
limited stimulus measures during the global economic crisis, from which Canada emerged in
better shape than most other developed countries.
Harper struck a conciliatory note on election night, saying “[w]e are intensely aware that we are
and must be the government of all Canadians, including those that did not vote for us.” After 5
years of running a minority government, conservatives now have greater latitude to pass the kind
of legislation they want to. But observers note that they still need to steer somewhat toward the
middle—with an eye toward maintaining control of parliament after the next elections, which
may be held no later than May 2016.
The Conservatives have already launched several proposals through parliament, including bills
that would repeal the long gun registry, eliminate the Canadian Wheat Board, strengthen the
criminal code, and scrap election subsidies for political parties. Harper has also proposed certain
changes in the structure of the parliament, including increasing the number of members in the
House of Commons—in order to reflect population changes—and reform of the by-appointment
Senate. Harper has indicated that he will address other issues, including immigration reform,
public pensions, and bilateral trade liberalization agreements with several countries. His
government will also continue to assert its sovereignty in the Arctic, and to promote the
production and export (mainly to the United States) of Alberta’s oil sands petroleum.15
The Liberals are reportedly attempting to rebuild their campaign coffers and are preparing for the
next leadership race (Ignatieff resigned shortly after the elections). The NDP is a work-in-
progress—many of the incoming class of MPs are young and/or relatively inexperienced, and,
more importantly, the party lost its charismatic leader, Jack Layton, to cancer in August 2011. In
March 24, 2012, the NDP elected as their new leader Thomas Mulcair, a former Layton deputy.
Mulcair is from Québec , and has been described as a “firebrand center-leaning” pragmatist.16
In recent weeks, Ottawa has been preoccupied with a the so-called “Robocall” controversy. In
February 2012—9 months after the elections—two journalists alleged that campaign operatives
14 Data from Canadian Parliament’s website, updated August 2011:
http://www.parl.gc.ca/Parlinfo/Files/Parliament.aspx?Item=1924d334-6bd0-4cb3-8793-
cee640025ff6&Language=E&MenuID=Lists.Parliament.aspx
15 “Harper Finally Wins Majority As NDP Surges Into Opposition.” Globe and Mail. May 2, 2011. “A Conversation
With the Prime Minister.” Policy Options. June-July, 2011. p. 6.
16 “Canada Opposition Chooses New Leader.” Agence France Presse. March 24, 2012. “A Principled Pragmatist
Who’s Always Up For a Fight.” Globe and Mail. March 26, 2012. NDP Opts For a Power Broker Over a Protest
Leader. Globe and Mail. March 25, 2012.
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for the Conservatives had computer-generated recorded telephone messages to registered
opposition voters, directing them to incorrect polling stations. Elections Canada (the Canadian
equivalent of the Federal Election Commission) is investigating the claims. The controversy,
along with other factors, has caused the Conservatives to slump in the polls recently.17
National Unity
For more than four decades, an emotional debate has waxed and waned 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 provincial 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 essentially voted on whether they
wished to continue to remain a part of Canada, or strike off on their own. The vote went 50.6% to
49.4% in favor of keeping the country whole. The wafer-thin margin shocked federalists and
separatists alike. Nearly two decades later, the country is still affected by the impact of what has
been called a “near-death experience.”
In 2003, Québec voters turned out the PQ 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. In the
early part of his first term, Charest lost some support 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. In elections held in 2007 and 2008, the Liberals won a plurality, and a
majority, respectively; Charest retained his spot as premier. The next provincial election must be
held by November 2013. In recent months, Charest’s popularity has plummeted, in part due to
corruption allegations associated with the construction industry. A recent poll showed the Liberals
being trounced by the PQ.18
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.
17 “Delayed Reaction.” The Economist. March 3, 2012. “Tories Accused of Minimizing Robo-calls Controversy.”
Globe and Mail. March 30, 2012. “Numbers Add Up To Trouble For Tories.” National Post. March 23, 2012.
18 “’The Nationalists Are on the Rise’: Pollster; Forum Research Survey; PQ Would Romp To Landslide Victory If
Provincial Election Were Held Today” Montreal Gazette. March 27, 2012.
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Foreign and Security Policy Issues
The Canadian Ministry of Foreign Affairs and International Trade lists five policy priorities for
the period 2011-2012:
• implementation of the Global Commerce Strategy, with a special focus on
emerging markets (including China, India, and Brazil) and on negotiating a trade
agreement with the European Union;
• further strengthening of ties with the United States through cooperation in the
areas of border management, trade, investment, energy (particularly with regard
to oil sands), and the environment;
• contributing to effective international governance, security, and stability;
• enhancing security cooperation in the Americas, particularly with Mexico,
Central America, and Haiti; and
• exercising sovereignty in the Arctic. 19
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, G-20,
and the Asia-Pacific Economic Cooperation forum. From 1998 to 2006, Canadian diplomat
Louise Frechette served as Deputy Secretary General of the United Nations, and from 1996 to
2006 Canadian Donald Johnston was Secretary General of the Organization for Economic
Cooperation and Development. The president of the International Criminal Court from 2003 to
2009 was Judge Philippe Kirsch from Canada. The first head of the U.N. War Crimes Tribunal
was Canadian Louise Arbour.
Canadian military officers have also been tapped for leadership positions in international
organizations and coalitions. In June 2005, Air Force General Ray Henault was named head of
NATO’s military committee, a post he held until 2008. And in 2011, Lieutenant-General Charles
Bouchard was head of the allied military operations in Libya.20
Canadians are proud of the active role played by their military 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 numerous U.N. peacekeeping operations, from
Cyprus and the Sinai, to Bosnia, Rwanda, Somalia, and Afghanistan. As of March 2012, more
than 1200 Canadian Forces personnel were participating in international operations in
Afghanistan, the Caribbean, the Middle East, and Africa. An autumn 2010 survey showed that
52% of Canadians “believe traditional peacekeeping is the proper role for our men and women in
uniform.”21
19 Priorities For 2011-2012. Foreign Affairs and International Trade Canada. Modified March 8, 2012.
http://www.international.gc.ca/about-a_propos/priorities-priorites.aspx?view=d
20 “Canada Moving Into Role As Leader Overseas.” Vancouver Sun. March 28, 2011.
21 Canada and International Peacekeeping. By Joseph T. Jockel. Center for Strategic and International
Studies/Canadian Institute of Strategic Studies. Washington, DC, 1994. Canadian Forces Operations. Canadian
National Defence web site. Updated March 23, 2012. http://www.forces.gc.ca/site/operations/index-eng.asp “Canada
Must Stand On Guard.” Winnipeg Free Press. October 27, 2010.
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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) spent
a lower percentage. Canada’s meager military budget irked some within the alliance, particularly
the United States.22
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 in 2004, the 56th largest in the world. The Canadian
forces also were strapped for resources to replace aging equipment. This trend disturbed many,
and there were numerous warnings published. 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.23
Recent Canadian governments appear to have heeded these messages. As of March 2011, there
were approximately 66,000 regular force members and 34,000 reserves. In addition, Canada’s
defense spending has been trending upward. The budget tabled in February 2005 contained the
largest military spending increase in two decades: C$12.8 billion—roughly equal to the entire
2005 military budget—spread over five years. The Harper government’s first budget added C$5.4
billion in military spending over the next four years. The 2007 budget confirmed the previous
year’s spending increase, and the 2008 budget sought to ensure continuity through the Canada
First Defence Strategy, which is set to provide for yearly increases of 2% beginning in
2011-2012. The government budget for the armed forces in 2008-2012 will average around C$20
billion annually; due to budget retrenchment, the rate of growth of military spending is expected
to slow. In addition, Canada unilaterally halted its contribution to two NATO air surveillance
programs, and may cancel, delay, or reduce its planned purchase of F-35 fighter aircraft (see
below).24
U.S.-Canada Foreign and Security Policy Issues
For a variety of practical and historical reasons, Canada’s relations with the United States have
always been a key priority. The two countries share a 5,500 mile border, a common language,
cultural similarities, as well as vital interests in the international realm. Trade between the two
22 “Spend More On Military, U.S. Envoy Urges Ottawa.” Toronto Star. February 25, 2004.
23 “Armed Forces Hobbled, Report Says.” By Daniel LeBlanc. Globe and Mail. December 3, 2003. “Senators Sounding
Alarm On Defence.” The Gazette. October 3, 2005.
24 The Military Balance, 2011. International Institute for Strategic Studies. Defence and Budget 2005—Highlights.
DND website. http://www.forces.gc.ca/site/reports/budget05/summ05_e.asp.
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countries exceeds $1 billion per day; however, Canada’s dependence on exports to the United
States has prompted several governments to attempt to expand and diversify its international
commerce.
According to the U.S. State Department, “U.S. defense arrangements with Canada are more
extensive than with any other country.” Former Canadian Ambassador to the United States
Michael Kergin referred to the defense relationship as being “intermestic” in nature.25
Over the past century, U.S.-Canadian defense cooperation has been close. In 1940, President
Franklin D. Roosevelt and Prime Minister McKenzie King established the Permanent Joint Board
on Defense, which formalized bilateral consultation on military matters and is still in operation.
In 1949, the two countries were founding members of NATO. During peacetime, military
cooperation has occurred chiefly in the context of bi- and multinational organizations.
NORAD
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. In the wake of the September 11 terrorist
attacks, there were discussions of deepening military cooperation along the NORAD model, in
the 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.
In February 2008, the commanding generals of U.S. Northern Command and of its Canadian
counterpart, Canada Command, signed a binational Civil Assistance Plan. Under the plan, the
armed forces of each country, after appropriate consultation with civilian authorities on both sides
of the border, may come to the support of the other country’s military in the event of civil
emergencies such as floods, earthquakes, or the effects of a terrorist attack. In May 2011,
NORAD leaders noted that changes in the Arctic—specifically, ice melt and commercial
development—would likely lead to a need for increased activity in the high north.26
25 United States Department of State. Bureau of Western Hemisphere Affairs. Background Note: Canada. December
22, 2011. “Remarks to the Center for Strategic and International Studies.” February 28, 2005.
26 “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. September 12, 2005.
Binational Planning Group. Final Report. March 13, 2006. http://www.canadianally.com/BPGFinalReport.pdf U.S.
Northern Command website: http://www.northcom.mil/news/2008/021408.html “NORAD Commanders Say Melting
Ice and Energy Development Will Make Arctic Busier,” Canadian Press. May 7, 2011.
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Missile Defense
Ottawa long debated whether it should participate in the U.S. ballistic missile defense (BMD)
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.”27
On February 24, 2005, the Canadian government said that it would not participate in BMD.
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. BMD 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 BMD, leading some analysts to suggest that domestic political
pressures may have guided the decision. In late February 2006, Canada’s Defense Minister said
that the Harper government likely would 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. In April 2008, U.S. Air Force General Gene Renuart, head of NORAD, was quoted as
having said that all incoming intelligence concerning missile threats was shared with Canada.28
Joint Strike Fighter
In February 2002, Canada agreed to participate in the further development of the U.S.-led
multinational Joint Strike Fighter (JSF, or F-35) 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. Canada has reportedly agreed to
consider purchasing the new fighters to replace its own fleet of CF-18 planes when they are
retired in 2017, and has earmarked nearly C$4 billion for the new planes. In June 2007, the
Department of National Defense announced plans to form a new office to evaluate Canada’s
future air defense requirements. Canada appeared to reap rewards from its participation; as of
June 2007, Canadian firms had won 150 JSF contracts worth about $160 million. In addition,
Canadian defense companies stand to benefit from the Pentagon’s plans to purchase additional F-
35s. In July 2010, Defense Minister MacKay confirmed that the government planned to spend
C$9 billion on the acquisition of 65 F-35 aircraft. The opposition Liberals criticized the decision,
arguing that it should have been reviewed by parliament first, while the New Democrats
maintained that the radar-evading F-35 may be more airplane than Canada needs. The media have
also faulted the purchase, pointing to large cost overruns. During a January 2011 visit to Canada,
former U.S. Defense Secretary Robert Gates urged Canada to proceed with its planned
procurement of the aircraft. However, in early 2012, it was reported that the government was
27 “Shoot Down Defence Dreamers.” By Paul Koring. Globe and Mail. June 25, 2003.
28 “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. “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.
“Canada Kept In Loop At NORAD About All Missile Threats.” Ottawa Citizen. April 10, 2008.
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contemplating delay or cancellation of the purchase. Associate Defense Minister Julian Fantino
told a parliamentary defense committee that “we have not as yet discounted the possibility, of
course, [of] backing out of the program.” He later clarified that the government might purchase
fewer than 65, and that “this government will adapt our plans as necessary to maintain this
acquisition within the existing budget.”29
NATO
Canada has been engaged in the debate over NATO’s future. It supported the 1999 and 2004
rounds of enlargement and announced that it would participate in the NATO Response Force,
which the alliance agreed to at its November 2002 Prague summit. At the April 2008 Bucharest
summit, Canada endorsed the addition of Croatia, Albania, and Macedonia; in addition it
supported the proposal to offer Membership Action Plans to Georgia and Ukraine. Finally, as
noted above, Ottawa has maintained troops in Afghanistan since 2002, and its military leaders
have served in a command capacity. In April 2003, then Foreign Minister Graham, along with the
Dutch and German governments, requested that NATO take over command of ISAF.30 In a 2009
speech in the UK, Canadian Defense Minister Peter MacKay cautioned that NATO was being
tested in the crucible of Afghanistan, and urged more equitable burden sharing.31
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.
Canada also supplied 200 troops to NATO’s mission in Macedonia. 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 1,500 troops each to KFOR. In addition Canada has supported non-NATO
peacekeeping operations; it has provided 600 to the initial U.N. peacekeeping mission in East
Timor and has also sent 500 troops to maintain stability in Haiti. In 2011, former Secretary of
Defense Robert Gates lauded Canada for its contributions to the alliance missions in Afghanistan
and Libya.32
In March 2012, however, it was reported that, as a part of its wide-ranging budget retrenchment
efforts, the Canadian government had notified the alliance that it would halt its participation in
the NATO Airborne Warning and Control System (AWACS) and the Alliance Ground
Surveillance (AGS) program; the government estimates savings at C$90 million.33
29 “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. “New Office To Assess
Canada’s Fighter Needs.” Defense News. June 18, 2007. Forces Tag $3.8B To Buy Advanced Jets. Ottawa Citizen.
June 27, 2007. “Canada’s Defense Chief Rejects Criticism of F-35 Jet,” New York Times. July 17, 2010. “Costs Rocket
for Canada’s Jet Fighter,” Toronto Star. May 20, 2011. “Canada’s F-35s: Engines Not Included” Ottawa Citizen. April
17, 2011. “U.S. Calls On Canada to Stick With F-35,” Globe and Mail. January 27, 2011. “Ottawa Having Second
Thoughts on F-35 Jets.” Globe and Mail. March 14, 2012. “Tories Say F-35 Jets Will Come, Eventually.” Toronto
Star. March 17, 2012.
30 “NATO Umbrella Sought.” By Allan Thompson. Toronto Star. April 4, 2003. “NATO Sees Key Role For Canada In
Afghan Security.” Reuters. May 6, 2003. CRS interview of Canadian government official, May 7, 2008.
31 NATO’s Future At Stake In Afghanistan: MacKay. Ottawa Citizen. February 16, 2009.
32 Current Operations. Canadian Expeditionary Force Command website. Updated April, 2009. http://www.comfec-
cefcom.forces.gc.ca/pa-ap/ops/index-eng.asp “Canada Punches Above Its Weight In NATO: U.S. Defence Secretary,”
Montreal Gazette. June 11, 2011.
33 “Canada Bails Out of NATO Surveillance Programs.” National Post. March 19, 2012.
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Afghanistan
Canada was one of the first countries to join the military operation in Afghanistan; its
participation dates back to October 2001. Along with British, Dutch, Danish, and U.S. troops,
Canadian forces have been serving on the front line in the combat operations to counter attacks by
al Qaeda and Taliban fighters. Much of the time, Canada maintained approximately 2,800 troops
in the country. A total of 157 Canadians, including one diplomat, have died in Afghanistan. In
2005, Canada launched a Provincial Reconstruction Team mission in Kandahar. Ottawa also has
provided humanitarian and reconstruction assistance to Afghanistan. Canada is among the top
five donors to the country, and has pledged C$1.9 billion through 2011 in reconstruction and
development assistance.34 As noted above, Canada ended its combat role there in July 2011,
however, Canadian troops (510 as of January 2012) will remain until 2014 to help train Afghan
national security forces.
Libya
In March 2011, the Harper government committed approximately 650 troops, including air, sea,
and land forces, to assisting the U.N.-sanctioned NATO mission to protect the civilian population
in Libya. Canadian CF-18 fighters patrolled the no-fly zone and conducted a disproportionately
large number of air strikes, and the frigate HMCS Charlottetown came under fire from Qadhafi
loyalists, but suffered neither damage nor casualties. In late March, a Canadian general was
appointed commander of NATO military operations in Libya. Some analysts argued that Canada
took part in the mission in order to demonstrate its continuing commitment to the North Atlantic
alliance, and to reinforce Canada’s traditional leadership role in U.N. peacekeeping missions.
According to public opinion polls, there was strong public support for Canada’s participation.35
Haiti
Canada and the United States have worked closely together over the past 17 years with 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 helicopters and nearly 500 troops. In February 2008, then-
Canadian Foreign Minister Bernier traveled to Haiti, where he announced that Ottawa’s total
multiyear aid package would be raised to C$555 million. In the wake of the turmoil over food
shortages, he called for international donors to harmonize their assistance during an April 2008
donor conference. Haiti is the second-largest recipient (after Afghanistan) of Canadian
development assistance. Canada’s former Governor General, Michaëlle Jean, who was born in
34 DND website: http://www.forces.gc.ca/site/newsroom/view_news_e.asp?id=1703. “Canadian Development
Assistance In Afghanistan: Current Projects.” Government of Canada website. January 31, 2008. http://www.canada-
afghanistan.gc.ca/cip-pic/afghanistan/library/afgh_security-en.asp “Canada’s War in Afghanistan Is Over.” National
Post. August 8, 2011.
35 “Dispatch: Canadian Support For the Libya Intervention.” Stratfor. March 28, 2011. “Libya: New Development.”
Foreign Affairs and International Trade Canada web site. September 1, 2011. “Canada: Country Report.” Economist
Intelligence Unit. April, 2011. “Canada Contributed a Disproportionate Amount To Libya Air Strikes: Sources.”
National Post. August 25, 2011.
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Haiti, traveled to the island in January 2009; she visited several development projects, and met
with government and civil society leaders. Jean returned to visit following the January 12, 2010,
earthquake that devastated the country. At an international donor conference held at the United
Nations, Canada made a two-year pledge of C$400 million in humanitarian and reconstruction
assistance, making it the largest per capita provider of aid to Haiti. Canada employs a “whole-of-
government” approach in supporting Haiti, involving the Defense and Foreign Affairs
Departments, the Canadian Border Services Agency, the Royal Canadian Mounted Police, and
Correctional Services Canada.36
Iraq
Canada was disinclined to expand the so-called war on terrorism beyond Afghanistan to Iraq. In
September 2002, during a meeting in Detroit with President Bush, Chrétien reaffirmed Canada’s
preference for a U.N. mandate, a stance that strongly reflected Canadian public opinion.
Washington later 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 participate.” The Bush Administration
expressed disappointment with the decision.37
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. Canada also provided funding in a number of areas, including humanitarian and
reconstruction aid, support for elections, and police training. The Canadian International
Development Agency pledged C$300 million (2003-2010) in assistance to Iraq. In January 2004,
Canada announced that it would cancel Iraq’s $564 million debt.38
Cuba
Cuba has been another issue where the two countries have not always seen eye-to-eye. For
decades, Canada has maintained normal diplomatic relations with Cuba, and has maintained
relatively extensive business links: Canada is Cuba’s third-largest trading partner and its number
one source of tourists. Because of this ongoing commercial relationship, Canadian government
officials 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
36 “Canada Pledges $555 Million In Aid To Haiti.” Reuters. February 24, 2008. Canada Participates In Harmonization
Efforts In Haiti. News Release. Foreign Affairs and International Trade Canada. April 23, 2008. ‘I Can Feel the
Strength of the People,’ Jean Says. National Post. March 30, 2010. Canada Pledges $400 million To Haiti. Ottawa
Citizen. April 1, 2010. Canada’s Role In Haiti. Globe and Mail. April 3, 2010. Government of Canada web site, last
modifiec January 1, 2011. http://www.canadainternational.gc.ca/haiti/engagement/whole_of_government-
pangouvernementale.aspx?view=d
37 “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.
38 “Iraq: Canada’s Commitment.” Canadian International Development Agency web page: http://www.acdi-cida.gc.ca/
iraq#1 Updated May 24, 2007.
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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 75 political dissidents, Ottawa expressed
official disapproval. The transfer of Cuba’s presidency from Fidel to Raul (temporary in 2006,
permanent in 2008) prompted vigorous debate in the Canadian press over what policy Ottawa
should adopt toward Cuba.39 In April 2009, the Obama Administration announced that it would
ease restrictions on family travel and remittances to Cuba and allow greater telecommunications
links with Cuba. The decision was welcomed by Ottawa; Peter Kent, Minister of State of Foreign
Affairs for the Americas, commented that “the election of the Obama Administration has given
real momentum to the sort of change that Canada has been encouraging for a long time.” A
planned trip by Kent to Havana in May 2009 was cancelled, reportedly because Kent had said
that he planned to address the human rights issue during his trip, and because Prime Minister
Harper had referred to himself as an “anti-communist conservative.” The trip was re-scheduled,
and Kent traveled to Cuba later in the year. In mid-2010, relations were strained over the case of a
teenaged Canadian traveler detained for three months in Cuba. The 19-year-old, who suffered
injuries when the vehicle he was driving was sideswiped by a pickup truck, was held by Cuban
authorities under threat of a jail sentence. He was allowed to return in early August.40
China
Relations between Canada and China were somewhat cool during the early years of the Harper
government, when Ottawa criticized Beijing’s human rights practices and conferred honorary
citizenship on the Dalai Lama.41 Observers argue that a turning point occurred in late 2009, when
Prime Minister Harper, reportedly responding to the Canadian business community, made his first
trip to China; Premier Wen Jiabao publicly chided the Canadian Premier for not having visited
sooner. Today, the Canadian Government’s web site characterizes bilateral cooperation as
“strong,” noting that several ministries “have productive cooperation programs and memoranda
of understanding with their Chinese counterparts, and hold regular exchanges ... .” During a July
2011 visit to Beijing, Foreign Minister John Baird declared that relations between the two
countries had “entered a new era,” and described China as a “friend” and “ally.” Prime Minister
Harper traveled to China a second time in February 2012. During the visit, he signed 20
commercial deals worth C$3 billion, as well as a declaration of intent on a long-pending
investment protection agreement.42
39 See, for example: “Castro’s Resignation Unlikely To Change Canadian-Cuban Relations, Experts Say.” The
Canadian Press. February 19, 2008. “Don’t Support Castro’s Island Prison.” National Post. February 19, 2008. “With
Fidel Castro Gone, U.S. Hawks Will Look North.” Toronto Star. February 20, 2008. “The Autumn Of the Patriarch.”
Ottawa Citizen. February 23, 2008.
40 “Unreformed Tyranny.” Globe and Mail. November 23, 2009. “Cuba To Give Canada Expanded Air Access With
Island To Boost Tourism.” Canadian Press. January 15, 2010. “Cuba’s Tainted Image,” Toronto Star. August 4, 2010.
41 Canada: Country Report. Economist Intelligence Unit. August, 2011. p. 11. Canada/China: Harper Trip Raises Hoes
For Relations. Oxford Analytica. December 2, 2009.
42 Canada—China. Government of Canada web site: http://www.canadainternational.gc.ca/china-
chine/bilateral_relations_bilaterales/china_canada_chine.aspx?lang=eng&view=d ’New Era’ For Canada and China,
Baird Says. National Post. July 21, 2011. Baird Embraces China As ‘Friend.’ Globe and Mail. July 19, 2011. “Harper’s
China Visit Ends with Panda Pact.” CBC News. February 11, 2012.
http://www.cbc.ca/news/world/story/2012/02/11/harper-china-saturday.html
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International Criminal Court
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, then-
Canadian Foreign Minister Bill Graham declared that he was “extremely disappointed” with the
U.S. 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.”43
Border Security
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 hijackers entered from Canada, the attacks
sparked renewed debate over Canadian laws regarding the treatment of immigrants seeking
refugee status or political asylum.44 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.”45
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 80% 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.46 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
43 “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.
44 In April 2009, U.S. Department of Homeland Security Secretary Janet Napolitano raised concerns when she averred
that some of the 9/11 terrorists and crossed over from Canada. “Napolitano’s Comments About Canada’s Border Spark
Diplomatic Kerfuffle.” The Canadian Press. April 21, 2009.
45 “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.
46 Canadian Government Fact Sheet: A Unique and Vital Relationship, modified, June 2, 2011,
http://www.canadainternational.gc.ca/can-am/offices-bureaux/welcome-bienvenue.aspx?lang=eng&view=d
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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, intended to permit
coordination of refugee and asylum policy.
The two countries also cooperate extensively on law-enforcement activities around the border.
Since 2002, U.S. Immigration and Customs Enforcement (ICE) and Royal Canadian Mounted
Police (RCMP), along with partner agencies in each country, have established 15 Integrated
Border Enforcement Teams (IBETs) operating at 24 locations at and between U.S.-Canadian ports
of entry. The IBETs are binational, mutli-agency, intelligence-led enforcement teams focused on
identifying, investigating, and interdicting common national security threats and criminal activity.
Between 2005 and 2010, RCMP and U.S. Coast Guard agents also participated in the Shiprider
pilot program, allowing fully cross-trained and cross-designated agents from each country to
conduct joint enforcement exercises along international waterways. The countries signed an
agreement to expand and extend Operation Shiprider in 2009, but the agreement has yet to be
approved by the Canadian Parliament.
In February 2011, President Obama and Prime Minister Harper signed the Beyond the Border
declaration, which described their shared visions for a common approach to perimeter security
and economic competitiveness. The 2011 agreement focuses on information sharing and joint
threat assessments to develop a common and early understanding of the threat environment;
infrastructure investment to accommodate continued growth in legal commercial and passenger
traffic; integrated cross-border law enforcement operations; and integrated steps to strengthen
shared cyber-infrastructure.
This vision was fleshed out by the Beyond the Border Action Plan, released during a meeting of
the two leaders on December 7, 2011. It set out goals and progress metrics related to:
• harmonized cargo screening under the “cleared-once, accepted twice” principle,
• joint inventories and gap analysis related to travel and trade threat assessments
and border surveillance,
• automated biographic and biometric data sharing,
• an integrated entry-exit system,
• enhanced pre-clearance of goods and travelers, and
• expansion of interoperability among law enforcement and deployment of cross-
designated personnel.47
The Western Hemisphere Travel Initiative (WHTI), a provision of a 2004 U.S. law requiring
travelers passing between the two countries to present a passport, a NEXUS card, or an
equivalent secure, approved document, at the border came into effect on June 1, 2009. The
Department of Homeland Security (DHS) has worked with the Canadian government to develop
an alternative document that is secure, inexpensive, and would be carried anyway—for example,
47 United States-Canada Beyond the Border Action Plan, December 2011, available at:
http://www.dhs.gov/xlibrary/assets/wh/us-canada-btb-action-plan.pdf
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a driver’s license containing enhanced biometric information. Currently, such enhanced licenses
are being issued by the provinces of British Columbia, Manitoba, Ontario, and Québec, and by
the states of Michigan, New York, Vermont, and Washington. In March 2011, GAO reported a
greater than 95% compliance rate with WHTI requirements in FY2010.48
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.
In 2004, the Canadian government created a Department of Public Safety and Emergency
Preparedness, a counterpart to the U.S. 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 RCMP, and increasing
outlays for countering nuclear, biological, and chemical weapons attacks.49
In early June 2006, Canadian police conducted a series of raids in the Toronto area, arresting 18
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 and capture hostages. Prime Minister Harper was said to
have been a key target. Most of the suspects were in their teens or early 20s. All were either
Canadian-born or had immigrated to the country at an early age. They 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. Of the Toronto 18, seven
admitted guilt and four were convicted. Charges against the other seven were stayed or dropped.50
U.S. officials claimed that the arrests proved that Canada’s law enforcement and intelligence
services were 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
48 U.S. Government Accountability Office, Border Security: DHS Progress and Challenges in securing the US
Southwest and Northern Borders, GAO-11-508T, March 30, 2011, p. 6, http://www.gao.gov/new.items/d11508t.pdf.
49 For another brief overview of efforts to secure the U.S.-Canada border, see Joint Counter-Terrorism Initiatives. By
Melissa Radford. Border Facilitation: Products and People. By June Dewetering. Both in Canada and the United
States: Shared Interests and Concerns. Canadian Library of Parliament. January, 2009. http://www.parl.gc.ca/
information/library/PRBpubs/prb0834_00-e.htm
50 “Recent Terrorism-related Cases in Canada,” January 24, 2011, http://www.cbc.ca/news/canada/story/2011/01/21/f-
terror-cases-quickfacts.html
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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.51
In a late August 2010 sting operation known as Project Samosa, the RCMP and the Canadian
Security and Intelligence Service (CSIS) seized bomb-making materials and arrested six men
suspected of conspiring to commit acts of terrorism and to transfer funds to insurgents in
Afghanistan. Authorities stated that the detainees, who were said to be mainly educated
professionals, are believed to have received training in Afghanistan or Pakistan. One of the
detainees was a contestant on the “Canadian Idol” television show in 2008.52 Three of the men
were charged with conspiracy and other offenses; two of them have been released on bail.53
Economic and Trade Issues
The Canadian economy experienced a shallower recession and has recovered faster than the
United States. Canada officially exited the recession in the 1st quarter of 2010. After dropping by
2.8% in 2009, Canadian gross domestic product (GDP) grew by 3.2% in 2010, 2.5% in 2011 and
the Economist Intelligence Unit and IHS Global Insight expect the economy to expand by 1.9%
and 2.0%, respectively, in 2012.
In contrast to the United States, the Bank of Canada has raised interest rates three times—to a 1%
target rate—to constrain demand. This interest rate, along with sustained commodity prices, led to
the Canadian dollar flirting with parity with the U.S. dollar for much of 2010, and remaining
above parity through the first eight month of 2011, dropping to a yearly low of $0.94 on October
4, 2011 and gradually rising back towards parity in the first three months of 2012. The
unemployment rate, which hit a generational low of 5.8% in January 2008, peaked at 8.7% in
August 2009, and gradually fell back to 7.5% by the end of of 2011.54 Canada recorded its first
current account (CA) deficit in nine years in the fourth quarter of 2008, and the collapse in trade
due to the great recession led to a CA deficit of $36 billion for 2009 as a whole. While the volume
of trade recovered in 2010, the CA deficit remained at about $40 billion, around 2.8% of GDP in
2011.
Budget Policy
While Canada is heavily dependent on the world economy, and thus easily affected by it, some
Canadian policymakers believed that the country was in a relatively better position to ride out the
economic downturn. After all, Canada had profited handsomely from the resources boom that
only began to wind down in the summer of 2008. Also, Canadians were reassured by its
51 “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.
52 “Third Terror Suspect was Canadian Idol Contestant,” Toronto Star, August 26, 2010; August 27, 2010. “Canada
Arrests Show Affluence Is No Bar To Militancy,” Oxford Analytica. August 27, 2010. “Few Details Given As 4
Canadians Are Held In Terrorist Plot,” New York Times. August 28, 2010.
53 “Recent Terrorism-related Cases in Canada,” January 24, 2011, http://www.cbc.ca/news/canada/story/2011/01/21/f-
terror-cases-quickfacts.html
54 Economic data are from Economist Intelligence Unit, wire service reports, and Statistics Canada.
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comparatively more regulated banking system, which was able to avoid the worst excesses of the
U.S. financial meltdown. However, Canada could not long avoid the effects of the collapse of the
U.S. housing market, the woes of the U.S. automotive sector, and the seizing up of credit markets
worldwide. Canada entered into recession in the first quarter of 2009 and would not emerge from
recession until a year later.
Canada’s Stimulus Program
Following the reconvening of parliament in January 2009, the government introduced a C$258.6
billion budget, which called for C$40 billion in stimulus spending and tax cuts for FY2009-
FY2011. The stimulus consisted of a package of income tax cuts, employment insurance (EI)
benefit extensions, job retraining, ‘hard’ infrastructure spending, tax credits for home renovation,
retrofits for social housing, and investments in First Nation’s health programs.55 In all, the C$40
billion represents a stimulus of about 1.5% of GDP in the first year and 1.1% in the second year.
Increased spending represents approximately 72% of this package and tax cuts contribute the
remaining 28%. The March 2010 budget allocated the remaining C$19 billion in stimulus.
The 2009 budget also marked a return to deficit spending for Canada after 12 successive budgets
in balance or surplus. The 2009 budget contemplated a deficit of C$34 billion the first year, and
predicted a total of C$81 billion in borrowing over five years before the budget was expected to
return to surplus in 2013. The March 2010 budget revised upward the 2009 deficit to C$53.8
billion, proposed a C$49.2 billion deficit in 2010, and envisaged the budget returning to balance
in 2015 with a total C$158.4 billion increase in the national debt.
The return to deficit spending, while acknowledged as necessary by most of the political
spectrum to combat the severe economic recession, was not undertaken lightly. Prior to the
“austerity” budget of 1995, Canada had racked up 27 straight years of deficit spending. At its
peak in 1996, Canada’s public debt represented 101.6% of GDP, and government sector spending
reached 53.6% of GDP in 1993. Realizing this course was unsustainable, the Liberal government
of then Prime Minister Jean Chrétien and his Finance Minister Paul Martin embarked on a
financial austerity plan using such politically risky measures as cutting federal funding for health
and education transfers, applying a means test to those eligible for Seniors Benefits, and cuts in
defense. A nationwide goods and services tax was introduced to help close the gap. Under this
budget discipline, the government submitted a balanced budget in 1998 and a political consensus
emerged not to resort to deficit spending, at least until 2009.
The March 2012 budget confirmed that the government’s program of fiscal consolidation is
underway. The budget intends to save approximately C$5.2 billion on an annualized basis by
2014-2015 through:
• elimination of 19,200 public service positions (about 4.8% of the federal
government),
• a 10% cut to the Canadian Broadcasting Corporation (CBC),
• increasing the eligibility of Old Age Security (OAS) from 65-67 to be phased in
from 2023-2029,
55 “Tories to Aggressively Implement Budget Spending Measures,” The Hill Times, February 2, 2009.
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• cuts to health care and public safety (RCMP and corrections), and
• elimination of the penny, among other initiatives.
The 2012 budget contemplates a C$21.1 billion deficit for the current 2012-13 period with the
defict narrowing to C$1.3 billion in 2014-15 and a return to surplus in 2015-16.56
Energy
Canada is the United States’ largest supplier of energy—including oil, uranium, natural gas, and
electricity—and the energy relationship has been growing.57 Canada is the world’s fifth-largest
petroleum producer, and its reserves are believed to be the third largest in the world only after
those of Saudi Arabia and Venezuela; Canada’s sources of oil include traditional and offshore
wells and, increasingly, Alberta’s oil sands.58 In 2010, the value of U.S. petroleum and natural gas
imports from Canada reached $82.2 billion from $63.7 billion in 2009. Canada provides 22% of
U.S. crude oil imports and supplies 85% of U.S. natural gas imports.59 Canada is particularly
valued because it is considered a reliable source of energy, as it is not a member of OPEC. The
two countries are also working on the development of pipeline construction projects. China has
shown interest in Canada’s oil sector, and has recently bought stakes in the Alberta’s oil sands
projects. Canada also a net exporter of electricity to the United States, and the North American
electricity grid is closely interconnected.
Bilateral Trade Issues
The United States and Canada enjoy the largest bilateral commercial relationship in the world;
total two-way cross-border trade amounted to over $1.3 billion per day in 2010. Over the past
twenty years, U.S.-Canada trade relations have been governed first by the 1989 U.S.-Canada Free
Trade Agreement and, subsequently, by the 1994 North American Free Trade Agreement. These
agreements, along with the conclusion of the Uruguay Round of multilateral trade negotiations
and the creation of the World Trade Organization, contained mutual concessions on commercial
trade barriers, and, more importantly perhaps, established binding dispute settlement mechanisms.
While these agreements have resolved some of the sharp differences from the past, questions
regarding the effectiveness of dispute resolution mechanism remain.
Meanwhile, 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.
56 See Budget 2012 site, http://www.budget.gc.ca/2012/home-accueil-eng.html
57 See CRS Report R41875, The U.S.-Canada Energy Relationship: Joined at the Well, by Paul W. Parfomak and
Michael Ratner.
58 U.S. Energy Information Administration (EIA), Country Analysis Brief: Canada, April 2011,
http://www.eia.gov/countries/cab.cfm?fips=CA
59 2009 statistics from U.S. International Trade Commission http://dataweb.usitc.gov
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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)
duties on Canadian softwood. Canada challenged the agency decisions under NAFTA and in the
WTO.
After several years of inconclusive and sometimes conflicting litigation, the two sides announced
that they had struck a seven-year agreement on softwood on April 26, 2006 (the SLA). 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 and/or quotas. In addition, the United States will return to Canada a large
majority of the duties it had collected.60
The implementation of the softwood lumber agreement has not been without controversy. As the
depressed housing market has reduced demand for softwood lumber, the market price has been
under the level ($355 thousand board feet) in which export taxes must be charged. The United
States and Canada resorted to arbitration over the use of adjustment mechanisms to calculate the
quotas used for eastern Canadian lumber. The arbitral panel sided with the United States, and
after Canada did not implement the panel’s recommendation, the United States levied a 10% tariff
on the affected lumber to recoup the compensation awarded by the arbitral panel in April 2009.
In January 2008, the United States also requested arbitration over six provincial forest sector
assistance programs in Québec and Ontario, programs that the United States believes contravene
the anti-circumvention provision of the SLA. In January 2011, the LCIA found certain of these
programs breached the SLA, and Canada began imposing additional charges on lumber from
Quebec and Ontario for the duration of the agreement.
The Obama Administration has also sought arbitration under the SLA over timber grading
practices in British Columbia. They claim that the BC government has changed its classification
procedures for timber and has been grading an increasing amount of its cut as salvage Grade 4
lumber. For its part, Canada attributes this increase to an infestation of mountain pine beetles and
rejects the assertion that this policy represents a subsidy for Canadian producers. A panel was
established in January 2011, although no determination has been made in this dispute.
Country of Origin Labeling
The 2002 Farm Bill required retailers to provide country-of-origin labeling (COOL) for fresh
produce, red meats, seafood, and peanuts. The requirements for seafood were implemented on
September 30, 2004, but COOL requirements for other products were delayed until September
30, 2008. The 2008 Farm Bill, The Food, Conservation, and Energy Act of 2008 (P.L. 110-246),
reaffirmed this timetable and added goat meat, chicken, ginseng, pecans, and macadamia nuts as
covered commodities. A final rule was issued on January 15, 2009, effective March 16, 2009. A
60 “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.
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WTO dispute settlement panel found that COOL violated the WTO’s Technical Barriers to Trade
Agreement in November 2011. The United States appealed that ruling on March 23, 2012.
Buy American Stimulus Provisions
The Buy American provision of the American Recovery and Reinvestment Act of 2009 (ARRA,
§1605, P.L. 111-5) states that no funds shall be appropriated for building projects or public works
projects unless all the iron, steel, and manufactured goods are made in the United States. This
provision was subject to three discrete waivers: (1) applying this policy would not be in the public
interest; (2) the iron, steel, or manufactured products are not produced in sufficient quantities or
of a satisfactory quantity in the United States; or (3) the inclusion of the applicable U.S. products
would increase the cost of the overall project by more than 25%. The Senate added language to
ensure that the provisions are applied in a manner consistent with U.S. trade obligations.
With regard to Canada, the United States has undertaken government procurement obligations
under the World Trade Organization’s (WTO) Agreement on Government Procurement (AGP)
and under the North American Free Trade Agreement (NAFTA). The AGP is a plurilateral
agreement that only binds those WTO members that agreed to undertake obligations under it.
Furthermore, the AGP only applies to the sectors and the procurement agencies that the national
government (and sub-national government agencies) includes in its schedule of national
commitments. NAFTA contains similar commitments on the national level, but excluded sub-
national entities.
Both the United States and Canada have undertaken extensive obligations to open their
government procurements at the national level under both agreements. However, because
Canadian provinces never signed up to the AGP, as had 37 U.S. states, regulations implementing
the ARRA excluded Canadian firms from bidding on ARRA-financed contracts that are tendered
by the U.S. states.61 In February 2010, the United States agreed to permit Canadian firms to bid
on sub-federal ARRA contracts in return for a Canadian commitment to sign its provinces up to
the AGP, which it did by notice to the WTO on March 19, 2010. In addition, both parties
committed themselves to begin negotiations reciprocally to expand commitments for market
access in procurement between the two countries.62
Intellectual Property Rights
In 2011, the U.S. Trade Representative again listed Canada on its Special 301 report on
intellectual property rights protections to the priority watch list for intellectual property rights
protections.63 The priority watch list indicates that the listed trading partner has problems with
respect to IPR protection, enforcement, or market access for persons relying on intellectual
property and that these problems merit “increased bilateral attention.” In this designation, Canada
joins such notorious IPR violators as China and Russia. The United States again urged Canada to
implement the World Intellectual Property Organization’s Copyright treaty, which has been
61 Office of Management and Budget, “Updated Implementing Guidance for the American Recovery and Reinvestment
Act of 2009, April 3, 2009. pp. 160-166.
62 “U.S.-Canada Announce Buy American Deal, Provinces to Sign GPA,” Inside U.S. Trade, February 12, 2010.
63 United States Trade Representative, 2011 Special 301 Report, p. 27. Available at http://www.ustr.gov/webfm_send/
2841.
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signed but not ratified by Canada.64 The United States also expressed concern about trade in
pirated and counterfeit goods in Canada, and urged greater enforcement and “deterrent-level”
penalties for IPR infringement. The United States urged Canada to adopt tougher border security
measures to crack down on this trade, including allowing for the seizure of pirated and counterfeit
goods by customs agents without a court order. The government re-introduced the Copyright
Modernization Act (C-11) in September 2011, and is pending debate in the House of Commons.
This legislation was intended to bring Canadian copyright law into conformance with the WIPO
Internet treaties and allow for some format shifting and fair-dealing (fair-use) exceptions, but
would prohibit the circumvention of digital protection measures. It also would have clarified the
rights and responsibilities of internet service providers for infringement of their subscribers.65
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.
In 2002, Canada ratified the Kyoto Agreement; in 2006, however, the government announced that
emission targets had been exceeded. The Harper government has established a goal of cutting
greenhouse gas emissions 20% by 2020, mainly by increasing reliance on hydro- and nuclear
power, and by increasing carbon abatement in the oil sands, but it has also declared that it would
coordinate its greenhouse emission strategy with the United States. In December 2011, Canada
announced that it was withdrawing from the Kyoto Protocol, after having declined to take on a
second phase commitment in June 2011.
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
(PST) and with sound conservation practices. After a pause, talks resumed in 1997, and the two
sides finally reached an accord in 1999; both countries are monitoring implementation of the
agreement.66 The so-called Annex IV fisheries regimes of the PST were renegotiated in 2008.
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 recreational 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
64 The WIPO Copyright treaty updates existing copyright protections for Internet and other electronic media.
65 “Bill Would Update Canadian Copyright Act To Respect Needs of Digital Age, Official Says,” International Trade
Reporter, June 10, 2010.
66 CRS Report RL30234, The Pacific Salmon Treaty: The 1999 Agreement and Renegotiated Annex IV, by Eugene H.
Buck.
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governments, the United States agreed to install a permanent filtration system at the Devils Lake
outlet. However, this filtration system, estimated to cost $15 million, has not been installed. In
February 2008, the North Dakota Supreme Court found that the state had acted improperly in
changing certain environmental standards for the water released from the lake’s outlet. At this
time, the channel operates intermittently, subject to North Dakota health regulations. Meanwhile,
Manitoba has offered to address the issue of a 30-mile border road that acts as a dike, trapping
water in northeastern North Dakota, if North Dakota installs the filtration system at the Devils
Lake Channel. North Dakota’s governor demurred, maintaining that the two issues are
unrelated.67
Other environmental problems the two countries have dealt with in recent years include
secondary wastewater treatment, control of predator fish and other invasive species introduced
into the Great 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, and have been the subject of legislation
in the U.S. Congress. 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.
Canada and Afghanistan68
Issue Definition
Canada has participated in military operations in Afghanistan from the outset of the conflict in the
fall of 2001. In early 2002, Ottawa deployed troops to Kandahar. However, as the mission
changed focus from peacekeeping to counter-insurgency operations involving combat and
casualties, Canadian public support declined. Parliament approved legislation requiring Canada to
end its combat role by July 2011, and for all troops to be withdrawn by the end of that year. In the
fall of 2009, a long-running scandal erupted when it was alleged that Canadian troops had turned
over insurgent prisoners to Afghan officials, who subsequently tortured the detainees. The Obama
Administration has expressed support for a continued role in Afghanistan by Canada. In late
2010, the Canadian government announced that, among other measures, it would maintain a
sizeable military training contingent in Afghanistan through 2014.
67 “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. Manitoba Scores Partial victory In Water Dispute With North Dakota. The Canadian
Press. February 22, 2008; “ND governor to Manitoba: No deal on water dispute,” Fargo Forum, May 8, 2009.
68 Prepared by Carl Ek, Specialist in International Relations; Foreign Affairs, Defense, and Trade Division.
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Background and Analysis
Canada was one of the first countries to join the U.S.-led military operation in Afghanistan. In
October 2001, the Canadian government launched Operation Apollo, in support of Operation
Enduring Freedom. Nearly 900 infantry troops and approximately 40 members of Canada’s
Special Forces unit, Joint Task Force 2, served in the initial combat in Afghanistan. Canadian
forces—about 2,800 during most of their deployment—served on the front line in combat
operations in southern Afghanistan to counter attacks by al Qaeda and Taliban fighters. It was the
fifth-largest national contingent. Canadian troops operated without national combat operational
restrictions (“caveats”). Canada has suffered among the heaviest casualties proportionally of the
NATO coalition member states; a total of 158 Canadians, including one diplomat, have been
killed in Afghanistan.
In addition to infantry troops, Canada contributed a helicopter squadron and Operational Mentor
and Liaison Team (OMLT ) trainers; in addition, Royal Canadian Mounted Police have assisted
the Afghan National Police. In August 2005, Canada established a Provincial Reconstruction
Team in Kandahar in the volatile southern part of the country. Ottawa also has provided
humanitarian and reconstruction assistance to Afghanistan, which is the number one recipient of
Canadian foreign aid. Canada is among the top five donors to the country, and pledged C$1.9
billion (about $1.9 billion) through 2011 in reconstruction and development assistance. Canada
also shared the leadership of Regional Command-South with the Netherlands and the UK.
As Canadian military operations in Afghanistan shifted from peacekeeping to counter-insurgency,
public support for Canada’s presence diminished. However, Prime Minister Harper was willing to
challenge public opinion over Canada’s participation in Afghanistan; he relied upon an approach
that emphasized training Afghan troops to replace departing Canadians. In 2006, 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.
In the fall of 2007, Harper appointed an advisory panel to review options on the mission. The
commission found that the troop presence was justifiable and that the mission should be
maintained until 2011, but recommended that Canadian forces be withdrawn unless NATO allies
stepped up their contributions. This became the basis of a compromise between the Liberals and
Conservatives. Harper declared that Canadian troops would be withdrawn unless other NATO
countries provided an additional 1,000 troops. At the April 2008 NATO summit in Bucharest,
France and the United States announced that they would commit 800 additional troops.
Canada’s Afghanistan mission was thrown into the national spotlight in November 2009, when a
Foreign Ministry whistleblower publicly alleged that, in 2006 and 2007, Canadian forces had
turned combatant prisoners over to local Afghan authorities, who subsequently tortured the
detainees; Foreign Affairs Minister Peter MacKay and other officials denied the charges, but later
backtracked somewhat. The controversy, which generated considerable public interest, continued
into mid-2010.
In November 2010, Canada’s Ministers of Foreign Affairs, Defense, and International
Cooperation announced that the Afghan mission would be extended until 2014. They outlined a
new role for Canada to help promote security, stability, and self-sufficiency in Afghanistan, and
stated that it would focus on four areas: education and health of children and youth; promoting
security and rule of law; supporting regional diplomacy; and providing humanitarian assistance.
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Toward that end, the ministers said that up to 950 Canadian troops would be provided to help
train the Afghan National Army, and up to 45 Canadian civilian law enforcement officers to help
develop Afghan police forces. The ministers declared that the estimated cost of these various
initiatives from 2011-2014 would be approximately C$700 million.
Status of the Issue
In March 2010, U.S. Secretary of State Hillary Clinton said during a visit to Ottawa that she
hoped Canada would continue its presence in Afghanistan after 2011, suggesting “a training role
instead of a combat role, a logistics-support role instead of front-line combat.” Some observers
noted that the Obama Administration and NATO officials had privately expressed concerns that
the withdrawal of Canadian troops might prompt other allies to bring their troops home. As noted
above, Canada ended its combat role there in July 2011, however, Canadian troops (510 as of
January 2012) will remain until 2014 to help train Afghan national security forces. In December
2011, it was reported that Canadian Foreign Affairs Minister John Baird said that Canada would
provide C$100 million per year to Afghanistan between 2011 and 2014.
Questions
1. Please describe Canada’s new role in Afghanistan. Will Canadian military trainers be
accompanying Afghan troops on patrols? If so, under what rules of engagement will the Canadian
troops operate?
2. Do you believe that Canada’s decision to extend its mission in Afghanistan has influenced the
policies of other allies?
Canada’s Arctic Sovereignty Claim69
Issue Definition
Scientists have forecast that, by 2030 or earlier, global warming will reduce the Arctic ice pack in
Canada’s northern archipelago sufficiently to create a “northwest passage” that will permit
commercial ship traffic through the summer months. If created, a northwest passage would
significantly reduce transit distances for commercial ships operating between certain ports. It
could also be used by commercial fishing or cruise ships, ships supporting Arctic scientific
research or resource exploration, or military vessels. The presence of ships in the passage could
require the establishment and enforcement of shipping lanes and other rules for ensuring safe ship
operations, add to existing demands for maritime search and rescue capabilities, and create a risk
of environmental damage to the Arctic. The use of the passage by foreign military ships might be
viewed as creating potential security risks to Canada (and the United States). Successive
Canadian governments have maintained that such a passage would be an inland waterway, and
would therefore be sovereign Canadian territory, subject to Ottawa’s surveillance and regulation.
The United States, the European Union, Japan, and others assert that the passage would constitute
an international strait between two high seas.
69 Prepared by Carl Ek, Specialist in International Relations; Foreign Affairs, Defense, and Trade Division.
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Background and Analysis
Arctic sovereignty has been an issue for Canada for decades. In 1985, a U.S. icebreaker, the Polar
Sea, caused an uproar in Canada when it traversed the waters of the northern archipelago without
first seeking permission. Afterward, Washington and Ottawa came to an agreement in 1988 under
which the United States pledged to notify Canada when its ships would transit the region, and
Canada agreed to grant its consent. In recent years, however, the question over who, if anyone,
would have control over the regional waters has intensified as scientific consensus has grown that
the melting of the polar icecap will open up a Northwest Passage during the summer months.
The debate over the Northwest Passage has commercial, environmental, and security
considerations. The opening of a channel of water during the summer months through Canada’s
36,000-island arctic archipelago would cut shipping routes between Europe and Asia by 3,000-
4,000 miles, saving time and fuel costs. However, many Canadians are concerned that unfettered
maritime traffic through the region could result in serious environmental hazards ranging from
the catastrophe of an oil spill to more cumulative pollution caused by ocean dumping of ballast
and garbage by transiting vessels. In terms of security, the Canadians are concerned that
recognition of the passage as international waters would result in free access to naval warships
and submarines, including, for example, those of Russia and China.
Canada seeks recognition of its sovereignty over the entire area, among other reasons, because of
a strong national identification with its northern regions. Ottawa argues that it has a historical
claim based on centuries of Inuit inhabitation—of the islands and of the ice extending from them.
From a practical standpoint, Canada wishes to have the ability to enforce protection of the fragile
arctic ecosystem and to ensure sustainable commercial fishing practices. In addition, the
Canadians want there to be no doubt that they have rights to the region’s abundant natural
resources, including oil, natural gas, minerals, and precious metals.
The Harper government has been seeking to bolster Canada’s sovereignty claim by maintaining
and expanding the “Northern Strategy” launched by his Liberal predecessors. The most visible
part of Conservatives’ plan has been the establishment of a stronger military presence. In July
2007, Harper announced plans for the construction of 6-8 armed, medium-sized icebreakers to
patrol the north. The following month, he traveled to Resolute Bay, Nunavut, and announced
plans to construct a winter warfare training center and deep-water port in the region. He declared
that “Canada’s new government understands that the first principle of Arctic sovereignty is: Use it
or lose it.” Some Canadians, however, have criticized Harper for seeking to militarize the debate.
The prospective passage raises jurisdictional questions. Canadians maintain that it would be an
internal waterway and would likely require all vessels to register with their coast guard’s vessel
traffic reporting system. They contend that this would facilitate possible search-and-rescue
missions, and would dissuade ships bearing contraband from sailing through the region. There is
general agreement that the natural resources in the region are Canadian; the debate concerns free
transit rights. Analysts note that the U.N. Convention on the Law of the Seas calls for the right of
transit passage “between one part of the high seas ... and another part of the high seas.” In
addition, some analysts believe that the recognition of the Northwest Passage as a Canadian
inland waterway would set an international precedent that might be viewed as applicable
elsewhere in the world. Other governments could echo Canada’s sovereignty claim and prohibit
the passage of U.S. naval ships, as well as of oil tankers bound for the United States; the Straits of
Malacca and Hormuz have been cited as examples. Others, however, such as former U.S.
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Ambassador to Canada Paul Cellucci, argue that it would be in the interests of U.S. national
security if Canada were to manage and police shipping through the straits.
Several possible solutions have been put forward. Some argue that Canada could achieve its
objectives through regulations approved by the U.N. International Maritime Organization. Also, it
has suggested that NORAD and the Arctic Council might be able to coordinate cooperative
patrolling of the passage. Others—though not the United States—have proposed that the
countries bordering the Arctic adopt an agreement prohibiting military, residential, or commercial
use of the region, as was done for Antarctica in 1959. Finally, some believe that a renewed and
updated version of the 1988 U.S.-Canada agreement would suffice.
Status of the Issue
On January 9, 2009, the outgoing Bush White House issued National Security Presidential
Directive 66, entitled Arctic Region Policy. The document reiterated the Administration’s stance
regarding Canada’s sovereignty claim, stating that “the Northwest Passage is a strait used for
international navigation.” The Obama Administration is currently operating under the policy
directive. For the time being, Ottawa and Washington will continue to “agree to disagree.”
However, Canadian analysts have argued that the debate over who should manage the straits will
intensify if ships carrying hazardous materials or illegal immigrants are discovered in the region.
In mid-2011, Foreign Minister Lawrence Cannon announced a new “Statement on Canada’s
Arctic Policy,” which reaffirmed the government’s commitment to Canada’s sovereignty, to
economic and social development, to environmental protection, and to empowerment of the
peoples of the region. The statement also emphasized the government’s intention to negotiate
settlements to long-standing boundary disputes with the United States and Denmark. The
government has emphasized its commitment to the Arctic through frequent visits by government
officials; Prime Minister Harper made his sixth annual trip to the north in August 2011. Because it
has been highlighted as a priority area for the Harper government, this issue will likely continue
to be the subject of bilateral discussions between U.S. and Canadian policymakers.
Questions
1. Several governments have taken issue with Canada’s assertion of sovereignty over the Arctic
waters. Do any foreign countries support Canada on this question? Has the Canadian government
offered a legal precedent for its claim?
2. If Canada were to win recognition of its sovereignty over the passage, how might it regulate
shipping traffic through the straits?
3. What might be the security, economic and environmental consequences for the United States if
Canada were to win its sovereignty claim? If the passage were to be declared international
waters?
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Inter-American Cooperation70
Issue Definition
In 2007, Prime Minister Harper declared that the Americas are a critical foreign policy priority for
Canada, and committed to deepening and broadening Canada’s engagement in the region. Since
then, Canada has sought to expand its presence throughout the region while reinforcing bilateral
ties and strengthening regional organizations. The Conservative government’s current objectives
for the hemisphere closely align with those of the Obama Administration, with both countries
advancing policies designed to reinforce democratic governance, increase economic prosperity,
and enhance regional stability and security.
Background and Analysis
Although Canada has long been active in the region, its commitment to sustained engagement in
inter-American relations is relatively recent. Throughout the 20th century, Canada forged strong
diplomatic and commercial ties with many Latin American and Caribbean countries.
Nevertheless, it generally did not consider the region to be a top foreign policy priority.
Authoritarian governance and widespread poverty fueled negative perceptions of the region and
led Canada to focus its attention elsewhere. According to a number of analysts and former
officials, Canada was also reluctant to engage extensively in hemispheric affairs out of concern
that it could be drawn into disputes with the United States, which had traditionally played a
dominant role in the region.
Canada began to reexamine its role within the Western Hemisphere as the Cold War drew to a
close and Latin American and Caribbean countries opened their markets and reestablished
democratic governance. In 1989, the Progressive Conservative government of Brian Mulroney
(1984-1993) completed a full cabinet review of Canada’s position in the hemisphere and declared
that inter-American cooperation was integral to its interests. Canada became a full member of the
Organization of American States (OAS) in 1990, where it has been a leader in democracy
promotion efforts and one of the drivers of the Summits of the Americas process. Canada also
sought to expand commercial ties in the region by pursuing trade liberalization. In 1994, Canada
entered the North American Free Trade Agreement (NAFTA) with Mexico and the United States,
and participated in the initiation of negotiations over a hemispheric Free Trade Area of the
Americas (FTAA). Although the FTAA negotiations were effectively abandoned in 2005, Canada
continued to pursue bilateral trade agreements with many countries in the region.
Since taking office in 2006, Prime Minister Harper has sought to reinvigorate Canada’s
engagement in the hemisphere. He created a new Minister of State of Foreign Affairs position
with special responsibility for the Americas. He also placed a renewed emphasis on trade, signing
agreements with Colombia, Honduras, Panama, and Peru, and pursuing negotiations with several
other nations. Within the OAS, Canada continues to support efforts to strengthen democratic
governance. It also is encouraging the organization to better define its priorities and become more
effective and accountable. Additionally, Canada has provided substantial amounts of assistance to
support security and economic and political development efforts in the region. In fiscal year
70 Prepared by Peter J. Meyer, Analyst in Latin American Affairs; Foreign Affairs, Defense, and Trade Division.
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2009-2010, Canada provided over C$807 million (about U.S.$811 million) in bilateral and
multilateral aid to Latin America and the Caribbean. Selected issues in Canada’s hemispheric
relations are discussed below.
Organization of American States
Although Canada remained outside of the OAS for many years, it became a permanent observer
in 1972 and a full member in 1990. Canada is currently the second-largest financial contributor to
the OAS after the United States. In 2011, Canada had an assessed contribution of U.S.$11.3
million, and provided an additional U.S.$10.8 million in voluntary contributions to support
activities such as electoral observation missions and the special OAS missions in Haiti and
Colombia. The Harper government’s emphasis on effective, results-oriented multilateralism has
led it to support efforts to improve the organization’s governance. Canada is providing funding to
introduce results-based management at the OAS, and chairs a working group seeking to improve
the priority-setting process and accountability of the organization. It also is working with the
OAS to improve aid effectiveness in the hemisphere, supporting donor coordination efforts and
chairing a working group to strengthen the Inter-American Committee for Integral Development.
Since becoming a full member of the OAS, Canada has taken a particular interest in advancing
democratic governance in the hemisphere. One of its first initiatives was to create the Unit for the
Promotion of Democracy, which focused on strengthening democratic institutions and observing
elections. Canada was also instrumental in the drafting of the Inter-American Democratic Charter,
a document signed by all 34 participating member states asserting that all peoples of the Americas
have a right to democracy and their governments have an obligation to promote and defend it.
Canada joined with the rest of the member states in voting to invoke the charter and suspend
Honduras from the OAS following the June 2009 ouster of that country’s president. After
Honduras held elections in November 2009, Canada quickly recognized the new government and
pushed to end the OAS suspension, which was ultimately lifted in June 2011.
Haiti
Although Canada has few historic ties to Haiti, it has worked closely with the United States and
Latin American and Caribbean partners to support stability and development efforts in the
country over the past 17 years. As part of a U.N. mission in 1994, a contingent of the Canadian
armed forces and members of the Royal Canadian Mounted Police assumed control from
departing U.S. forces who had helped restore the democratically elected government of Jean-
Bertrand Aristide. In 2004, after the Aristide government stepped down in the face of armed
rebellion, Canada joined the United States and other partners in providing peacekeepers to the
U.N.-authorized Multinational Interim Force (MIF). Canada initially deployed nearly 500 troops
to the MIF, and has continued to participate in the Brazilian-led U.N. Stabilization Mission in
Haiti (MINUSTAH). Following the January 2010 earthquake that devastated Haiti, Canada
temporarily dispatched over 2,000 armed forces personnel to assist in security and humanitarian
relief efforts. It currently has 131 police and military personnel serving in MINUSTAH.
In addition to assisting in security efforts, Canada has sought to foster development in Haiti. Haiti
receives over 41% of Canada’s aid to Latin America and the Caribbean, and was the largest
recipient of Canada’s international assistance world-wide in fiscal year 2009-2010. Canada is a
member of the Interim Haiti Recovery Commission and has provided over C$1 billion (about
U.S.$1.005 billion) in aid to Haiti since 2006, including an estimated $252.9 million (about U.S.
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$254 million) in fiscal year 2010-2011. The country’s assistance to Haiti is concentrated in three
areas: increasing food security, securing the future of children and youth, and stimulating
sustainable economic growth. Canada has also been a leader in debt relief efforts. It forgave
C$2.3 million (about U.S.$2.31 million) in loans to Haiti in September 2009, and was one of the
first countries to call on the international community to forgive Haiti’s debts in the aftermath of
the earthquake. In June 2010, Canada paid off C$33 million (about U.S.$33.1 million) in Haitian
debt to the international financial institutions, becoming the first of the G20 countries to fulfill its
pledge and pay off its share of Haiti’s debt.
Status of the Issue
Despite Prime Minister Harper’s efforts to boost engagement with the countries of Latin America
and the Caribbean, Canada’s presence and influence in the region remains limited. Total two-way
trade between Canada and the region increased over 67% between 2006 and 2011 to U.S.$57.7
billion. This represents a small portion of Canada’s global trade relations, however, as Latin
American and Caribbean countries are the destination of only 3% of Canada’s exports. Similarly,
while Canada’s total aid to the region is substantial, it is heavily concentrated in Haiti and a few
Andean and Central American nations. In 2011, the principal Canadian think-tank that focused on
hemispheric affairs—the Canadian Foundation for the Americas (FOCAL)—shut down due to
lack of funding. An internal evaluation of Prime Minister Harper’s Americas strategy that was
released in 2011 by the inspector general of the Canadian Foreign Affairs Department found that
Canada’s influence with individual nations in the region is uncertain, as high-level visits and
announcements have raised hopes but concrete action has been slow. The evaluation also noted
that the strategy lacked direction, coordination, and funding. Prime Minister Harper reportedly
intends to reinvigorate his government’s Americas strategy at the Sixth Summit of the Americas,
scheduled to be held in Cartagena, Colombia on April 14-15, 2012. The revised strategy is
expected to place a larger emphasis on economic prosperity through trade.
Questions
1. How have Canada’s relations in the hemisphere changed as a result of Prime Minister Harper’s
Americas strategy? What are the primary objectives of the strategy? What do you consider to be
the strategy’s major successes thus far?
2. How would you assess the current direction of the OAS? How are Canada’s reform efforts
within the organization proceeding? What outcomes do you expect from the Sixth Summit of the
Americas?
3. Canada has committed substantial personnel and resources to Haiti over many years. What is
your assessment of the reconstruction efforts since the earthquake? How well are the efforts of
international donors and the Haitian government being coordinated? What progress has been
made in the reform and rebuilding of Haiti’s educational system, for which Canada has taken on a
leadership role among donors? What do you foresee as Canada’s level of involvement in Haiti in
the coming years?
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Border Security Issues71
Issue Definition
Border security has emerged as an area of public concern, particularly since the September 11,
2001 terrorist attacks. The United States and Canada attempt to balance adequate border security
with the facilitation of legitimate cross-border travel and commerce. In the wake of statutory and
administrative steps to enhance border security, concerns persist with respect to the potential for
terrorists and criminals to exploit the border and about the adequateness of infrastructure and
personnel at the U.S.-Canadian border and ports of entry.
Background and Analysis
The U.S.-Canadian border between Washington State and Maine spans about 4,000 miles,
includes vastly different types of terrain, and is the site of about 150 ports of entry, including 20
major land ports. In 2010, northern border ports admitted 5.4 million trucks, 26,000 trains,
116,000 busses, and 28.9 million passenger vehicles according to the U.S. Bureau of
Transportation Statistics—numbers which exceed analogous data for the U.S.-Mexican border for
trucks and trains, while passenger traffic is higher on the southern border.
Border Infrastructure and Personnel
A series of laws since 2001 have increased the number of enforcement personnel at the U.S.-
Canadian border and strengthened border screening technology. The USA PATRIOT Act of 2002
(P.L. 107-56) authorized the Attorney General to triple the number of border patrol personnel and
immigration inspectors along the northern border and authorized additional technological
improvements and equipment. The Enhanced Border Security and Visa Reform Act of 2002 (P.L.
107-173) similarly authorized additional personnel, technology, and infrastructure improvements.
The Trade Act of 2002 (P.L. 107-210) required 285 additional customs inspectors for the northern
border in FY2003. And the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA,
P.L. 108-458) authorized an increase of 2,000 border patrol agents per year for FY2006-FY2010,
while stipulating that 20% of the increases in agent manpower be assigned to the northern border.
A total of 2,237 border patrol agents were posted in northern border sectors in FY2011, up from
340 in FY2001, along with 3,706 U.S. Customs and Border Protection (CBP) inspectors at ports
of entry, up from 1,550 in FY2001. These increased deployments represent substantial growth in
border enforcement personnel, but lag slightly behind the goals established by the USA-
PATRIOT Act and the IRTPA. Some Members of Congress have raised concerns about staffing
levels at the northern border.
Western Hemisphere Travel Initiative
The IRTPA also required the Secretary of Homeland Security, in consultation with the Secretary
of State, to develop and implement a plan to require all travelers (i.e., including American and
71 Prepared by Marc R. Rosenblum, Specialist in Immigration Policy, Domestic Social Policy Division.
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Canadian nationals) to use a passport or other secure document when entering the United States.
Under WHTI rules in effect since June 1, 2009, travelers no longer may use driver’s licenses and
birth certificates as proof of identity and citizenship at the border. Approved documents include
passport books, passport cards, and trusted traveler cards (such as Secure Electronic Network for
Travelers Rapid Inspection, NEXUS, and the Fast and Secure Trade programs), as well as
additional documents for military personnel and certain other special groups. Four states
(Michigan, New York, Vermont, and Washington) and four Canadian provinces (British
Columbia, Manitoba, Ontario, and Québec) issue enhanced driver’s licenses that are also valid for
WHTI purposes.
Prior to its implementation, WHTI fostered concern in both countries that the increased
documentation requirements could suppress U.S.-Canadian travel, but no such effect has been
observed. A Government Accountability Office (GAO) review in March 2011 found CBP’s
outreach campaign had led to a greater than 95% compliance rate with WHTI requirements in
FY2010. And an October 2011 GAO report singled out WHTI technology that facilitates
inspections at land borders as one of seven government-wide “successful major acquisitions.”
U.S.-Canadian Collaboration
The United States and Canada have a long history of collaboration around border security. Such
efforts date to February 24, 1995, when the two countries signed a joint accord, Our Shared
Border, followed by the 1999 Canada-U.S. Partnership Forum (CUSP). Shortly after the 9/11
attacks, the United States and Canada signed a joint statement of cooperation on border security
and migration that focused on the detection and prosecution of security threats, the disruption of
illegal migration, and the efficient management of legitimate travel. The agreement produced a
30-point plan (later updated to 32 points) commonly referred to as the “Smart Border Accord,”
signed on December 12, 2001. The points include coordinated law enforcement, intelligence
sharing, infrastructure improvements, compatible immigration databases, visa policy
coordination, biometric identifiers in travel documents, prescreening of air passengers, joint
screening for high risk travelers, and improved processing of refugee and asylum claims, among
other things. In July 2010, the countries signed an Action Plan for Critical Infrastructure intended
to strengthen the safety, security, and resilience of critical shared infrastructure.
Three collaborative law enforcement programs exist along the U.S.-Canadian border. As part of
the Smart Border Accord, the countries have established 15 Integrated Border Enforcement
Teams (IBET), operating at 24 border locations. The IBETs are binational, mutli-agency,
enforcement teams jointly led by U.S. Customs and Immigration Enforcement (ICE) and the
Royal Canadian Mounted Police (RCMP). IBETs share intelligence to identify, investigate, and
interdict common national security threats and transnational criminal activity.
Second, beginning in 2007, ICE also operates four Border Enforcement Security Task Forces
(BEST) in Blaine, WA; Detroit, MI; Buffalo, NY; and Massena, NY. The BEST program also
emphasizes information sharing to combat cross-border crime, and brings in a larger number of
federal, state, provincial, local, and tribal stakeholders from both sides of the border, all under
ICE leadership.
Third, since 2005, the countries have operated a pilot program called Shiprider, which places
fully cross-trained, cross-designated RCMP and U.S. Coast Guard agents on law enforcement
vessels operating along certain international waterways. Agents from each country conduct joint
enforcement activities on both sides of the border. The Obama and Harper Administrations signed
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an agreement in 2009 to extend and expand Shiprider, but implementation of the agreement
awaits authorizing legislation in the Canadian Parliament; and it may be superseded by the
Beyond the Border agreement, discussed below.
In addition to these programs, the U.S.-Canada Cross Border Crime Forum, which includes the
Secretary of Homeland Security, the Attorney General, and the Canadian Ministers of Public
Safety and Justice, provides a regular meeting place for the top law enforcement officials from
both countries to discuss cross-border criminal activity and to coordinate their responses.
Beyond the Border Agreement and Action Plan
On February 4, 2011, President Obama and Prime Minister Harper signed a joint declaration
describing their shared visions for a common approach to perimeter security and economic
competitiveness: the Beyond the Border agreement. The agreement describes four key areas of
cooperation, including efforts to identify and address threats before they reach the U.S.-Canadian
perimeter, trade facilitation, integrated cross-border law enforcement, and critical infrastructure
and cybersecurity.
On December 7, 2011, President Obama and Prime Minister Harper released the Beyond the
Border Action Plan, which includes a series of concrete steps to be taken within each of these
areas, along with deadlines and metrics for measuring progress toward each goal. The plan is
most ambitious with respect to trade facilitation, calling for a harmonized approach to cargo
screening under the principle of “cleared one, accepted twice.” Additional provisions related to
border security include, among others: plans for joint inventories and gap analyses for
intelligence work related to travel and trade threat assessments (due by September 2012) and to
border surveillance (October 2012), automated biographic (2013) and biometric (2014) data
sharing to verify the identity of travelers and to share risk assessments and watchlist information,
an integrated entry-exist system so that the record of a land entry into one country can be used to
establish an exit record from the other (pilot program September 2012; full implementation June
2014), broader pre-clearance programs for goods and travelers (pilot programs December 2012),
and the expansion of integrated law enforcement efforts including interoperable radio systems
(2012) and the deployment of cross-designated officers to four additional Shiprider teams and to
inland locations (between 2012 and 2016).
Status of the Issue
The Beyond the Border Action Plan lays out an ambitious agenda for deeper cooperation. The
countries have expanded the NEXUS trusted traveler program to 19 border crossing locations, 33
marine reporting locations, and 8 Canadian pre-clearance locations. Since 2004, they have taken
steps to share passenger information on high-risk travelers en route to either country through a
joint risk-scoring scheme and shared “lookout” data. How the countries will implement additional
steps identified in the Beyond the Border Action Plan, such as more deeply integrated cross-
border law enforcement efforts, widespread cargo and passenger pre-clearance, and an integrated
biometric entry-exit system, remains to be seen.
CBP and other observers still consider the U.S.-Canadian border to be the locus of a wide range
of security threats, including transnational terrorist entities present along both sides of the U.S.-
Canadian border; criminal enterprises focused on illegal drugs, firearms, tobacco, intellectual
property, and currency; and vulnerabilities related to migration, agriculture, and transnational
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health issues. Based on CBP’s current measure for assessing border security—which is in the
process of being replaced—the agency considered only 69 of the nearly 4,000 miles of the U.S.-
Canadian border to be under an acceptable level of control, according to a 2010 GAO report.
Questions
1. A number of different technologies, including the U.S. Visitor and Immigrant Status Indicator
Technology (US-VISIT) entry-exit program, have been implemented at northern ports of entry in
recent years. With the advent of these technologies and the WHTI, the demand for improved
screening and passenger processing infrastructure is critical. What measures has the Canadian
government taken to enhance border infrastructure? Are there additional collaborative efforts that
could alleviate some of the pressure on busy ports of entry? How can the United States and
Canada make progress on an integrated entry-exit system?
2. The Beyond the Border agreement calls on the two countries to develop a common security
perimeter and to move customs inspection activities away from the border under the principle of
“cleared once, accepted twice.” Such an approach currently is limited mainly to Canadian
airports. What is the Canadian government doing to facilitate pre-clearance and pre-inspections
for travel through land ports? What safeguards will be in place to protect the integrity of pre-
cleared truck shipments? How will common perimeter programs address differences between
U.S. and Canadian attitudes about privacy protections and civil liberties and in how the countries
define certain criminal offenses?
3. When will authorizing legislation be considered that would allow full implementation of the
Shiprider Agreement governing full cross-designation of law enforcement officers? What are the
prospects for expanding the program to include integrated land-based law enforcement programs?
Border Security: Trade and Commercial Concerns72
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 and Analysis
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
72 Prepared by Ian F. Fergusson, Specialist in International Trade and Finance, Foreign Affairs, Defense, and Trade
Division.
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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. With the U.S. and Canadian economies
recovering from the global economic downturn, the two nations continue to have the largest
trading relationship in the world with over $1.5 billion per day in goods and services crossing the
border in 2011. In that year, Canada purchased 19.0% of U.S. exports and supplied 14.3% of all
U.S. imports. The United States supplied 49.5% of Canada’s imports of goods in 2011 and
purchased 73.7% of Canada’s merchandise exports; two-way trade with the United States
represented 40.2% of Canadian GDP. In 2010, the Ambassador Bridge and Detroit-Windsor
Tunnel complex that links Detroit, Michigan and Windsor, Ontario was the largest trade link in
the world with more than 3,340 daily truck crossings with cargo valued at more than $91.7 billion
per year.
Action Programs and Initiatives
Several initiatives to increase security of the border without impeding the flow of commerce were
implemented under the Security and Prosperity Partnership (SPP), which in turn expanded on
previous bilateral efforts by the United States and Canada, including the Smart Border Action
Plan of December 2001 consisting of four 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 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 Free and Secure Trade (FAST) is a joint harmonized commercial processing initiative at 21
border locations, 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.
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President Obama and Prime Minister Harper signed the Beyond the Border declaration on
February 4, 2011, committing both nations to a shared vision of perimeter security and economic
competitiveness. On December 7, 2011, the two leaders announced the Beyond the Border Action
Plan (See also, Border Security Issues, above). Regarding trade facilitation and trans-border
commerce, the Action Plan has identified such issues as providing a “single window” for
submitting customs and other regulatory information, harmonizing the low value shipment
process to enhance supply chain connectivity, and increasing the transparency of existing border
fees. Additionally, the February 2011 declaration created the Regulatory Cooperation Council to
increase regulatory cooperation to ensure the simplicity, transparency, and compatibility of
regulations where possible to promote commerce and eliminate barrier to trade between the two
nations. The December statement announced that initial work would be focused on regulations
concerning agriculture and food, transportation, health, personal care products, workplace
chemicals and the environment.
Status of the Issue
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 called 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. A 2008 GAO report cited
disagreements over arrest authority, fingerprinting practices, and the right of individuals to
withdraw an application to enter the United States while at the preclearance station. The Obama
Administration reviewed this decision, but in August 2009 Secretary Napolitano announced that
negotiations to construct a preclearance site adjacent to the Peace Bridge would not be reopened.
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.
There are two competing plans to build additional bridge capacity over the Detroit River to ease
truck congestion on the Ambassador Bridge. One proposal involves building a new span adjacent
to the Ambassador and has been put forward by the private owner of the bridge. A competing
proposal, the Detroit River International Crossing (DRIC), would be built approximately 2 miles
south of the Ambassador between Zug Island in Detroit and the Brighton Beach area of Windsor.
The DRIC proposal is supported by the Canadian government, which believes a new span should
not be privately held. To this end, then-Canadian Transport Minister John Baird offered to loan
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the state of Michigan $550 million to fund its share of the new bridge, the total cost of which is
expected to be $5.3 billion. Michigan Governor Rick Synder endorsed the construction of the
bridge in January 2011, but a bill creating a bridge authority was rejected by a Michigan state
Senate committee in October 2011. Meanwhile, the owner of the Ambassador Bridge, the
principal opponent of the new crossing, has brought a North American Free Trade Agreement
(NAFTA) investor-state dispute over his contention that the proposed rival bridge would divert
traffic (and tolls) from his bridge.
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. 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?
3. How important is building a new Detroit-Windsor bridge to cross-border trade? The owner of
the Ambassador Bridge has offered to assume the cost of building a twin span adjacent to the
current bridge. Why not let him?
4. Do you believe aspects of the Beyond the Border declaration threaten Canadian sovereignty?
How has the Canadian government communicated the specifics of the negotiations to legislators
or to average Canadians?
Canada’s Free Trade Agreement Agenda73
Issue Definition
While the current Doha Round of multilateral World Trade Organization (WTO) negotiations
remains stalled, regional and bilateral free trade agreements (FTA) have become a prominent, if
controversial, feature of the world trading system. In the past, the United States was relatively
more aggressive in pursuing FTAs, while Canada emphasized multilateral trade liberalization to
supplement liberalization with its predominant partner, the United States, first through the U.S.-
Canada FTA and subsequently through the North American Free Trade Agreement (NAFTA).
This trend has shifted with Canada now negotiating several FTAs as it seeks to join the Trans-
Pacific Partnership (TPP), a proposed FTA being negotiated among the United States, Australia,
Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam.
73 Written by Ian F. Fergusson, Specialist in International Trade and Finance; Foreign Affairs, Defense, and Trade
Division
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Background
After concluding the U.S.-Canada FTA in 1988 and expanding it to include Mexico in 1994, both
countries made the new WTO the cornerstone of further trade liberalization. While both countries
concluded FTAs, political rationales were often paramount. For example, close ties prompted
both countries to conclude FTAs with Israel. Canadian attempts to establish a greater role in Latin
America were reflected in FTAs with Chile (1997) and Costa Rica (2002). Negotiations were
started with the European Free Trade Area (EFTA) nations (Norway, Switzerland, Iceland, and
Liechtenstein) in 1998, with Singapore and with the Central American Four (El Salvador,
Guatemala, Honduras, Nicaragua) in 2001, and with South Korea in July 2005. However, none of
these negotiations yielded an agreement during the Liberal governments of Jean Chrétien and
Paul Martin. Moreover, the importance of such agreements was overshadowed by the
overwhelming volume of Canadian trade that continued to be conducted under NAFTA, with the
United States continuing to account for the bulk of that trade.
In 2001, the George W. Bush Administration embarked on a new trade strategy known as
“competitive liberalization.” This policy pushed forward trade liberalization simultaneously on
bilateral, regional, and multilateral fronts. It was designed to spur trade negotiations by
liberalizing trade with countries willing to join FTAs, and to pressure other countries to negotiate
multilaterally. A pending agreement with Jordan, negotiated with the Clinton Administration was
passed by Congress in 2001. Under trade promotion authority (TPA) passed by Congress in 2002
and in effect until 2007, FTAs were negotiated and approved by Congress with Chile, Singapore,
Australia, Morocco, the countries of the Central American Customs Union and Dominican
Republic (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican
Republic), Bahrain, Oman, and Peru. In addition, negotiations were conducted with the nations of
the South African Customs Union (SACU) (Botswana, Lesotho, Namibia, South Africa, and
Swaziland), the United Arab Emirates, Malaysia, and Thailand, but they resulted in no agreement.
Long pending agreements with Colombia, Panama, and South Korea concluded under TPA were
approved by Congress in October 2011. Currently, the Obama Administration’s trade policy has
stressed enforcement of existing trade agreements rather than negotiating new ones. The one
exception has been the TPP negotiations.
The Conservative government of Prime Minister Stephen Harper, first elected in 2006, has placed
greater emphasis on negotiating regional and bilateral FTAs. Existing negotiations with EFTA
were concluded in January 2008, resulting in an agreement that was approved by Parliament in
January 2009 and received Royal Assent in April 2009. Negotiations with Peru and Colombia
were initiated in June 2007. An agreement was signed with Peru in May 2008, which was
approved by Parliament in June 2009 and received Royal Assent later in the month. Negotiations
with Colombia were concluded in November 2008, and was approved by Parliament and received
Royal Assent in June 2010. The Canada-Colombia FTA went into effect on August 15, 2011.
Legislation to implement FTAs with Jordan (signed in August 2008) and Panama (signed in May
2010) were re-introduced in the 41st Parliament on November 15, 2011. In general, the
Conservative and Liberal parties have voted to approve these agreements, but have been opposed
by the labor-influenced New Democratic Party (NDP) and the Québec-separatist Bloc Québecois.
In addition, negotiations have been started with Morocco, the Dominican Republic, India,
Ukraine, and the nations of CARICOM, and are continuing with South Korea, Singapore, and the
Central American Four. With South Korea, issues familiar to U.S. negotiators, such as market
access for beef and non-tariff barriers in the auto sector, are complicating the talks. Most recently,
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during a trip to Asia, Prime Minister Stephen Harper announced the launch of negotiations with
Japan and Thailand as well.
At the Asia-Pacific Economic Cooperation Forum (APEC) in November 2011, the leaders of
Canada, Japan, and Mexico announced that they would seek consultations with TPP partner
countries with a view towards joining the negotiations. Canada has held consultations with the
United States and other countries, and the U.S. Trade Representative has sought public comment
from interested stakeholders on Canada’s potential participation. Canada reportedly has
encountered resistance from New Zealand and the United States over its dairy supply
management policies, and from the United States over its intellectual property rights regime. For
its part, Canada has vigorously pursued membership, attempting to make the case that Canada
was willing to meet the high level of ambition for the talks.
In May 2009, Canada and the European Union (EU) agreed to launch FTA negotiations, known as
the Comprehensive Economic and Trade Agreement (CETA), and nine rounds of negotiations
have occurred thus far. This negotiation is significant in that it raised issues of concern to
countries at a similar level of development and with relatively low tariffs. Issues that have been
flagged include the regulation of professional services, temporary entry for business workers, and
provincial participation in government procurement agreements. Agreement on this latter point
may become easier following the U.S.-Canada agreement on Buy American provisions in the
U.S. economic stimulus. Negotiations on agriculture likely will prove challenging, as both sides
will likely seek to protect sensitive sectors, yet negotiations on traditional sticking points such as
the EU’s desire to protect geographic indications and Canadian supply-management policies
reportedly have not been precluded.
Status of the Issue
The Conservative government’s new enthusiasm for negotiating FTAs was expressed by then-
International Trade Minister Peter Van Loan on April 23, 2010. Canada is pursuing FTAs “with a
vigor right now because we’re a trading country, our businesses need it, our workers need it, our
prosperity depends on it, so we’re going to make it happen for Canada and not simply depend on
the WTO.” While in some ways this policy resembles the “competitive liberalization” policy
undertaken by the George W. Bush Administration, it remains to be seen whether agreements
resulting from such negotiations, will increase trade flows and lessen the dependence of Canada
on the U.S. market. It also remains to be seen whether Canada will retain its traditional
engagement in the WTO.
Questions
1. How controversial is the Canadian government’s trade policy? Does the public approve of
further trade liberalization? How does the continuing decline of the Canadian manufacturing
sector affect public attitudes towards free trade generally?
2. Do you think the emphasis on negotiating bilateral and regional FTAs complements or weakens
the multilateral trading system? Does this policy reflect a lack of confidence in the ability to
conclude the WTO Doha Round, or that Canada will not benefit much from a Doha agreement?
3. Canadian negotiators are actively pursuing TPP participation and maintain that Canada can
meet the high level of ambition for the talks, while not appearing to negotiate with itself on issues
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such as supply management. How well do you believe this balance is being achieved? Do you
believe that Canada should encounter resistance in joining the negotiations, given the level of
economic development of certain existing negotiating partners such as Vietnam and Malaysia?
4. Would joining the TPP advance the objective, promoted by successive Canadian governments,
of expanding Canada’s role in the Asia-Pacific region? If Canada is not invited to join the TPP,
would the recently announced negotiations with Japan and Thailand represent an acceptable “Plan
B”?
5. FTA negotiations are continuing between the European Union and Canada. How optimistic are
you that the negotiations will be concluded this year? Do you believe that “there is no more
important trade negotiating priority today than the CETA,” quoting the communique from the
annual Federal-Provincial trade ministers meeting in Ottawa on February 28, 2012, or that it is
“jumping on a sinking ship,” quoting a Canadian commentator?
North American Cooperation on Competitiveness
and Security74
Issue Definition
How can the United States improve cooperation with its North American neighbors on issues
related to trade, transportation, and security? How are the United States, Canada, and Mexico
currently cooperating on improving competitiveness, promoting economic growth, and enhancing
security in North America? Should the three countries continue cooperating trilaterally or would
separate, bilateral cooperation efforts with Canada and Mexico be more effective due to the
different issues facing each country?
Background and Analysis
The United States, Canada, and Mexico have made efforts since 2005 to increase cooperation on
security and economic issues through various endeavors, most notably by participating in
trilateral summits known as the North American Leaders Summits. The most recent Summit was
hosted by President Barack Obama on April 2, 2012 in Washington, DC at the White House
where he met with Canadian Prime Minister Stephen Harper and Mexican President Felipe
Calderón to discuss the economic well-being, safety, and security of the United States, Mexico,
and Canada.
After the meeting, the three leaders issued a joint statement in which they renewed their
commitment to North American cooperation in the following key areas of interest: protection and
enforcement of intellectual property rights (IPR); enhancement of collective energy security,
including the safe and efficient exploration and exploitation of resources; advancement of the
goals of the Energy and Climate Partnership of the Americas and enhancement of electricity
interconnection in the Americas; support of efforts to advance a lasting global solution to the
74 Prepared by Angeles Villarreal, Specialist in International Trade and Finance, Foreign Affairs, Defense, and Trade
Division.
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challenge of climate changes; and the recognition of the importance of adopting the Budapest
Convention on Cybercrime, including Canada’s commitment to ratifying the Convention and
Mexico’s necessary preparations for signing it. In addition, the leaders announced the North
American Plan for Animal and Pandemic Influenza (NAPAPI) to strengthen North America’s
response to future animal and pandemic influenza events. In the area of strengthening security in
the Americas and concerns about transnational organized crime, the three governments agreed to
launch in 2012 a consolidated Central America Integration System-North America Security
Dialogue to deepen regional security coordination and cooperation.
The first North American Leaders’ Summit took place on March 23, 2005, in Waco, TX; this was
followed by several trilateral summits in Mexico, Canada, and the United States. The March 2005
Summit resulted in increased efforts to enhance North American regulatory cooperation through
the former initiative known as the Security and Prosperity Partnership of North America (SPP).
The main goal was to increase and enhance prosperity in the United States, Canada, and Mexico
through regulatory cooperation. The SPP was endorsed by all three countries, but it was not a
signed agreement or treaty and contained no legally binding commitments or obligations.
Although the SPP built upon the existing trade and economic relationship of the three countries, it
was distinct from the existing North American Free Trade Agreement (NAFTA).
The SPP has evolved to other efforts pursued by the Obama Administration for regulatory
cooperation, which have included separate bilateral endeavors. In May 2010, the United States
and Mexico released the Declaration Concerning Twenty-first Center Border Management and, in
December 2011, the United States and Canada announced the Beyond the Border Action Plan: A
Shared Vision for Perimeter Security and Economic Competiveness. In February 2012, the United
States and Mexico announced the High-Level Regulatory Cooperation Council (HLRCC) to help
align regulatory principles, an effort similar to the U.S.-Canada Regulatory Cooperation Council.
In March 2012, the Defense Ministers of the three countries met in Ottawa, Canada for the first
ever “Trilateral Meetings of North American Defense Ministers” to increase cooperation on
national security issues.
Most efforts to increase North American regulatory cooperation generally have followed the
recommendations of special working groups created under the SPP. These recommendations have
included (1) increasing the competitiveness of North American businesses and economies through
more compatible regulations; (2) making borders smarter and more secure by coordinating long-
term infrastructure plans, enhancing services, and reducing bottlenecks and congestion at major
border crossings; (3) strengthening energy security and protecting the environment by developing
a framework for harmonization of energy efficiency standards and sharing technical information;
(4) improving access to safe food and health and consumer products by increasing cooperation
and information sharing on the safety of food and products; and (5) improving the North
American response to emergencies by updating bilateral agreements to enable government
authorities from the three countries to help each other more quickly and efficiently during times
of crisis.
Some critics of North American trilateral cooperation contend that it has been an attempt to create
a common market or economic union in North America. Others have contended that past efforts
under the SPP were contributing to the creation of a so-called “NAFTA Superhighway” that
would link the United States, Canada, and Mexico with a “super-corridor.” Proponents of North
American competitiveness and security cooperation view the initiatives as constructive to
addressing issues of mutual interest and benefit for all three countries. Business groups generally
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support increased North American cooperation and believe that it is necessary to enhance the
competitiveness of U.S. businesses in the global market.
Status of the Issue
The United States, Canada, and Mexico have made progress in recent years in addressing issues
related to North American competitiveness and security. The Obama Administration has affirmed
its commitment to continue past efforts on North American cooperation under a different
approach from the Bush Administration’s SPP framework. The 2012 North American Leaders
Summit and the former SPP have served as mechanisms to increase communications among
North American trading partners on issues of mutual interest, but because there are no binding
agreements, their role in improving prosperity and security has been limited.
Questions
1. How effective has North American cooperation been in improving competitiveness through its
focus on intellectual property rights protection and regulatory harmonization? What other steps
can be taken by the three countries to improve competitiveness of U.S. businesses?
2. How effective has North American cooperation been in improving safety, security, and the flow
of goods and services among NAFTA partners? What other steps could be taken in these areas?
Canada’s Financial System75
Issue Definition
Canadian banks on the whole weathered the 2008-2009 financial crisis better than banks in the
United States and Europe. Nevertheless, Canada’s financial system was buffeted by the financial
crisis as equity and housing prices fell and as economic growth slowed as a result of the downturn
in global trade. Canada’s economy is also feeling the effects of the European sovereign debt
crisis. Are there lessons to be learned from Canada’s banking system, which has proven to be
somewhat more immune to the financial troubles that have brought down better known banks?
Background and Analysis
Canada’s financial system proved to be more resistant to the failures and bailouts that marked
systems in the United States and Europe. No Canadian financial institution failed or required
public capital injections. Nevertheless, the financial crisis and global economic recession battered
the Canadian economy in ways that are similar to those in the United States and in Europe.
According to the International Monetary Fund (IMF), the Canadian economy contracted by -2.5%
in 2009, before rebounding to a positive growth rate of 3.0% in 2010. Canada’s economy is
estimated to have grown by 2.4% in 2011, but forecasts for 2012 indicate that economic growth
75 Prepared by James Jackson, Specialist in International Trade and Finance, Foreign Affairs, Defense, and Trade
Division.
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could slow slightly to 2.0% The vast economic and financial linkages between Canada and the
United States means that Canada is feeling the impact of the slowing U.S. economy.
Much of Canada’s economic recovery is attributed to low interest rates and a $33 billion fiscal
stimulus package-one of the largest among advanced economies-over two years in infrastructure
spending, tax decreases, worker retraining, housing, and aid to struggling industries. In addition,
the federal government pumped additional liquidity into the economy by purchasing insured
mortgages. In April 2009, the Bank of Canada lowered the nation’s key interest rate to 0.25%. A
drop in commodity prices caused the Canadian dollar to fall relative to the U.S. dollar, which
improved the cost competitive position of Canada’s exports. In relative terms, Canada’s fiscal
outlook is among the best in the G-20.
According to the Bank of Canada, major risks to Canada’s economic recovery are (1) global
sovereign debt issues associated with some European countries that potentially could raise
borrowing costs for Canadian banks; (2) an economic downturn in advanced economies,
especially in Europe, could drag down economic growth; (3) the risk that global financial
imbalances arising from large current account (exports and imports of goods, services, and
income) imbalances could be disorderly and create sharp adjustments to exchange rates and other
financial asset prices; (4) high levels of indebtedness among Canadian households leave them
vulnerable to economic and financial shocks; and (5) low interest rates could encourage excessive
risk taking. Although Canadian banks are not highly exposed to public or private entities in
Greece, Italy, Spain, or Portugal, Canadian banks are exposed to banks in Europe and the United
States that are themselves highly exposed to the four countries. This high level of financial
linkages could amplify shocks throughout the global financial system.
The IMF has concluded that Canada’s financial system is highly mature, sophisticated, and well-
managed. In addition, the system is characterized by strong prudential regulation and supervision,
stringent capital requirements, low risk tolerance, a well-designed system of deposit insurance
and arrangements for crisis management and resolution of failed banks, a well-regulated and
conservative mortgage market, and comprehensive mortgage insurance coverage. Supervisory
responsibility for the financial sector in Canada is divided among the federal government, the
provincial governments, and among a group of agencies within the federal government. The
federal government is responsible for supervising all banks, federally incorporated insurance
companies, trust and loan companies, cooperative credit associations, and federal pension plans.
Provincial governments are responsible for supervising securities dealers, mutual fund and
investment advisors, credit unions, and provincially incorporated trust, loan, and insurance
companies. As a result, there are 13 regulatory authorities, each administering a separate set of
securities laws and regulations.
Within the federal government, the Financial Institutions Supervisory Committee (FISC) acts as
the chief coordinating body that sets regulatory policy and supervises financial institutions. The
Committee is comprised of the Department of Finance of the Ministry of Finance and four
independent government agencies: the Office of the Superintendent of Financial Institutions
(OSFI); the Bank of Canada; the Canada Deposit Insurance Corporation; and the Financial
Consumer Agency of Canada (FCAC). All of these agencies report to the Minister of Finance,
who is responsible to the Canadian Parliament. The Bank of Canada is responsible primarily for
conducting monetary policy by setting interest rate targets and adjusting the supply of credit. The
bank also serves as the key component in the payments system by providing a check clearing
function, and it serves as the traditional lender of last resort. The Office of the Superintendent of
Financial Institutions plays a key role in Canada’s financial supervisory scheme by supervising all
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domestic banks, branches of foreign banks operating in Canada, trust and loan companies,
cooperative credit companies, life insurance companies, and property and casualty insurance
companies.
The financial system is dominated by five large banking groups (Royal Bank of Canada, TD
Canada Trust, Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial Bank) that account
for about 60% of total assets. In comparison, foreign banks account for about 4% of assets. The
low representation by foreign banks is attributed to the “widely-held” rule for large banks that
limits the concentration of bank share ownership and, therefore, reduces the scope for mergers
and for foreign entry through acquisition. Canada’s financial legal framework has allowed
Canadian banks to concentrate on their low-risk, profitable domestic retail banking activities
(services provided to individuals including: deposits, savings accounts, mortgages, credit cards,
etc.), leaving large domestic borrowers to conduct their wholesale banking activities (services
provided to corporations, governments, and other entities) abroad. Canada’s insurance sector is
dominated by three large domestic groups, which account for over 80% of the assets in this
sector. The securities sector is marked by large Canadian, as well as U.S. and UK securities firms.
Unlike the United States and some European countries, subprime mortgages account for less than
5% of Canadian mortgages, which sharply limited Canada’s direct exposure to the meltdown that
occurred in the subprime mortgage market. In addition, Canadian law requires that all bank-held
mortgages above a loan-to-value ratio above 80% be insured, which has curtailed the
securitization of mortgages by banks in Canada. In addition, prepayment penalties and the lack of
interest deductibility reduces the demand for long-term mortgages, so the maturity of most
mortgages does not exceed 5 to 10 years.
Canada’s financial supervisory system and regulatory structure have proven to be less susceptible
to the bank failures that have loomed in the United States and Europe. Nevertheless, Canada’s
approach has a number of drawbacks. Canada’s system of regulating securities markets at the
provincial level means that regulations regarding market participants and investor protection
differ by province and that the nature, structure, and powers of the provincial regulators also vary.
In addition, the conservative, risk-adverse approach employed by Canada’s banks shielded the
banks from some of the current financial turmoil, the approach also reduces efficiency in the
market and reduces competition. Acquisitions of Canadian banks is significantly impeded by the
rule that bank stocks be widely held and mergers are effectively prohibited. With reduced
competitiveness pressures, Canadian banks maintain low-risk balance sheets at the expense of
greater innovation and more efficient capital allocation. This approach also means that financing
for small firms and venture capital for potentially high-growth companies is sharply reduced. In
concert with other advanced economies, Canada is moving to provide greater oversight of the
over the counter (OTC) derivatives market by developing central counterparty services and a
central clearing of standardized OTC derivatives contracts.
Questions
1. Do the differences in the size and the scope of the U.S. and Canadian financial markets reduce
the importance of the Canadian system as a model for the United States to potentially follow?
2. Are there aspects of Canada’s federal supervision of its banking system that could serve as a
model for bank supervision by the United States?
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3. Canada’s approach to financial supervision concentrates the majority of that responsibility in
an authority that is separate from the central bank. Is this an approach that the United States
should consider at it evaluates the effects of changes it has made to its own regulatory structure?
U.S. Imports of Canadian Softwood Lumber76
Issue Definition
The U.S. lumber industry has long argued that imports of subsidized Canadian lumber are
injuring U.S. producers. In May 2002, after the U.S. lumber industry filed antidumping and
countervailing petitions to restrict imports, agency determinations of Canadian subsidies,
dumping, and injury to the U.S. industry led to a duty of 27% (later reduced) 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 Softwood Lumber Agreement in
2006 with Canadian export charges depending on U.S. lumber prices, and the United States
revoked the countervailing and antidumping orders. On January 23, 2012, the United States and
Canada agreed to extend this agreement—as provided for in the agreement—for two years
beyond its October 2013 expiration.
On February 26, 2009, a tribunal found that four Canadian provinces had violated the Agreement
in calculating 2007 quotas; the United States rejected the Canadian offer of compensation, and on
April 15, 2009, the United States began collecting 10% ad valorem duties from the four provinces
to compensate for the 2007 breach.
Background and Analysis
U.S. lumber producers have long expressed concerns about imports of subsidized Canadian
lumber. The current lumber agreement is termed Lumber IV, because it is the result of the fourth
dispute since 1981, with various findings of subsidy levels and agreements in the previous
disputes.
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 and settlement of unpopulated areas. 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.
76 Prepared by Ross W. Gorte, Specialist in Natural Resources Policy, Resources, Science, and Industry Division, and
Jeanne J. Grimmett, Legislative Attorney, American Law Division and updated by Ian F. Fergusson, Specialist in
International Trade and Finance.
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U.S. lumber producers assert that subsidies 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 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 subsidized, 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 33% 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
In 2001, after the 1996 U.S.-Canada softwood lumber agreement expired, the U.S. Coalition for
Fair Lumber Imports filed countervailing duty and antidumping petitions, asking the DOC to
investigate Canadian imports again. The Department of Commerce issued final determinations of
subsidies on March 22, 2002. On May 3, 2002, the ITC determined that the U.S. lumber industry
was threatened with material injury by Canadian imports. A duty averaging 27% was imposed on
May 22, 2002.
Canada challenged each of the agency determinations under the North American 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 lumber imports.
On April 26, 2006, a tentative seven-year Softwood Lumber Agreement, with an optional two-
year renewal, was announced to resolve the dispute. 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. Lumber from logs harvested in the Atlantic Provinces, Yukon, Northwest
Territories, or Nunavut is exempt from the export charges. Disputes are to be resolved through
bilateral consultations, non-binding mediation, or binding arbitration in the London Court of
International Arbitration (now LCIA).
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U.S. interest groups have questioned whether Canada is faithfully implementing the agreement.
The 2008 farm bill (P.L. 110-246) included a provision (§3301) establishing a softwood lumber
importer declaration program to verify and reconcile data on softwood lumber imports. In August
2007, U.S. officials requested a ruling from the London Court of International Arbitration (LCIA)
on export quota volumes and export tax levels. In March 2008, the Court ruled that Canada had
violated the export quota volumes for Manitoba, Ontario, Québec, and Saskatchewan for the first
six months of 2007, but was not required to collect taxes related to export surges from Alberta
and British Columbia during that period. To comply with the above ruling, an LCIA tribunal
issued a decision that Canada must collect an additional 10% ad valorem export charges from the
four provinces until C$68.26 million (then valued at US$54.8 million) had been collected on
February 26, 2009. The U.S. Trade Representative rejected the Canadian offer of a compensation
payment of US$36.66 million, and on April 15, 2009, began collecting 10% duties on lumber
from the four provinces.
In January 2008, the United States requested arbitration over six provincial forest sector
assistance programs in Quebec and Ontario, programs that the United States believes contravene
the anti-circumvention provision of the SLA. In January 2011, the LCIA found certain of these
programs breached the SLA, and Canada began imposing additional charges on lumber from
Quebec and Ontario for the duration of the agreement.
U.S. lumber producers and some Members of Congress, including Senators Max Baucus and
Olympia Snowe, have urged the Administration to seek consultations under the SLA over certain
timber pricing practices in British Columbia. They claim that the BC government has been
classifying an increasing amount of its cut as salvage Grade 4 lumber and charging less for it than
better grades, resulting in a subsidy for Canadian timber processors. Canada attributes this
increase to an infestation of mountain pine beetles, but U.S producers dispute this, claiming that
BC has changed its grading procedures and producers are heating lumber prior to grading,
resulting in greater cracks and defects. In October 2010, the USTR announced consultations with
Canadian officials, but the unsuccessful negotiations led the USTR to file a request for arbitration
in the LCIA on January 18, 2011. An LCIA tribunal hearing was held in Washington D.C. from
February 27-March 9, 2012 on the dispute.
Questions
1. The modern dispute over U.S. imports of Canadian lumber has persisted for nearly 30 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. In January 2012, the SLA was extended until 2015. Given the three arbitrations, do you believe
it has performed satisfactorily enough to extend it? Are the current oversight mechanisms
sufficient to assure that implementation of the agreement is acceptable to all parties? Are there
ways to provide adequate and timely data to identify possible violations (deliberate or
unintentional) and thus the delay and cost of arbitration and subsequent remedies? What
unilateral U.S. enforcement measures might be acceptable to Canada under the agreement?
3. What approaches are feasible to compensate communities and workers for injury from weak
lumber markets without providing subsidies to the lumber industry?
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Canada’s Supply Management Programs for Dairy,
Poultry, and Eggs77
Issue Definition
Canada uses supply management to support its dairy, poultry, and egg sectors. Its main features
(1) provide price support to producers based on their production costs and return on equity and
management, (2) limit production to meet domestic demand at the cost-determined price, and (3)
restrict imports to protect against foreign competition. The Canadian government has supported
producers’ decisions to use this approach for more than 40 years, and succeeded in limiting
imports of these products in negotiating the U.S.-Canada Free Trade Agreement and its
multilateral commitments in the Uruguay Round’s Agreement on Agriculture. Canada’s interest in
participating in the Trans-Pacific Partnership (TPP) trade negotiations has renewed calls from
interest groups in the United States and New Zealand for Canada to open its borders to imports of
these products. While Canadian dairy, poultry, and egg producers generally oppose trade
liberalization, others argue that Canada should consider making concessions so that other
Canadian economic sectors can benefit from export openings negotiated in the TPP context with
the growing Asian economies.
Background and Analysis
According to the World Trade Organization, Canada in recent years has introduced an agricultural
policy framework that includes a number of business risk management measures designed to
partially compensate producers for revenue or income losses arising from low commodity prices,
increased production costs, reduced production, or natural disasters. However, the supply
management systems for dairy, poultry, and eggs “remain unchanged.”
National bodies and provincial commodity marketing boards, granted statutory powers by the
federal and provincial governments, control the supply management systems for these
commodities. At the national level, the amount of each commodity that producers can market is
controlled by a quota system. Imports of each commodity are limited by tariff rate quotas. These
allow a specified amount to enter annually under Canada’s trade commitments at little or zero
duty, but apply a very high tariff on imports above the specified level or quota amount. Both tools
work together to control the supply of each commodity, but the objective is to ensure that
producers receive a price that guarantees them a return that covers their production costs. The
quota is set to balance supply with demand at that price, and is frequently adjusted to ensure that
this balance is achieved. Producers of these commodities must participate in their respective
supply management systems, with farm-level production subject to individual quota limits that
can only be sold into permitted marketing channels.
Supply management for dairy is divided into a nationally-managed system for industrial milk
(used to manufacture dairy products such as cheese and butter) and provincial-level systems for
the marketing of fresh milk. The Canadian Milk Supply Management Committee (CMSMC)
oversees the national system for industrial milk. It is chaired by the Canadian Dairy Commission
77 Prepared by Remy Jurenas, Specialist in Agricultural Policy, Resources, Science and Industry Division.
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(CDC), a federal agency that provides a framework for federal-provincial participation. The
CMSMC determines the national domestic supply of industrial milk and allocates this volume
among provinces.
The Farm Product Council of Canada (FPCC) oversees four national marketing agencies for
poultry (chicken and turkey) and eggs that seek to balance the interests of stakeholders from
producers to consumers. These agencies (Chicken Farmers of Canada, Turkey Farmers of
Canada, Egg Farmers of Canada, and Canadian Hatching Egg Producers) are managed by
representatives primarily from provincial commodity boards plus a few members representing
processors and consumer associations. The provincial commodity boards regularly consult with
their stakeholders to determine their poultry and egg needs. This information is used to set the
national production level, which the agencies implement under a quota order that the FPCC must
approve. Each provincial board allots its share of each quota to registered producers, and
negotiate producer selling prices with processors.
Producers of these commodities point out they have benefited from the supply management
approach because it has significantly reduced price volatility. The stability of prices over time,
combined with the guarantee that covers production costs, has served to provide income support.
Others point out that these features have resulted in the lack of market orientation for these
commodities, as the value of supply management has become capitalized, or incorporated, into
the value of the quota. In other words, those who hold the quota benefit more than producers.
Status of the Issue
In November 2011, Prime Minister Harper expressed Canada’s interest in seeking to join the TPP
talks and initiating consultations with the nine countries already negotiating the TPP. This interest
has focused attention on how Canada’s supply management systems for dairy, poultry, and eggs
could be affected. Harper subsequently stated that Canada will not negotiate this issue in order to
gain entry, and has remained non-committal on how supply management would be handled if
Canada is welcomed as a TPP participant. He has stated that Canada expects to negotiate and
debate “all manner of issues” if it were to join the TPP, and also has said if that occurs, Canada
would attempt to “promote and to defend [its] interests not just across the economy, but in the
individual sectors as well.” President Obama when asked whether Canada would have to drop
supply management in order to join the TPP reportedly only hinted in his response that Canada
may have to make some adjustments in this area.
Though the United States exports dairy and poultry products to Canada, the import quotas in
place under supply management have significantly limited access to this next-door market. The
National Milk Producers Federation representing U.S. dairy farmers and dairy cooperatives, and
the U.S. Dairy Export Council representing this sector’s export interests, have stated they would
support Canada’s inclusion in the TPP only if the United States and Canada finally negotiate
comprehensive market access for all agricultural sectors, including the full range of dairy
products. Also, both groups would want to see negotiators tackle outstanding non-tariff measures
that have and could limit access for U.S. fluid milk and cheese in the Canadian market.
The National Chicken Council has reportedly urged the U.S. Trade Representative to condition
Canada’s inclusion in the TPP talks on its agreement to open up its market to U.S. poultry in a
short period of time.
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Questions
1. Most of the support for Canada’s supply management systems is concentrated in Ontario,
Quebec, and the Maritime provinces. What would be the internal politics associated with
completely changing these systems or modifying them to allow for increased imports of dairy and
poultry products from the United States and other TPP countries?
2. How strong is support among other Canadian economic sectors for maintaining Canada’s
supply management programs?
3. Could Canada ensure that the objectives of supply management (stable prices and income
support to producers) are met if additional imports are allowed? Please elaborate on why or why
not this would be the case?
Country of Origin Labeling78
Issue Definition
Mandatory country-of-origin labeling (COOL) in the United States for specified agricultural
products took effect on March 16, 2009. This was the culmination of a near decade-long
legislative effort to arrive at an accommodation that addressed the concerns of competing
interests. U.S. food retailers are now required to label the country of origin for fresh produce
(fruits and vegetables), meats, nuts, and seafood, among other products. Canada and Mexico are
major suppliers of live cattle and hogs that are fed in U.S. facilities and/or processed into beef and
pork in U.S. meat packing plants. As the U.S. meat processing sector geared up to implement
COOL, U.S. imports of Canadian and Mexican cattle and of Canadian hogs noticeably declined.
Concerned that this development adversely affected their livestock sectors and not satisfied with
the outcome of consultations held with U.S. officials, Canada and Mexico pressed their case
using the World Trade Organization (WTO) dispute resolution process. The WTO panel handling
this case found that COOL with respect to meat labeling violates international trading rules. The
United States appealed these findings, and a WTO decision on this appeal is expected to be
reached by late June 2012.
Background and Analysis
Under the Tariff Act of 1930, as amended, most unprocessed agricultural commodities had long
been exempt from requirements that every import be clearly marked to indicate country of origin
for the “ultimate purchaser.” However, provisions in the 2002 farm bill (Section 10816 of P.L.
107-171) require that retailers covered by the Perishable Agricultural Commodities Act (i.e.,
those which deal in at least $230,000 per year in produce—fresh and frozen fruits and vegetables)
begin to provide such information. Other covered commodities specified in the 2002 farm bill
were: ground and muscle cuts of beef, lamb and pork; seafood; and peanuts. Labeling is not
required if these commodities are ingredients in processed foods, or if they are sold in dining-out
settings.
78 Prepared by Remy Jurenas, Specialist in Agricultural Policy, Resources, Science and Industry Division.
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Passage of the initial COOL provisions in 2002 did not end debate over the value and efficacy of
mandatory COOL, particularly with regard to meats. COOL opponents argued that record-
keeping and verification costs will far exceed any perceived economic benefits to producers; that
smaller-sized farms and firms will have the most difficulty with compliance; that little evidence
exists showing consumers actually want labeling; and that COOL is a protectionist policy that
undermines free trade. Supporters countered that compliance would not be nearly as burdensome
as some large industry groups and USDA have portrayed it; that studies show U.S. consumers, if
offered a clear choice, will pay extra for fresh foods of domestic origin, thereby strengthening
demand and prices for them; and that consumers have a right to know where their foods were
produced. They pointed out that all but two of the North American cases of “mad cow” disease
(bovine spongiform encephalopathy, or BSE) occurred in Canadian-born cattle, yet the United
States is permitting the import of large quantities of Canadian beef and cattle. (COOL opponents
argue that country of origin labeling is a matter of marketing, not food safety, and that food safety
concerns are best addressed through science-based regulation.)
Initially scheduled to take effect on September 30, 2004, Congress postponed COOL
implementation until September 30, 2008, for all but seafood, because of ongoing debate. Some
issues were addressed in talks held among key players during consideration of the 2008 farm bill,
and incorporated into Section 11002 of the Food, Conservation, and Energy Act of 2008, P.L.
110-246. These provisions retained the implementation schedule, and added other commodities
(chicken meat, goat meat, ginseng, pecans, and macadamia nuts) to its coverage. However,
several new types of label categories were created that are intended to facilitate and simplify
compliance in specifying the country or countries of red meat products. For all covered
commodities, the amended law also seeks to ease recordkeeping and verification requirements,
and to lower non-compliance penalties.
Status of the Issue
Following enactment of the amended COOL provisions, USDA moved quickly to issue rules to
implement them. The August 2008 interim rule for meat labeling requirements generated the most
controversy, in large part because of the steps that U.S. feeding operations and packing plants
took to segregate, hold, and slaughter foreign-origin livestock (e.g., Canada and Mexico) from
U.S. livestock. With U.S. bilateral trade agreements with Canada and Mexico having led to free
trade in livestock and resulted in a more integrated North American livestock sector, imports of
live cattle and hogs from both countries became subject to mandatory COOL. On December 1,
2008, Canada filed a request for formal WTO consultations on COOL with the United States,
expressing concern about changes in normal livestock trade flows in reaction to the interim rule
and questioning COOL’s legality under international trade rules. Bilateral consultations were held
twice, but failed to resolve differences. On October 7, 2009, Canada requested the establishment
of a WTO dispute settlement (DS) panel to review its claims. On November 19, 2009, the WTO
agreed to establish a panel to examine this and Mexico’s nearly identical case on COOL.
Canada asserted that COOL is inconsistent with several WTO-related trade commitments,
including those providing that imports must be treated no less favorably than products of
domestic origin; that laws on marks of origin should not damage imports, reduce their value, or
unreasonably increase their cost; and that laws, rules, and procedures on country of origin should
not themselves create or disrupt international trade. Canadian officials stated that the COOL
requirements are “so onerous” that Canadian exporters of cattle and hogs were discriminated
against in the U.S. market. U.S. officials regretted that consultations did not resolve Canada’s
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concerns, and stated their belief that U.S. implementation of COOL provides consumers with
information that is consistent with WTO commitments. They noted that countries had agreed that
country of origin labeling was legitimate policy long before the WTO was created, and that other
countries (including Canada) also require goods to be labeled with their origin.
On November 18, 2011, the WTO DS panel found that COOL treats imported livestock less
favorably than like U.S. livestock (particularly in the labeling of beef and pork muscle cuts), and
does not meet its objective to provide complete information to consumers on the origin of meat
products. The panel reached these conclusions by examining the economic effects of the
measures taken by U.S. livestock producers and meat processors to implement COOL, and by
accepting arguments that the labeling of meat, indicating where the multiple steps of livestock
birth, raising, and slaughtering occurred, is confusing.
The Obama Administration welcomed the WTO’s affirmation of the U.S. right to require COOL
for meat products. Participants in the U.S. livestock sector had mixed reactions, reflecting the
heated debate on COOL that occurred over the last decade. Those in the industry and some
Members of Congress that favor COOL as now implemented urged the Administration to appeal
the WTO panel’s findings. Other groups and some Members that have questioned COOL called
for the Administration to accept the report’s findings, and begin to take steps to bring COOL into
compliance with WTO rules. On March 23, 2012, the United States appealed the panel report to
the WTO Appellate Body (AB). The AB that will consider this appeal has from 60 to 90 days to
uphold, reverse, or modify the panel findings. If, as a result of the appeal, the United States is
found to be in compliance with its WTO obligations, it would be free to continue COOL as now
in effect. If the appeal fails, the United States would need to bring COOL into compliance with
the AB’s findings within a reasonable period of time. COOL opponents may use the opportunity
to seek legislative changes as Congress considers the 2012 farm bill. Options would be to
consider regulatory and/or statutory changes to the COOL regulations and/or law. Proponents in
turn can be expected to vigorously defend a policy they worked for more than a decade to secure.
If the United States does not comply, Canada and Mexico would have the right to seek
compensation or retaliate against imports from the United States.
Questions
1. Reports in meat trade publications have suggested that the COOL requirements have strained
marketing relationships between Canadian and U.S. livestock producers and meat processors.
What economic adjustments if any have occurred in Canada’s beef and pork sectors in response
to the decrease in Canadian cattle and hog exports to the United States? To what degree have
other market developments (e.g., exchange rates, impact of the economic recession, meat exports
to third markets) affected the beef and pork sectors in both markets?
2. How does Canada’s country of origin labeling program for agricultural commodities and food
products compare to that implemented under the U.S. COOL program? Is it a voluntary or
mandatory program?
3. If the WTO Appellate Body upholds the dispute settlement panel’s findings (meaning the
United States loses its appeal), what statutory and/or regulatory changes could be considered to
bring the U.S. COOL program into compliance with such findings?
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The Canadian Steel Sector79
Issue Definition
The impact of the 2008 global financial crisis and the subsequent economic downturn has had
substantial negative effects on manufacturing industries in the United States and Canada,
including the steel industry. An earlier slump in steel, which occurred in the 1990s, led to
numerous bankruptcies and takeovers of many U.S. and Canadian steel makers. As a result,
almost all of the major steel makers in Canada are now foreign owned. Therefore, decisions to
close or idle plants or reduce production in Canada have raised national economic and political
concerns.
Pittsburgh-based U.S. Steel Corp. (U.S. Steel) idled many of its Canadian operations in 2009
when steel orders fell precipitously. The Canadian government, the United Steel Workers, and
local steel manufacturers took legal actions against it under the Investment Canada Act (ICA), a
Canadian federal law governing large foreign direct investment in the country. The Canadian
government alleged that U.S. Steel is not abiding by commitments (such as investment and level
of local employment) it made under the ICA when it acquired the Canadian steelmaker, Stelco, in
2007. After lengthy legal proceedings, the Canadian government and U.S. Steel reached an
agreement to settle the case in December 2011.
Background and Analysis
During the 1990s and the first decade of the 21st century, many U.S. and Canadian steel
companies experienced a downturn that led to a major restructuring and reorganization of the
steel industry in North America. Today, the Canadian steel industry looks very different than it
did in 2000. The major Canadian integrated steel producers, such as Stelco and Algoma Steel, are
now owned by international companies. In 2006, Mittal Steel acquired several Stelco subsidiaries
and U.S. Steel purchased the remaining part of Stelco, which was renamed U.S. Steel Canada Inc.
Algoma Steel was purchased by Essar Steel of India in 2007, and operates as Essar Steel Algoma
Inc.
The Canadian minimill steel sector also went through a restructuring process. Minimills produce
steel from scrap metal in electric arc furnaces (EAFs). In 2002, the Canadian firm, Co-Steel,
merged with Ameristeel, the North American subsidiary of Gerdau S.A., of Brazil. Dofasco,
another big steel company, was acquired by Luxemburg-based Arcelor in 2006. At about the same
time, Arcelor agreed to merge with Mittal Steel of Rotterdam and became ArcelorMittal. Dofasco
is now a subsidiary of ArcelorMittal, the world’s largest steelmaker. More recently, in 2008,
Russia’s Evraz Inc. S.A. acquired another major Canadian minimill steel maker, IPSCO Canada.
The U.S. and Canadian steel industry struggled from 1997 through 2002. In March 2002,
President Bush imposed safeguard measures (in the form of increased tariffs) in response to
surging imports of steel that were deemed to have seriously injured U.S. domestic steel
producers. One goal of the safeguards was to enable a restructuring of the domestic steel industry
to improve its efficiency and competitiveness. To a great extent, that restructuring has been
79 Prepared by Rachel Tang, Analyst in Asian Affairs; Foreign Affairs, Defense, & Trade Division.
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achieved. There are now two dominant players among integrated steel mill companies in the
United States and Canada, and two clear market leaders among the minimill producers.
The recovery of pricing power in the domestic industry may have been attributable to industry
consolidation, as well as to rising global demand spurred, in large part, by China. The
establishment of industry pricing power, plus the rise of global demand, higher steel prices, and
the falling exchange rate of the dollar, also made establishment of new production facilities in the
United States a more attractive proposition. After removal of the safeguard measures, steel prices
generally moved upward through August 2008, when the benchmark price of hot-rolled steel
reached nearly $1,200 per metric ton (MT) —up from $222 per MT in 2002.
Starting in September 2008, the global economic crisis caused a decline in steel demand, falling
prices, and reduced production. Like many other industrialized countries, the impact of the
market downturn was felt by all the major steel consuming sectors in Canada (as well as the
United States) — automotive, construction, manufacturing, appliance, and energy. Furthermore,
given the overall difficult economic environment, the steel export market was also lackluster.
During the first half of 2009, the overall capacity utilization rate in U.S. steel mills lingered in the
low to mid-40% range. By 2009, U.S. crude steel production dropped more than 36% from the
2008 production level to 58 million metric tons, with steel mills running at a capacity utilization
rate slightly over 50%. In early 2009, U.S. Steel shut down or heavily curtailed production at a
number of its plants in the United States.
Canadian steel production also experienced a sharp drop in 2009, to approximately 9 million MT
of crude steel, nearly 40% less than the 15 million MT produced in 2008. In 2009, the steel-
making capacity utilization rate in Canada was about 43%. U.S. Steel moved to idle much of its
Canadian operations in March 2009, largely because of low demand for steel. Affected U.S. Steel
plants in Canada included the flat-rolled steel plant in Hamilton, Ontario, known as Hamilton
Works, and Lake Erie Works in Nanticoke, Ontario. U.S. Steel met strong resistance from the
Canadian government and the local United Steelworkers union (USW), which raised questions
about why more facilities in Canada were affected than in the United States. On May 5, 2009,
Canadian Minster of Industry Tony Clement sent a “demand letter” to U.S. Steel under Section 39
of the Investment Canada Act, asking the company to comply with its alleged contractual
commitments:
When U.S. Steel acquired Stelco Inc. in 2007, it committed to a series of undertakings
regarding, among others, capital expenditures, research and development and production. I
am concerned by the actions of U.S. Steel in cutting operations in Canada and by the impact
this has on its workers. While I recognize that these are challenging economic times, we
expect the company to live up to its commitments.
A demand letter is the first step in the enforcement process under the Investment Canada Act. If a
company is found in violation of the act, it could be forced to sell its Canadian operations or pay
fines of C$10,000 per day (roughly US$10,000). In July 2009, after reviewing U.S. Steel’s
response, the Canadian government took U.S. Steel to the Federal Court of Canada, asking the
Court to order appropriate measures to remedy the situation.
In 2010 and 2011, the steel sector in the United States and Canada showed measurable recovery
from the previous years, but production level and capacity utilization were still below 2007
levels. Canadian annual steel output was approximately 13 million MT in 2010, as well as in
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2011, lingering at a capacity utilization rate of 62%. Utilization rate in the U.S. steel sector was
70% in 2010 and 74% in 2011.
Status of the Issue
U.S. Steel moved to file a challenge to the Investment Canada Act (ICA) in November 2009,
claiming that certain provisions of the law violated its constitutional rights. Among them is the
stipulation that companies that fail to comply with promises made under the ICA must pay fines
or must divest their assets, but are not given a chance to mount a proper defense. U.S. Steel also
argued that the penalty of C$10,000 a day was akin to criminal punishment. The Canadian
government is seeking the dismissal of U.S. Steel’s challenge and “is trying … to force U.S. Steel
to either operate its Canadian assets or sell them to a party that will operate them.”
On April 15, 2010, U.S. Steel and USW Canadian local union 8782 reached a three-year labor
agreement for employees at U.S. Steel Canada’s Lake Erie Works. The deal will allow U.S. Steel
to restart production at the facility based on improving steel demand. Production at Hamilton
Works had restarted earlier.
On April 28, 2010, U.S. Steel Canada announced that it has entered into an agreement to sell its
bar mill and bloom and billet mill at its Hamilton Works to Max Aicher (North America) Inc., a
wholly-owned subsidiary of Max Aicher GmbH & Co. KG of Germany. Max Aicher had
previously entered into talks to purchase the bar and bloom mills in 2007, prior to their purchase
by U.S. Steel. Max Aicher (North America) Inc. officially took ownership of the bar and bloom
mills in November 2010.
In June of 2010, the Federal Court of Canada ruled in favor of the Canadian government,
upholding a portion of the Investment Canada Act being challenged by U.S. Steel as
unconstitutional. U.S. Steel subsequently appealed the decision. On July 26, 2010, a federal
appeals judge in Canada ruled that the case by the Canadian government against U.S. Steel can
proceed. This marks the first time in history that the Canadian government has sued a company
for not living up to employment and production promises made earlier in exchange for federal
approval of a foreign investment.
On November 7, 2010, about 900 workers were locked out of U.S. Steel Canada’s plant in
Hamilton, after labor negotiations over issues such as pensions had made little progress. On June
8, 2011, The workers represented by the USW local union 1005 in Hamilton, Ontario, moved to
block the Burlington Canal Lift Bridge leading into the city’s port in an effort to prevent two
vessels carrying steelmaking coke from leaving the area. The locked-out U.S. Steel workers later
left the port after a Canadian court issued injunctions against the union on June 10, 2011. On
October 15, 2011, U.S. Steel and Local 1005, which represents union workers at Hamilton Works,
reached a new three-year labor contract and has since resumed operations.
In November 2011, the Supreme Court of Canada declined to hear U.S. Steel’s contention that
laws governing investments in Canada are unconstitutional, upholding rulings previously made in
lower courts.
On December 12, 2011, the Canadian government and U.S. Steel came to an agreement.
According to the agreement, U.S. Steel has committed to continue operations in Canada until
2015, with $50 million in capital investments above its original undertaking of $200 million and a
contribution of $3 million toward community programs in Hamilton and Nanticoke.
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Questions
1. To what extent can American investors be assured that economic and market conditions that
affect their Canadian businesses will not be subject to legal action under the Investment Canada
Act?
2. Do you believe that the Investment Canada Act is working appropriately? Does the perception
that an act regulating foreign investment and business operations is a tool of industrial policy
cause you any concern?
3. With the significant restructuring of the North American steel sector after 2002, the collapse of
global steel markets in 2008 and 2009, and the slow recovery in 2010 and 2011, should the U.S.,
Canadian, and Mexican governments begin discussions on a common steel policy that will protect
the North American market from import surges?
4. In light of the trade actions brought by the United States and other parties against China’s
export restrictions on raw materials such as rare earths, tungsten, coke, magnesium, and zinc
(some of which are important to steel production), what is Canada’s position? Should the North
America Free Trade Agreement (NAFTA) countries work to secure supply of raw materials that
are crucial to industrial production?
Intellectual Property Rights80
Issue Definition
The United States contends that Canada’s protection and enforcement of intellectual property
rights (IPR) are inadequate and do not meet international standards. Protection and enforcement
of IPR are important to bilateral relations because of the high levels of trade between the two
countries. U.S. stakeholders have expressed concern about the levels of counterfeiting and piracy
in Canada, as well as the transit of IPR-infringing products across Canada’s borders. Areas of
bilateral engagement on IPR include Canada’s efforts to reform its copyright regime and IPR
enforcement system.
Background and Analysis
Canada and the United States have entered into a range of international commitments on IPR.
Bilateral commitments on IPR exist in the North American Free Trade Agreement (NAFTA). As
members of the World Trade Organization (WTO), both countries are signatories to the WTO
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), which
sets standards for IPR protection and enforcement. Both countries also have ratified the World
Intellectual Property Organization (WIPO) Copyright Treaty and WIPO Performance and
Phonograms Treaty (the “WIPO Internet treaties”), which focus on IPR protection and
enforcement in the digital environment. Canada ratified the WIPO Internet treaties in 1997, but
80 Prepared by Shayerah Ilias, Analyst in International Trade and Finance, Foreign Affairs, Defense, and Trade
Division.
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remains one of few developed countries that has not brought its laws into compliance with the
treaties. The United States implemented the WIPO Internet treaties in 1998 through the Digital
Millennium Copyright Act (DMCA) (P.L. 105-304).
In addition, Canada and the United States were among the nearly 40 countries that negotiated the
Anti-Counterfeiting Trade Agreement (ACTA), a new international IPR agreement which would
build on the TRIPS Agreement. ACTA negotiations were concluded in 2010. The ratification
(“formal approval”) of the ACTA is in a state of uncertainty, despite the fact that most negotiating
parties (Australia, Canada, the EU and 22 member states, Japan, South Korea, Morocco, New
Zealand, Singapore, and the United States) have signed the proposed agreement. In recent
months, controversy over the ACTA has escalated in the EU, where several member states
(including some that had previously signed the agreement) have decided to suspend or not initiate
their domestic adoption of the ACTA. The ACTA would enter into force after the sixth instrument
of ratification, acceptance, or approval is deposited by ACTA negotiating parties. No party has
submitted a formal instrument of approval to date.
One key area of U.S. concern is Canada’s domestic copyright regime. The Canadian government
periodically has attempted to overhaul its domestic copyright regime to bring its domestic law in
line with international standards, including the WIPO Internet treaties. Some copyright-based
industry and other groups assert that Canada does not sufficiently combat online piracy or the
circumvention of technological measures that protect copyrighted works. Others, including
consumers and Internet service providers (ISPs), call for greater exceptions to copyright for
educational, research, and other purposes to promote the free flow of information and innovation.
Some stakeholders have opposed efforts to revise Canada’s copyright law on the basis that such
changes may reflect U.S. DMCA-style laws that they believe excessively limit the rights of users
of copyright works.
On September 29, 2011, the Canadian government introduced the Copyright Modernization Act
(Bill C-11), in the 1st session of the 41st Parliament. A committee report on the bill, as amended,
was presented on March 15, 2012. Bill C-11 is a reintroduction of Bill C-32, which was
introduced in the 40th Parliament and failed to advance before the dissolution of that Parliament.
Among its provisions, Bill C-11 would:
• incorporate the WIPO Internet treaties into domestic law;
• introduce provisions prohibiting the circumvention of technological protection
measures (“digital locks”);
• clarify the roles and responsibilities of ISPs for the copyright infringements of
their subscribers;
• include a “notice and notice” provision (a copyright holder notifies the ISP that a
subscriber has made available or accessed content without authorization, and the
ISP passes on the notification to the subscriber, but takes no subsequent action to
remove the content);
• permit the copying of legally obtained content onto other devices provided it
does not circumvent digital locks (“format shifting”);
• provide expanded “fair dealing” exceptions—a concept similar to “fair use” in
the United States—for education use, parody, and satire; and
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• lower statutory damages in cases of non-commercial infringement from $500-
$20,000, as in current Canadian law, to $100-$5,000.
The debate about copyright reform in Canada has been heightened with legislation introduced in
the United States in the 112th Congress—the Preventing Real Online Threats to Economic
Creativity and Theft of Intellectual Property Act (PROTECT IP Act, S. 968), Stop Online Piracy
Act (SOPA, H.R. 3261), and Online Protection and Enforcement of Digital Trade Act (OPEN Act;
S. 2029, H.R. 3782)— to tackle online piracy issues similar to some of those addressed by the
ACTA. Following protests by civil society groups and several Internet-based companies,
congressional consideration of these bills has been postponed.
Another key area of bilateral engagement is Canada’s enforcement of IPR. Presently, the Canada
Border Services Agency (CBSA) is not authorized to seize products at the border that are
believed to be pirated or counterfeit without a court order, which requires detailed information.
The United States contends that this lack of ex-officio authority limits the effectiveness of IPR
enforcement in Canada. The United States also contends that the enforcement penalties imposed
by Canada do not serve as sufficient deterrents for future IPR infringement.
Canada’s IPR protection and enforcement remain an ongoing area of concern for the United
States. In 2011, the Office of the U.S. Trade Representative (USTR) continued to place Canada
on its Special 301 “Priority Watch List” (PWL), a designation of criticism for a country’s
inadequate IPR protection and enforcement. The USTR cited ongoing issues with Canada’s
copyright reform and IPR enforcement efforts at the border. The USTR first placed Canada on the
PWL in 2008. Canada previously had been on the “Watch List,” the mildest category of criticism
for a country’s IPR regime, since 1985. Some supporters of Canada’s IPR regime assert that the
Special 301 process is overly industry-driven and that Canada’s piracy rates are significantly
lower than those of other countries on the PWL in 2011 (China, Russia, Algeria, Argentina, Chile,
India, Indonesia, Israel, Pakistan, Thailand, and Venezuela). Some industry groups maintain that
Canada’s placement on the PWL accurately reflects inadequacies in Canada’s IPR regime. The
United States and Canada remained engaged on key bilateral IPR issues.
Status of the Issue
Canada could have to pass new laws in order to implement the enforcement standards of the
ACTA, including granting ex-officio authority to customs officials to initiate criminal
investigations in cases of trademark infringement and copyright piracy and providing legal
remedies for circumventing technological protection measures. Canada’s possible revision to its
domestic copyright law could help it to meet some of the ACTA standards related to IPR in the
digital environment. The Parliament may act on Bill C-11 in the coming months. Bill C-11 is
subject to two votes in the House of Commons, and if passed, will be submitted to the Senate for
consideration.
Questions
1. What issues have arisen in developing legislation to implement the WIPO Internet treaties?
What is Canada’s vision of a fair and balanced copyright law? What are key issues in the
Parliament’s consideration of Bill C-11? How could Canada’s implementation of the WIPO
Internet treaties differ from the DCMA?
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2. What steps has Canada taken to promote international protection and enforcement of IPR?
What are the opportunities and challenges that Canada sees in the proposed ACTA? What is
Canada’s status with respect to ratification of the ACTA? What changes to Canada’s laws, if any,
would be required for implementation of the ACTA?
3. What measures is Canada currently taking to address trade and transshipment of pirated and
counterfeit goods? What steps can Canada undertake to improve IPR border and domestic
enforcement? What can the United States do to assist Canada in improving IPR enforcement?
4. How does Canada view the U.S. Special 301 process? How does the Special 301 process and
Canada’s continued placement on the Priority Watch List affect bilateral relations? If passed, to
what extent might Bill C-11 affect Canada’s placement on the Special 301 list?
Electric Reliability, Trade, and Access to Renewable
Power81
Issue Definition
The electric power grids of the United States and Canada are physically connected. Consequently,
electric power reliability problems can easily cross the international border. This was
demonstrated by the 2003 power blackout, which originated in Ohio and eventually spread into
eastern Canada and the northeastern United States. The United States and Canada are therefore
mutually dependent for the reliable operation of their common electric power systems. The
interconnected grid also creates opportunities for trade and joint expansion of the use of
renewable power.
Background and Analysis
There are three components of electric power delivery: generation by power plants, transmission
over long distances by high voltage power lines, and final delivery at low voltage by distribution
lines. The transmission lines that constitute the North American power grid cross state and
international boundaries. The U.S. and Canadian grids are, in fact, inextricably linked:
• At the broadest level of organization, the North American grid is divided into
regional “interconnections” within which power moves freely (the links between
the regions are very limited). The large Eastern and Western Interconnections
cover most of the contiguous United States and the heavily populated regions of
Canada.
• At the level of major transmission lines, the Canadian grid has evolved by
building south from heavily populated areas to connect with U.S. generation and
load. Consequently, while the grid in the conterminous United States is a web
crisscrossing the lower 48 states, the Canadian backbone system consists of
north-south lines closely linked to the United States. More electricity actually
81 Prepared by Richard Campbell, Specialist in Energy Policy; Resources, Science, and Industry Division.
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moves north and south between the United States and Canada than east and west
among Canadian provinces.
• In terms of system reliability, as discussed further below, the North American
Electric Reliability Corporation (NERC) has responsibilities for the reliable
operation of the power grid in both countries. Three of the eight regional
reliability entities through which NERC performs much of its work extend from
the United States into Canada and cover that nation’s entire southern tier.
Reliability
In reaction to the 2003 blackout, the Energy Policy Act of 2005 (P.L. 109-58) required the Federal
Energy Regulatory Commission (FERC) to designate an Electric Reliability Organization (ERO)
charged with ensuring the reliability of the bulk power system, largely by issuing mandatory
reliability standards. In 2006 FERC selected NERC for this role (NERC is an industry
organization whose reliability recommendations had been voluntary prior to its designation as the
ERO). NERC’s members include Canadian power companies and it has memoranda of
understanding (MOUs) with Canadian provinces and the Canadian federal government to help
coordinate reliability activities. However, NERC does not have the same statutory authority in
Canada as in the United States. The MOU between the Canadian National Energy Board (NEB)
and NERC recognized NERC as the ERO for the Canadian part of international transmission lines
but not for lines located entirely within Canada’s borders (which are under provincial, not federal,
regulation). NERC currently has agreements with most Canadian provinces that make, or will
make in the future, NERC’s reliability standards mandatory and enforceable. NERC’s standards
also cover critical infrastructure protection (including measures to enhance the cybersecurity of
the grid).
Authorities in both Canada and the United States are monitoring space weather. The Sun is
entering an especially active period for solar storms. Northern latitudes are more susceptible to
extreme space weather caused by solar storms. These storms could induce geomagnetic induced
currents which can adversely affect bulk power system components like transformers, or cause
voltage instability and power system collapse.
Transmission capacity and congestion issues that can impair reliability and increase power costs
exist in the United States and Canada, and the solution is often to construct new transmission
capacity or enhance existing facilities. Many transmission projects are under construction or
planned in both nations. However, transmission planning and construction in the United States
and Canada face similar challenges, particularly for long-distance projects. These challenges
include permitting and siting approvals that often involve multiple jurisdictions, and finding the
funding for the large investments in transmission (and power generation) that will be needed to
meet demand growth. Two international transmission projects of note include
• The Montana-Alberta Tie Line project (expected to be completed in 2012) will be
the first transmission link between that state and province. This is a 214-mile,
US$213 million project that is expected to facilitate the export of wind power
from both regions and improve transmission system reliability. The project
received a US$161 million loan under the American Recovery and Reinvestment
Act.
• A proposed high capacity transmission line to ship up to 1,200 megawatts of
hydroelectric power from Québec to New England. Although this project has
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received preliminary approval from the U.S. Federal Energy Regulatory
Commission, its future is uncertain because declining power prices in the United
States (linked to low natural gas prices) may make the project uneconomical for
the Canadian partner in the venture, the large utility Hydro-Québec.
Another Canadian project, the Northwest Transmission Line planned for northern British
Columbia, may eventually connect southeastern Alaska to part of the Canadian power system.
Trade and Renewable Energy Development
The United States is a net importer of electricity from Canada, and imports had been increasing,
from 42.7 terawatt-hours (Twh) in 2006 to 50.3 Twh in 2007 and 56.0 Twh in 2008. But imports
have decreased recently with 51.8 Twh in 2009 to 44.4 Twh in 2010. From the U.S. perspective,
while these imports can be locally important (e.g., in New York and New England), on a national
basis they are very small, equivalent to 1.1% of net U.S. electric power generation (4,125 Twh) in
2010. Electricity trade is more significant from Canada’s standpoint. Canada generated 589 Twh
of electricity in 2010. Exports to the United States represented 7% of Canada’s domestic
generation.
The United States relies on coal for about half its electricity production, while Canada derives
about 75% of its electricity from non-fossil fuel sources (i.e., hydropower, nuclear, and wind
energy). Electricity trade between the countries is likely to become intertwined with renewable
energy development and transmission planning issues. Both nations currently have policies for
the increased use of renewable power. The United States and Canada have established a “Clean
Energy Dialogue” (CED) to facilitate the development of low carbon energy sources. Elements of
the CED include, among other things, collaboration on expansion and modernization of the North
American transmission grid to improve reliability and facilitate trade in low carbon power;
advancement of smart grid technology; and development of electricity storage technology.
Canadian sources of renewable power may have the potential to reduce the need to build new,
long-distance transmission projects (which can take up to a decade or more to permit and
construct) in the United States. For example, imports of hydropower from Québec into New
England and New York, using new but relatively short power lines, have been suggested by the
transmission system authorities in those regions as an alternative to building power lines to
Midwestern wind farms. However, as discussed above, one of these projects has been thrown into
question by declining natural gas and power prices. Disputes at the state or provincial level can
also complicate energy project development. The potential development of new gas resources
(i.e., from coal bed methane and tight shale formations) in both the United States and Canada
could have a major impact on technology and energy choices in both countries.
In the United States, the intersecting issues of renewable power development, transmission
system expansion and reliability, and long-standing difficulties in multi-state permitting of new
projects, has spurred suggestions for new regulatory and planning processes. The planning
element of some proposals envisions creating transmission “master plans” on a wide geographic
scope to facilitate renewable energy development and other purposes. While these proposals are
limited to planning within the United States, they will inevitably have an impact on Canada
because of the grid connections and the much larger size of the U.S. power system.
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Status of the Issues
NERC and FERC are continuing a process of developing and implementing mandatory reliability
standards for the grid, with cybersecurity a growing concern. In Canada, the National Energy
Board is reportedly working with provincial authorities on implementation of mandatory
reliability standards, although it is not clear if in all cases these will be the same as the NERC
standards or whether NERC will function as the ERO in every province.
Questions
1. Will all Canadian federal and provincial regulators approve and enforce NERC electric
reliability standards? Without identical standards in the United States and Canada, the reliability
of the electric power system could be reduced.
2. Given that the United States and Canadian power grids are integrated, what steps should be
taken to coordinate transmission planning and development of smart grid protocols? Is this an
area for NERC to establish a formal leadership role?
3. To what degree is Canada interested in increasing exports of renewable power to the United
States, rather than reserving these resources for domestic consumption?
4. How can the United States and Canada effectively resolve energy development issues that may
involve both federal and state/provincial authorities? Given the likelihood for increasing energy
integration, should a formal bi-national body be instituted to oversee energy trade and energy
security issues?
U.S. Energy Security and Canadian Oil Sands82
Issue Definition
Canada ranks as the United States’ number one source of imported crude oil and thus plays an
important role in U.S. energy security. Canada’s oil sands make up an increasing proportion of its
petroleum resources, and Canada’s oil sands producers continue to look primarily to the United
States as the major market for their oil exports. Of the approximately 2.3 million barrels per day
(mbd) of crude oil Canada has exported to the United States during 2012, over 50% is delivered
to the Midwest. This region’s current capacity to process increasing volumes of Canadian crude
oil is limited in the near term. However, planned refinery expansion coupled with new refinery
and infrastructure construction, may place the region in a position to receive increased oil exports
from Canada in the longer term. Another possibility for processing additional Canadian oil is
expanded capacity in refineries along the U.S. Gulf coast, which is also likely to require new
pipeline construction.
Although U.S. refinery capacity is forecast to increase from 17.7 mbd in 2011 to nearly 19.0 mbd
in 2030—a 1.3 mbd increase, the deteriorating economics of the refining industry may bring these
82 By Robert Pirog, Specialist in Energy Economics, Resources, Science, and Industry Division.
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projections into question. Since 2009, the U.S. refining industry has been characterized by plant
closures and divestiture. Actual, as well as projected, capacity expansion may not be enough to
keep up with Canada’s projected increase in oil sand production, especially if the investment
climate continues not to warrant expansions to include upgrades for heavy oil processing. Canada
is also pursuing additional refinery capacity for its heavier oil. Refinery expansions based on the
use of heavy oils will have environmental effects, and Congress will likely continue to face
controversy over the balance between energy security and the environment. In addition,
investment and production plans are likely to be altered by the reduced demand for petroleum
products in the United States, associated with high prices and the ongoing effects of the economic
recession that began in the last quarter of 2007.
Another possible impediment to expanded Canadian oil use is Section 526 of the Energy
Independence and Security Act of 2007 (P.L. 110-140) which prohibits federal procurement of an
alternative or synthetic fuel “unless the contract specifies that the lifecycle GHG emissions are
less than or equal to such emissions from the equivalent conventional fuel produced from
conventional petroleum sources.” The provision is intended to ensure that federal agencies are not
spending taxpayer dollars to promote new fuel sources that will exacerbate global warming, and
would apply to fuels derived from “oil sands,” which are currently associated with producing
higher greenhouse gas emissions than fuels derived from conventional, lighter crude oils.
Background and Analysis
When it comes to future oil supplies, production from Canada’s oil sands will likely make up a
larger share of U.S. oil imports. Oil sands account for nearly 50% of Canada’s total oil
production, and oil sand production is increasing as conventional oil production declines. Since
2004, when production from a substantial portion of Canada’s oil sands were deemed economic,
Canada has been ranked second behind Saudi Arabia in proved oil reserves. Canada has over 175
billion barrels of reserves and a total of over 300 billion barrels of potentially recoverable oil
sands (an attractive investment under high oil price conditions, demonstrated by the billions of
dollars already committed to Canadian development). Canadian crude oil exports (from oil sands
and conventional petroleum sources) were over 2 mbd in 2011, of which 99% went to the United
States. Canadian crude oil accounts for about 25% of U.S. crude oil imports, and about 19% of all
U.S. crude oil and petroleum products supplied. U.S.-based oil companies are major investors in
Canadian oil sands. The infrastructure to produce, upgrade, refine, and transport oil from
Canadian oil sand reserves to the United States is already in place although additional pipeline
capacity is planned. Oil sands production is expected to rise to 3.6 mbd by 2030.
Greenhouse gas “emissions intensity” (CO2/barrel) from oil sands are significantly higher than
that from conventional oil production. Canada’s federal government classifies the oil sands
industry as a large industrial air pollution emitter and expected it to produce half of Canada’s
growth in greenhouse gas (GHG) emissions in 2010. Reducing air emissions is one of the most
serious challenges facing the oil sands industry. Between 1995 and 2004, the oil sands industry
reduced its emission intensity by 29% while oil production rose. Overall, CO2 emissions have
declined from 0.14 tons/barrel (bbl) to about 0.08 tons/bbl since 1990. However, Alberta’s GHG
goals of 238 megatons of CO2 in 2010 and 218 megatons CO2 in 2020 are not expected to be met.
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Status of the Issue
New refinery capacity that would accommodate heavier crude from Canadian oil sands is being
challenged in Indiana, Michigan, South Dakota, and elsewhere. Some of these expansions or new
refineries are several years away from operation. A BP refinery upgrade and expansion in
Whiting, IN, expected to be completed in 2011, is progressing, but faces lawsuits from
environmental groups. A new $10 billion refinery in Union County, SD, being planned to process
heavy crude from oil sands, would be the first new refinery in the United States in over 25 years.
Environmental groups continue to promote standards for low-carbon emission fuel and oppose
the permitting of these refinery projects on the basis that processing heavy crude from Canadian
oil sands would generate much higher greenhouse gas emissions than from conventional
petroleum sources.
Another impediment to expanded use of Canadian heavy oil in refineries in the United States is
the opposition to the construction of the Keystone XL pipeline, which is designed to deliver up to
900,000 barrels per day of Canadian crude oil to new refining capacity that is expected to be built
in the U.S. Gulf Coast region. Opposition to the project in the United States centers on the
inherently high carbon emissions of liquids derived from oil sands, while Canadian opposition is
focused on likely job losses associated with the export of unprocessed crude oil. Unions in
Canada claim that processing the crude oil in Canada, and exporting finished products like
gasoline and diesel fuel to the United States, would create thousands of high-paying jobs for
Canadian workers.
Questions
1. What changes are necessary to significantly reduce the environmental footprint of heavy oil
from Canadian oil sands?
2. How much capital investment in pipeline and refinery infrastructure is needed to support
increased crude oil imports from Canada?
3. What would be the impact on U.S. federal and defense fuel procurements if Section 526
restrictions remain in place on fuel produced from Canadian oil sands?
4. As a result of the supply bottlenecks and resultant price discounts on Canadian crude oil, how
likely is it that Canadian oil sands development will be slowed because of revised investment
strategies by the major oil companies?
Keystone XL Pipeline83
Issue Definition
In September 2008, TransCanada (a Canadian company) applied to the U.S. Department of State
for a permit to cross the U.S.-Canada international border with the Keystone XL pipeline project.
83 Prepared by Paul Parfomak, Specialist in Energy Policy; Resources, Science, and Industry Division.
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If constructed, the pipeline would carry crude oil produced from the oil sands region of Alberta,
Canada, to U.S. Gulf Coast refineries. Because the pipeline would connect the United States with
a foreign country, it requires a Presidential Permit issued by the State Department. Although
similar pipelines from Alberta have been approved in recent years, the permitting process for the
Keystone XL pipeline has become highly controversial. Some Members of Congress have
expressed support for the proposed pipeline’s potential energy security and economic benefits
while others have expressed reservations about its potential environmental impacts. Though
Congress, to date, has had no direct role in permitting the pipeline’s construction, it may have an
oversight role stemming from federal environmental statutes that govern the pipeline’s
application review process. Congress also may seek to influence the State Department permitting
process, or may seek to assert direct congressional authority over permit approval, through new
legislation.
Background and Analysis
In 2010, Canada was the largest supplier of imported petroleum to the United States. Of the 11.4
million barrels per day (Mbpd) the United States imported last year, Canada supplied 2.7 Mbpd
(24%), more than the combined imports from the next two largest suppliers—Mexico and Saudi
Arabia. Pipeline infrastructure for Canadian petroleum exports to the United States has been
growing rapidly in support of this trade. Five major pipelines with a combined capacity of 3.3
Mbpd currently link Canadian petroleum producing regions to markets in the United States. Two
of these pipelines, Alberta Clipper and Keystone, with a combined capacity of just under 0.9
Mbpd (26% of the total) began service in 2010.
The permit for Keystone XL, which would add an additional 0.8 Mbpd of import capacity, was
denied by the U.S. State Department in January 2012. However, TransCanada subsequently
announced that it would proceed with development of the Keystone XL segment connecting
Cushing, OK, to the Gulf Coast as a stand-alone project not requiring a Presidential Permit. The
company also informed the State Department that it intended to file a new Presidential Permit
application for the remaining cross-border segment of the Keystone XL project from the
Canadian border through Nebraska. If ultimately approved and constructed, Keystone XL would
bring Canada’s total U.S. petroleum export capacity to over 4.1Mbpd, enough capacity to carry
over 35% of U.S. petroleum imports in 2011. Given that Canada actually supplied the United
States 2.7 Mbpd in 2011, large increases in Canadian supply will ultimately be possible, although
the industry anticipates significant excess pipeline capacity for the next decade. In addition,
several large pipeline projects are proposed within the United States to increase movements of
Canadian petroleum to and from key U.S. market hubs, including refineries in the Midwest and
on the Gulf Coast that employ complex technology in order to process “heavy” crude oils like
those from Canada, Mexico and Venezuela.
The recent expansion of petroleum pipelines from Canada, particularly Keystone XL, has
generated considerable controversy in the United States. Proponents of the pipeline, including
Canadian government agencies, petroleum industry stakeholders, and pipeline construction
workers, have based their public interest justifications primarily on increasing the diversity of the
U.S. petroleum supply and on expected economic benefits to the United States, including near-
term job creation associated with pipeline construction and operation. Some contend that the
Keystone XL project would secure growing Canadian oil supplies for the U.S. market, which
could offset imports from less dependable foreign sources. They also claim that if oil sands output
cannot flow to the United States, infrastructure to export it to Asia will likely develop. Opponents
to the Keystone XL pipeline project, primarily environmental groups and affected communities
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along the route, object to the project principally on the grounds that it supports “dirty” Canadian
oil sands development, that a potential spill could pose a risk to groundwater, that alternative
pipeline routes avoiding environmentally sensitive areas in Nebraska have not been fully
considered, and that it promotes continued U.S. dependency on fossil fuels. Arguments criticizing
the greenhouse gas emissions of oil sands production, generally, are based to some degree on the
assumption that limiting pipeline capacity to U.S. markets may limit output from Canada’s oil
sands. Some opponents also argue that, given the excess capacity anticipated in the existing
Canadian petroleum pipelines noted above, additional pipelines are not needed.
Status of the Issue
On January 18, 2012, the State Department, with the President’s consent, denied the original
Keystone XL permit, citing insufficient time under a 60-day congressional deadline to obtain all
the necessary information to assess the project. On February 27, 2012, TransCanada announced
that it would proceed with development of the Keystone XL in two segments as stated above. The
company intends to file a new Presidential Permit application “in the near future” for the northern
segment of the Keystone XL project, with a future supplement to the application specifying an
alternative route in Nebraska when that route is finalized. The company has previously stated that
it expected to establish the new route by October 2012.
The Obama administration has lent its support for TransCanada’s plan to proceed with the
southern segment of the Keystone XL pipeline, while reserving judgment on the reconfigured
northern segment until completion of a new Presidential Permit review. A final State Department
decision on a re-filed permit application appears unlikely before 2013, however. Congress may
act to influence this decision in the meantime. The North American Energy Access Act (H.R.
3548) would transfer the permitting authority over the pipeline to the Federal Energy Regulatory
Commission, requiring the commission to issue a permit for the project within 30 days of
enactment. The Keystone For a Secure Tomorrow Act (H.R. 3811) would immediately approve
the original permit application. S. 2041. The Energizing America through Employment Act (H.R.
4000) would also approve the original permit upon passage. All four bills include provisions for
later alteration of the pipeline route in Nebraska. S. 2100 would suspend sales of petroleum
products from the Strategic Petroleum Reserve until issuance of a Presidential Permit for the
Keystone XL project. H.R. 3900 would seek to ensure that crude oil transported by the Keystone
XL pipeline, or resulting refined petroleum products, would be sold only into U.S. markets.
Questions
1. Will the State Department approve the reconfigured Keystone XL pipeline?
2. How might the development of the Keystone XL pipeline affect the regional availability and
price of petroleum products in North America?
3. What are the prospects for new Canadian pipelines to Pacific markets and how might the
Keystone XL pipeline affect those?
4. Would the Keystone XL pipeline, added to the other recently constructed oil pipelines from
Canada, require special safety or environmental oversight?
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5. How might oil supplies from the Keystone pipeline affect U.S. oil imports from other
countries?
6. What could be the nature and timing of regional economic affects associated with the pipeline’s
construction?
Author Contact Information
Carl Ek, Coordinator
Peter J. Meyer
Specialist in International Relations
Analyst in Latin American Affairs
cek@crs.loc.gov, 7-7286
pmeyer@crs.loc.gov, 7-5474
Ian F. Fergusson, Coordinator
Paul W. Parfomak
Specialist in International Trade and Finance
Specialist in Energy and Infrastructure Policy
ifergusson@crs.loc.gov, 7-4997
pparfomak@crs.loc.gov, 7-0030
Richard J. Campbell
Robert Pirog
Specialist in Energy Policy
Specialist in Energy Economics
rcampbell@crs.loc.gov, 7-7905
rpirog@crs.loc.gov, 7-6847
Shayerah Ilias
Marc R. Rosenblum
Analyst in International Trade and Finance
Specialist in Immigration Policy
silias@crs.loc.gov, 7-9253
mrosenblum@crs.loc.gov, 7-7360
James K. Jackson
Rachel Tang
Specialist in International Trade and Finance
Analyst in Industrial Organization and Business
jjackson@crs.loc.gov, 7-7751
rtang@crs.loc.gov, 7-7875
Remy Jurenas
M. Angeles Villarreal
Specialist in Agricultural Policy
Specialist in International Trade and Finance
rjurenas@crs.loc.gov, 7-7281
avillarreal@crs.loc.gov, 7-0321
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