What is “border effect”?

Question

What are the facts, which are being defined as a paradox, observed in trade and investment flows between Canada and US.

Answer 1

The relationship between the United States and Canada is the closest and most extensive in the world. It is reflected in the staggering volume of bilateral trade--the equivalent of $1.5 billion a day in goods--as well as in people-to-people contact. About 300,000 people cross the shared border every day.

A 2004 law is phasing in new rules for travel between Canada and the United States. Since January 2007 U.S. citizens traveling by air to and from Canada have needed a valid passport to enter or re-enter the United States. Beginning January 31, 2008, U.S. and Canadian citizens aged 19 and older traveling into the U.S. from Canada by land or sea (including ferries) have had to present documents denoting citizenship and identity. This change primarily affects American and Canadian citizens who have previously been permitted entry into the U.S. by oral declaration alone, and marks the transition toward standard and consistent documents for all travelers entering the U.S. Acceptable documentation includes a valid passport or government-issued photo identification such as a driver's license and proof of citizenship such as a birth certificate. Children aged 18 and under need only to present a birth certificate. A list of acceptable documents is found at http://canada.usembassy.gov1. Travelers who do not present acceptable documents may be delayed as U.S. Customs and Border Protection officers at the port of entry attempt to verify identity and citizenship. Beginning in June 2009, all travelers, including U.S. citizens, will have to present a passport or other secure document that denotes identity and citizenship when entering the U.S. from Canada.

In fields ranging from law enforcement to environmental protection to free trade, the two countries work closely on multiple levels from federal to local. In addition to their close bilateral ties, Canada and the U.S. cooperate in multilateral fora. Canada--a charter signatory to the United Nations and the North Atlantic Treaty Organization (NATO) and a member of the G8--takes an active role in the United Nations, including peacekeeping operations, and participates in the Organization for Security and Cooperation in Europe (OSCE). Canada joined the Organization of American States (OAS) in 1990 and hosted the OAS General Assembly in Windsor in June 2000, and the third Summit of the Americas in Quebec City in April 2001. Canada seeks to expand its ties to Pacific Rim economies through membership in the Asia-Pacific Economic Cooperation forum (APEC), and will host the Winter Olympic Games in Vancouver-Whistler, British Columbia in 2010.

Canada views good relations with the U.S. as crucial to a wide range of interests, and often looks to the U.S. as a common cause partner promoting democracy, transparency, and good governance around the world. Nonetheless, it sometimes pursues policies at odds with our own. Canada decided in 2003 not to contribute troops to the U.S.-led military coalition in Iraq (although it later contributed financially to Iraq's reconstruction and provided electoral advice). Other recent examples are: Canada's leadership in the creation of the UN-created International Criminal Court (ICC) for war crimes; its decision in early 2005 not to participate directly in the U.S. missile defense program; and its strong support for the Ottawa Convention to ban anti-personnel mines. The U.S., while the world's leading supporter of demining initiatives, declined to sign the treaty due to unmet concerns regarding the protection of its forces and allies, particularly those serving on the Korean Peninsula, as well as the lack of exemptions for mixed munitions.

U.S. defense arrangements with Canada are more extensive than with any other country. The Permanent Joint Board on Defense, established in 1940, provides policy-level consultation on bilateral defense matters and the U.S. and Canada share NATO mutual security commitments. In addition, U.S. and Canadian military forces have cooperated since 1958 on continental air defense within the framework of the North American Aerospace Defense Command (NORAD). The military response to the terrorist attacks of September 11, 2001 both tested and strengthened military cooperation between the U.S. and Canada. The new NORAD Agreement that entered into force on May 12, 2006 added a maritime domain awareness component and is of "indefinite duration," albeit subject to periodic review. Since 2002, Canada has participated in diplomatic, foreign assistance, and joint military actions in Afghanistan. Approximately 2,500 Canadian Forces personnel are deployed at any given time in southern Afghanistan under a battle group based at Kandahar and as members of the Canadian-led Provincial Reconstruction Team (PRT) at Camp Nathan Smith in Kandahar. The Canadian Parliament has approved the extension of this mission in Kandahar until 2011. Canada has also contributed to stabilization efforts in Haiti, initially with troops and later with civilian police and electoral assistance, and humanitarian and developmental aid.

The U.S. and Canada also work closely to resolve trans-boundary environmental issues, an area of increasing importance in the bilateral relationship. A principal instrument of this cooperation is the International Joint Commission (IJC), established as part of the Boundary Waters Treaty of 1909 to resolve differences and promote international cooperation on boundary waters. The Great Lakes Water Quality Agreement of 1978 (as amended in 1987) is another historic example of joint cooperation in controlling trans-boundary water pollution. The two governments also consult regularly on trans-boundary air pollution. Under the Air Quality Agreement of 1991, both countries have made substantial progress in coordinating and implementing their acid rain control programs and signed an annex on ground level ozone in 2000. In late 2007, Canada and the U.S. began discussions aimed at negotiating a new annex to the Air Quality Agreement which will increase cooperation in combating cross-border air pollution in the form of particulate matter.

Canada ratified the Kyoto Accord in 2002, despite concern among business groups and others that compliance would place Canada's economy at a lasting competitive disadvantage vis-a-vis the U.S. However, Prime Minister Stephen Harper's government announced in 2006 that Canada would not be able to meet its original Kyoto Protocol commitments. In April 2007, the Canadian Government announced a new regulatory framework for air emissions that, when implemented, should lead to significant decreases in emissions of greenhouse gases and air pollutants as early as 2010. Canada participates in the U.S.-led International Carbon Sequestration Leadership Forum, which researches effective ways to capture and store carbon dioxide. Canada is also a founding member of the International Partnership for the Hydrogen Economy and the Global Earth Observation System of Systems, both of which are designed to address climate change and are supported by the U.S. In early 2005, Canada joined the U.S.-led Methane to Markets initiative, which focuses on transferring technology to developing countries for the capture and use of methane from pipelines, landfills, and other sources. In October 2007 Canada gained membership in the Asia Pacific Partnership on Clean Development and Climate, which joins it with the U.S., Japan, Australia, South Korea, China, and India in a broad effort to accelerate the development and deployment of clean energy technologies in major industrial sectors.

While bilateral law enforcement cooperation and coordination were excellent prior to the September 11, 2001 terrorist attacks in the United States, they have since become even closer through such mechanisms as the Cross Border Crime Forum. Canada, like the U.S., has strengthened its laws and realigned resources to fight terrorism. U.S.-Canada security cooperation to create a safe and secure border is exemplary. Canadian and U.S. federal and local law enforcement personnel fight cross-border crime through cooperation on joint Integrated Border Enforcement Teams (IBETs). Companies on both sides of the border have joined governments in highly successful partnerships and made massive investments to secure their own facilities and internal supply chains. Over 70% of Canada-U.S. trade is transported by truck. Some commercial drivers crossing the border have volunteered to undergo background security checks under the bilateral Free and Secure Trade (FAST) program and many companies participate in the Customs-Trade Partnership Against Terrorism (C-TPAT). These initiatives have helped secure trade while speeding border processing.

Canada is a significant source of marijuana and synthetic drugs (methamphetamines, ecstasy) reaching the U.S., as well as precursor chemicals and over-the-counter drugs used to produce illicit synthetic drugs. Implementation and strengthening of regulations in Canada and increased U.S.-Canadian law enforcement cooperation have had a substantial impact in reducing trafficking in precursor chemicals and synthetic drugs, but cannabis cultivation, because of its profitability and relatively low risk of penalty, remains a thriving industry. Canada increased maximum penalties for methamphetamine offenses in August 2005 and implemented new controls over various precursors in November 2005. Canada is active in international efforts to combat terrorist financing and money laundering.

Canada is a large foreign aid donor and targets its annual assistance of C$4.4 billion toward priority sectors such as good governance; health (including HIV/AIDS); basic education; private-sector development; and environmental sustainability. Canada is a major aid donor to Iraq, Haiti, and Afghanistan.

Prime Minister Harper, who entered office stating he intended to bring a new, more positive tone to